Japanese Prime Minister Fumio Kishida sees the LNG Canada terminal under construction at Kitimat, B.C. as a “flagship” facility, he said in remarks Jan. 12 during a visit to Ottawa to meet with Prime Minster Justin Trudeau. 

“LNG will indeed play a crucial role in striking a balance between energy security and decarbonization,” he said.  

“LNG Canada is a flagship project making maximum use of the latest technologies of Japanese companies.” 

Resource-poor Japan is the world’s largest LNG consumer, using the fuel to generate electricity, power industry, and heat homes and businesses. Qatar is one of Japan’s largest LNG suppliers. 

Kishida is expected to ask for Canadian LNG as the country looks to replace Russian gas supplies. Japan, a relatively short distance from the LNG Canada project compared to terminals on the U.S. Gulf Coast, imported nearly 75 million tonnes of LNG in 2020 – worth over $30 billion. 

Kishida’s visit comes just months after German Chancellor Olaf Scholz visited Ottawa also seeking Canadian LNG. Prime Minister Trudeau questioned the business case for shipping Canadian LNG to Europe.  

Germany, moving swiftly to reduce reliance on natural gas flows from Russia, built an LNG import facility in just 194 days and recently received its first shipment from the U.S. It also signed an agreement with Qatar to receive 2 million tonnes of LNG per year for 15 years starting in 2026. Germany will open a second LNG import terminal in January.  

While Canadian LNG can help alleviate the challenge in Europe, the larger long-term opportunity is in Asia, according to energy consultancy Wood Mackenzie. 

Module delivery, LNG Canada site, Kitimat, B.C., July 2022. Photo courtesy LNG Canada

“For Asian buyers, Canadian LNG is quite cost competitive due to its relatively low shipping and liquefaction costs compared to other global exporters,” says Dulles Wang, Wood Mackenzie’s director of Americas gas and LNG research. 

As of July 2022, Japan had 92 operating coal plants, 6 under construction and 1 in pre-construction, says Global Energy Monitor. Construction of new coal-fired power plants is occurring mostly in Asia, with China accounting for 52 per cent of the 176 gigawatts of coal capacity being built in 20 countries in 2021, says a New Scientist report.  

“If Canada increases its LNG export capacity to Asia, net emissions could decline by 188 million tonnes of CO2 equivalent per year through 2050 – or the impact every year of taking 41 million cars off the road,” according to Wood Mackenzie analysis. 

Asia drives 67 per cent of global LNG demand today, and that share is expected to grow to 73 per cent by 2050 as world consumption doubles to 700 million tonnes per year. 

“Starting in 2027, we see there’s going to be a global supply/demand gap that is probably going to grow to 120 million tonnes per annum and about 150 million tonnes per annum by 2035,” says Matthias Bloennigen, Wood Mackenzie’s director of Americas upstream consulting.  

“Developing western Canadian LNG would be helpful to alleviate the LNG demand that’s going to develop in the world.” 

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The Nisga’a Nation and its partners in a major proposed liquefied natural gas (LNG) project in British Columbia have been granted federal approval for exports through 2060 and beyond. 

The $10 billion Ksi Lisims LNG project, a floating terminal to be located about two kilometres from the Alaska border, has received a 40-year export license from the Canada Energy Regulator (CER).  

Ksi Lisims is seen as an opportunity for both economic benefits for Indigenous communities and help to reduce global greenhouse gas emissions.  

“The project has the potential to support the Nisga’a Nation and other Indigenous Nations’ goals of responding to climate change while allowing for economic development,” the project description says.   

Reducing emissions while meeting rising demand 

Driven by rising use in Asia, global LNG demand is expected to nearly double in the next two decades, reaching 700 million tonnes in 2040 compared to 380 million tonnes in 2021. 

Ksi Lisims would have export capacity of 12 million tonnes per year. It is one of the Canadian projects that, if built, could help reduce emissions in Asia by 188 million tonnes of CO2 equivalent per year – or the annual impact of taking 41 million cars off the road, according to Wood Mackenzie.  

Owned by the Nisga’a Nation 

The Nisga’a Nation says it has been working since 2014 to develop an LNG project in its treaty territory. 

“The Nisga’a Nation, like most rural Indigenous communities, struggles with consistently lower employment and labour force participation rates,” the project description says. 

“The direct and indirect economic benefits provided by the project will reduce social and economic disparities, improve the quality of life for all Nisga’a citizens, and enable the Nisga’a Nation to pursue economic self-determination.”  

The nation’s partners in Ksi Lisims are a consortium of B.C. and Alberta natural gas producers called Rockies LNG and a subsidiary of Houston-based LNG developer Western LNG. 

Broad benefits 

Startup is targeted by the end of 2027, which under the CER license would allow exports through 2067.  

