Years of successful deliveries of Canadian propane to Japan raise confidence in the upcoming LNG trade between the two countries, says the chair of the Institute of Energy Economics, Japan (IEEJ).

Thanks to new export facilities in Prince Rupert, B.C., Canada went from zero propane exports to locations outside the United States in 2017 to nearly 34 million barrels of propane last year, according to the Canada Energy Regulator.

Canada is now Japan’s second-largest supplier of propane, according to World Bank data, where uses include automobiles, electric power generation and petrochemical feedstock.

“The long history of reliability in the supply of propane from Canada serves as the basis for the high expectation for Canadian LNG to Japan,” said IEEJ chair Tatsuya Terazawa.

“We see LNG from strategic partners like Canada as important to our energy security and our country’s efforts to significantly reduce our dependence on coal as well as to provide dispatchable power to deal with the intermittency of renewable power.”

During a recent trade mission to Japan, leaders from Canadian organizations Energy for a Secure Future and the First Nations LNG Alliance signed a memorandum of understanding with IEEJ to advance energy trade.

“There is a real commitment between the three organizations to work together to support Canadian LNG projects being successfully built and getting our product to markets in Asia that need energy security and low-emission energy options,” said Shannon Joseph, chair of Energy for a Secure Future.

“It is an extremely positive thing.”

The agreement comes at a pivotal moment with multiple Canadian LNG projects in various stages of construction and advancement, and 10 per cent tariffs on U.S. imports of Canadian energy now in place.

“Canada must act now and diversify our energy systems and begin the process of exporting to other countries who are in desperate need of our resources,” said First Nations LNG Alliance CEO Karen Ogen.

With the LNG Canada terminal expected to ship its first cargo of LNG in July and two smaller projects, Cedar LNG and Woodfibre LNG, under construction, Canadian LNG will soon be able to service an expected 60 per cent increase in world demand by 2040, mostly driven by Asia.

By 2040, Japanese LNG imports could rise as high as 74 megatonnes per year compared to 66 million tonnes in 2024, according to Japan’s Ministry of Trade, Economy and Industry.

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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.” 

The unaltered reproduction of this content is free of charge with attribution to Canadian Energy Centre Ltd.