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LNG no quick fix for export diversification
16/03/25
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Mar. 13, 2025
The looming threat of a trade war with the U.S. has focused attention on lessening Canada’s historic dependence on trade with the our neighbours to the south.
Exporting more liquefied natural gas to Asian markets might seem a miracle solution. But the dream of market diversification via LNG must confront both harsh economic realities and worrisome environmental impacts. It does not warrant regulatory fast-tracking or public subsidies.
The future of LNG is not as promising as a few years ago. The International Energy Agency’s World Energy Outlook 2024 anticipates a peak in global gas consumption by 2030. The IEA concludes that no additional LNG projects are required to satisfy global demand beyond those already under construction.
One Canadian LNG terminal is nearing completion. The first phase of the LNG Canada project in Kitimat will start exporting up to 14 million tonnes per year (MTPA) later this year. Three other projects have federal and provincial approvals in hand: LNG Canada phase 2 (14 MTPA), Woodfibre LNG in Squamish (2.1 MTPA), and Cedar LNG in Kitimat (3 MTPA). An additional 12 MTPA project, Ksi Lisims LNG in Gingolx, and 3 MTPA for Tilbury LNG in Delta are awaiting approval.
Should all of the planned and additional LNG terminals be built, they will come onstream just as it’s expected that overcapacity will put downward pressure on LNG prices. Anticipated trends in LNG markets introduces significant uncertainty into profitability of new LNG projects intended to operate for decades — especially those facing relatively high production costs. Similarly expensive LNG export projects in Queensland, Australia, are already underperforming economically.
This is presumably part of the reason, that despite receiving government approval, phase 2 of LNG Canada has yet to receive a final go-ahead from its own investors.
LNG investors may be hoping for subsidized electricity rates that do not reflect the true cost of new generation and transmission capacity. For example, B.C. Hydro is already committing $3.5 billion to upgrading the North Coast Transmission Line from Prince George to Terrace in order to boost transmission capacity from 800 to 1,300 Megawatts.
Will ratepayers end up subsidizing LNG exporters’ massive electricity consumption? More generally, if private investors are nervous about committing their own money to LNG, why should Canadian governments accept risks to taxpayers by subsidizing the same projects? Public resources allocated to LNG-supporting infrastructure could be better used to expand public transit, electrify mobility, build housing, and improve health care.
These projects are also incompatible with federal and provincial climate targets.
Collectively, LNG terminals have been approved to release 4.4 million tonnes of CO2 per year on site, equivalent to adding 1.35 million gasoline cars to the roads. Even greater additional emissions will come from gas production and pipeline transmission, with mounting evidence that well-site methane leakage is seriously undercounted.
Massive new emissions from LNG will make it even more difficult for Canada to meet its climate targets. And to what end? A growing body of research finds few if any global climate gains from LNG, as new gas infrastructure will displace renewable energy investment instead of coal.
The oil and gas industry is trying to use the current economic turmoil to expedite new LNG terminals. As the saying goes “don’t let a good crisis go to waste.” But fast-tracking LNG projects and short-circuiting environmental assessments risks committing Canada to a future fraught with economic risk and environmental harm.
The prospect of a trade war with the United States is a moment of urgency for Canadian policymakers. However, they should not run towards the first path presented. It may turn out to be a dead end.
Werner Antweiler is an economics professor at the UBC Sauder School of Business and holds the research chair in International Trade Policy; Simon Donner is professor and director of the Climate Solutions Research Collective; Kathryn Harrison is professor of political science and McLean Family Chair in Canadian Studies. All three professors are at the University of B.C.
[Top photo: Cooling towers used to dissipate heat generated when natural gas is converted into liquefied natural gas are seen under construction at the LNG Canada export terminal in Kitimat. Photo by DARRYL DYCK /THE CANADIAN PRESS]