Before the project can proceed, it will require federal and provincial approvals as well as an assessment under the Nisga’a Treaty. 

Ksi Lisims would have broad benefits. Initial estimates are that across Canada the project would generate 21,000 employment opportunities, $890 million in annual provincial and federal tax revenues, and approximately $2.5 billion in annual gross domestic product.  

Net zero emissions 

The floating terminal is designed to operate with net zero greenhouse gas emissions. This will be achieved by the short shipping time to Asian markets, using renewable hydropower from B.C.’s electrical grid, and low-carbon Canadian natural gas that is subject to strong methane emissions regulations.   

‘Enormous’ natural gas resource 

Central to the CER’s consideration of the long-term export license is whether the project would impact the availability of natural gas for the needs of Canadians into the future.  

“The presently assessed resource, Canadian and North American, from which Canadians’ gas requirements will be met during the applied-for license term is enormous, approximately some 5,000 trillion cubic feet,” the CER said.  

“Demand will drive production, rather than production being constrained by the resource.” 

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This time next year, construction could be complete on both the Trans Mountain Expansion and Coastal GasLink pipelines, setting up Canada for the first major deliveries of its responsibly produced oil and gas to the world. 

Overall, Coastal GasLink is 80 per cent complete and TMX has reached 73 per cent completion, according to new project updates. 

“As Coastal GasLink enters into its final year of construction, we are on track to deliver cleaner, Canadian-made energy to the world at a time it is needed most,” the project said in a statement.  

Coastal GasLink will deliver natural gas produced in northeast B.C. to Canada’s first liquefied natural gas (LNG) export terminal, being built at the Port of Kitimat.   

TMX will significantly increase capacity for Canada to export oil from Alberta through the Westridge Marine Terminal at Burnaby, B.C.  

Both projects will help meet growing demand for oil and gas, particularly in Asia.  

The International Energy Agency’s latest outlook sees natural gas demand in the Asia-Pacific region growing by 27 per cent between 2021 and 2050. Oil demand will also continue to grow, increasing by 10 per cent over the same period.  

The benefits to Canada are already increasing.  

This fall, Coastal GasLink and TMX together employed nearly 22,000 workers: 15,560 on TMX and 6,365 on Coastal GasLink. Indigenous people represent about 10 per cent of the workforce so far, Trans Mountain says.  

Combined, the two pipeline projects have spent more than $4.6 billion with Indigenous and local businesses (over $3.2 billion for TMX and more than $1.4 billion for Coastal GasLink).  

Indigenous communities aren’t just benefitting from project agreements and business contracts. They will become project owners. 

“When First Nations benefit, the whole region, the province, and Canada benefits. All of us benefit together,” said Chief Priscilla Mueller of the Saik’uz First Nation, one of 16 Indigenous communities in B.C. who will become 10 per cent equity owners of Coastal GasLink when it is completed.  

Meanwhile, Indigenous groups including Project Reconciliation, Nesika Services and Chinook Pathways are in the process of seeking an ownership stake in Trans Mountain once the expansion is completed.  

The projects are both hitting big milestones. Coastal GasLink has completed nine out of 10 major watercourse crossings, and Trans Mountain recently finished drilling a 2.6-kilometre underground tunnel connecting its Burnaby Terminal and Westridge Marine Terminal.   

New pump stations for the Trans Mountain expansion are over 90 per cent complete. 

“Across Alberta and BC, we are in the process of transitioning our completed facilities and pump stations over from Project to operations,” Trans Mountain CEO Dawn Farrell said in a statement.  

“This is a great step forward towards successful integration of the new pipeline later in 2023.”   

Trans Mountain anticipates completion to occur at the end of the third quarter of 2023, with commercial service following before the end of the year. Coastal GasLink expects to complete construction “by this time next year.”  

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Asia’s demand for liquefied natural gas (LNG) is rising fast as countries look for cleaner alternatives to coal while their economies expand.  

To significantly reduce emissions, the LNG should come from Canada, according to a new report by global research consultancy Wood Mackenzie.  

If Canada increases its LNG export capacity to Asia, net emissions could decline by 188 million tonnes of CO2 equivalent per year – or the annual impact of taking 41 million cars off the road, analysts wrote. 

“It’s like taking all of the cars in Canada away, if we were able to build all of those projects,” said Matthias Bloennigen, Wood Mackenzie’s director of Americas upstream consulting. 

“It reduces emissions globally, so it’s for the good of everyone.” 

To reach global net zero emissions by 2050, the largest reductions will likely need to come from the power sector, analysts wrote.  

The heart of the opportunity is switching from coal-fired to gas-fired power plants, particularly in Asia. 

Natural gas – traded globally as LNG – produces less than half the emissions of coal when used in power generation.  

And it’s a so-called “baseload” reliable fuel that can help offset the intermittency of wind and solar as renewables take on a larger share of the global energy mix, analysts wrote.  

“Gas is also cost-competitive and there are large global reserves in many countries, including Canada,” the report said. 

“If Canada does not export as much LNG as anticipated to northeast Asia, the region would need to rely on LNG from elsewhere that has a higher emissions intensity.” 

If Canada limits its LNG exports to one or two projects, total emissions in northeast Asia would increase by 121 million tonnes of CO2 equivalent through 2050, analysts wrote.  

But if Canada significantly increases LNG capacity to help northeast Asia reduce its reliance on coal, net emissions would decline by 5,459 mtCO2e over the same period.  

“LNG from Canada going into northeast Asia has lower emissions than LNG coming from many other global LNG exporters,” the report said.  

LNG from western Canada has average life cycle emissions intensity 12 kgCO2e/mmbtu, compared to 21 kgCO2e/mmbtu for projects in the United States.  

“With its high environmental standards and stewardship, Canada would be a great partner to fill the LNG demand gap in Asia,” Wood Mackenzie analysts wrote.  

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Canadian liquefied natural gas (LNG) exports to Asia could provide the annual net emissions equivalent reduction of removing every single car from Canadian roads, shows a new study from global energy research and consultancy firm, Wood Mackenzie.   

Click here to access the full report.

The study, commissioned by the Canadian Energy Centre, demonstrates how natural gas from Canada could help energy hungry Asian countries meet growing demand, while also contributing towards lowering net global emissions by supplanting coal.  

The report assesses the impact of Canadian LNG in reducing emissions from the Asian energy mix by 1) determining the potential Asian demand for Western Canada LNG; and 2) modeling different scenarios for Canadian LNG supply and Asian natural gas demand to quantify the impact of Canadian LNG on Asian CO2 emissions. 

To determine the potential Asian demand for Western Canada LNG, the report develops country specific gas market overviews, including supply, demand, gas infrastructure, and market access for Canadian LNG; additionally, the report compares the cost competitiveness of Canadian LNG with other energy sources and forecasts Asian LNG demand.  

Key findings include:  

• Global energy demand will continue growing in the coming decades 
• Countries need to reduce GHG emissions substantially to attain climate goals set out in the Paris Agreement 
• Natural gas has many advantages, particularly in the power sector 
• Canada is well-positioned to capitalize on this unique opportunity 
• Canadian LNG to northeast Asia will have a significant impact on reducing emissions 
• Imported Canadian LNG has lower emissions than domestic coal in northeast Asia for power generation 

Click here to access the full report.

When the International Energy Agency (IEA) called for an immediate halt to all new oil and gas investment worldwide back in May, it appears they neglected to account for two important realities: Africa and Asia.  

Those two continents have been in a population and economic boom for decades. The forecast is for more of the same in the future, to at least 2050. This is relevant given that the IEA and others would like to see oil and natural gas exploration, extraction and consumption stopped dead around the world sooner rather than later.  

A problem for the IEA and others who engage in what amounts to magical thinking: African and Asian demand for oil and natural gas soared in the last three decades. Absent a miracle transformation of technology—which the world’s leading expert on energy transitions does not see—consumers, businesses, and governments in those two continents and everywhere else will need oil and gas as far as the demographic and economic “eye” can see.  

To grasp Africa and Asia’s appetite for energy, consider both continents’ massive population and economic growth.  

Back in 1990, Africa’s population was 630 million people. That doubled to 1.3 billion by 2019 and is forecast to double again to 2.6 billion by 2050. In Asia, the population grew from 3.2 billion in 1990 to 4.6 billion by 2019, and the forecast is for another 950 million people in Asia by 2050. Or put another way, compared with 2019, Africa and Asia will add nearly 2.3 billion people to the planet by 2050.  

As for economic growth, between 1990 and 2019 the Gross Domestic Product (GDP) of the emerging economies in Africa and Asia combined has been, on average, above four percent annually. The ten largest African economies increased their collective GDP from $346 billion in 1990 to $1.8 trillion in 2019. In Asia, the GDP of the top ten economies rose from $4.6 trillion in 1990 to $27.8 trillion in 2019. 

That economic growth required energy. Between 1990 and 2018 (the most recent year available for this next statistic), the total annual consumption of oil and natural gas rose by 177 percent. In Asia, the annual consumption of oil and gas between 1990 and 2018 rose by 189 percent. 

Akin to what stock market watchers offer as a caveat, past performance is no guarantee of future returns. It is possible all the forecasts for African and Asian population and economic growth turn out to be wrong, that both continents suddenly cease growing, though we are aware of no such predictions.  

If Africa and Asia do zoom ahead, then consumers, businesses and governments will need much more oil and natural gas.  

That this is likely—renewables will not yet meet the energy need be it in India, Nigeria, or China and South Korea, among others—comes from the world’s leading expert on energy transitions, Vaclav Smil, professor emeritus of the environment at the University of Manitoba.    

Also relevant is if other energy sources can replace oil and natural gas. As Smil noted in a 2018 interview, “In the past, humanity has typically adopted energy sources that have greater ‘power density,’ packing more punch per gram and requiring less land to produce.”  

As Smil also noted, ignoring energy density by moving to all-renewable sources of energy could require countries to “devote 100 or even 1,000 times more land area to energy production than today… [which] could have enormous negative impacts on agriculture, biodiversity, and environmental quality.”  

Given Smil’s caution, a reasonable question to ask is: How likely is it that the public and policymakers in Africa and Asia will cease oil and natural gas usage or halt it at current demand? This is especially relevant given that as even the IEA admits, worldwide, 700 million people do not have access to electricity and 2.6 billion people do not have access to energy to cook a meal.  

In short, it should not be assumed that the population and economic growth already observed in Africa and Asia can somehow be magically delinked from oil and natural gas. The growing economies of Africa and Asia will be hard-pressed to find energy sources as efficient for their needs as oil and gas. 

Mark Milke and Ven Venkatachalam are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report Supersized: Demand for Oil and Gas in Africa and Asia. 

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Canadian oil is arriving to supply customers in Asia and India, confirming the opportunity for the Trans Mountain pipeline expansion’s access to global markets as demand continues to grow.

But many of the tankers aren’t leaving from Canada’s shores. They’re being loaded from terminals on the U.S. Gulf Coast, according to price reporting agency Argus Media.

“All of this discussion of Canadian crude in Asia is not academic,” Argus vice-president Jeff Kralowetz told an industry webinar on May 20.

“Western Canadian Select is becoming one of the deliverable grades at the Chinese coast that competes head-to-head with other heavies like [Iraq’s] Basrah Medium and Basrah Heavy. WCS is a player.”

Argus reports that in March, nearly 170,000 barrels per day of Canadian crude was re-exported out of the U.S. Gulf Coast. Most of it, almost 100,000 barrels per day went to China, 57,000 barrels per day to India and about 16,000 barrels per day to Korea.

That’s about one quarter of the 630,000 barrels per day Canada exported to the U.S. Gulf Coast market in the same month.

Absent the Keystone XL pipeline, which would have been a direct pathway from Alberta to the U.S. Gulf Coast, Canadian oil is able to reach the market on Enbridge’s smaller, connecting pipelines Flanagan South and Seaway. And by rail.

Oil sands producer MEG Energy now moves the majority of its barrels to the U.S. Gulf Coast using Flanagan South and Seaway. The company has 100,000 barrels per day contracted on the system, which is nearly one-third of Seaway’s full capacity on the final leg to Texas.

MEG reports that in 2020, its oil sold for $9.55 more per barrel on average at that destination compared to in Edmonton.

MEG’s Access Western Blend crude is similar to WCS, which Argus reports is selling at a close price to competing global grades in the Asia-Pacific market.

The Argus Crude forward price for WCS delivered to China this July is just $1.47 less per barrel than Iraq’s Basrah Heavy.

“We’ve seen, and our peers have seen, very significant demand from Asian refineries from both China and India. That’s been drawing those barrels out of the Gulf Coast, as well as the [Gulf Coast] refiners,” MEG chief financial officer Eric Toews told analysts when presenting the company’s year-end results.

“We don’t see that structurally changing as we move through 2021 and frankly, into 2022 and onward.”

Improved commodity prices tied to the global recovery from the COVID-19 pandemic have boosted the earnings outlook for Canadian oil and gas producers. In fact, companies are expected to see a record $70 billion in free cash flow this year, according to ARC Energy Research Institute.

That’s good news for investors, who globally are increasingly focused on benefits like dividends and share buybacks, and debt reduction, over growth. But even if that trend wasn’t the case, Canadian oil and gas companies are challenged to invest in new projects that generate jobs and new revenues, says Phil Skolnick, New York-based analyst with Eight Capital.

It’s all a matter of lack of pipeline access, which in particular the Trans Mountain Expansion will help address, he says. The project, which is approaching peak construction with 7,875 people working along the route, has long-term shipping contracts from oil sands producers including MEG Energy.

“What would be really good for employment would be TMX,” Skolnick says.

The U.S. Energy Information Administration forecasts that global oil and liquids demand will rise to 101.4 million barrels per day in 2022, outpacing demand prior to the COVID-19 pandemic.

Without increased supply from Canada, that demand will be met by other jurisdictions including the OPEC+ producers, who are not as transparent or focused on environmental, social and governance performance.

The Trans Mountain expansion is expected to be in service in early 2023.

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