Summary
- The coast of British Columbia is seeing a significant build-out of LNG infrastructure, with four export facilities in various stages of development.
- The region benefits from proximity to natural gas production and access to renewable energy, making Canadian LNG production less carbon intensive.
- Amid strong global demand, Asian markets are a natural destination for Canadian LNG, given shorter transportation times.
Despite ample natural gas reserves, Canada is not currently an exporter of liquefied natural gas (LNG). However, by the end of this decade, Canada could become a notable LNG exporter. That is due to companies capitalizing on advantages provided by the country’s West Coast. This note looks at the LNG projects under development in British Columbia (BC) and how they will help meet growing demand from Asia.
Coastal British Columbia Is a Budding LNG Hub
With proximity to both natural gas production and deep-water ports, coastal BC is well-situated for LNG export facilities. These advantages are comparable to the U.S. Gulf Coast, where most U.S. LNG export capacity is located (read more). There are currently four LNG export projects in development in BC – LNG Canada, Woodfibre LNG, Cedar LNG, and Ksi Lisims LNG.
LNG Canada, the first LNG export project in Canada, is a joint venture comprising Shell (SHEL), PETRONAS, PetroChina, Mitsubishi Corporation, and KOGAS. The project is over 85% complete. It is expected to produce up to 1.8 billion cubic feet per day (Bcf/d) of LNG when it begins shipments around 2025. Woodfibre LNG is jointly owned by Singapore’s Pacific Energy Corporation at 70% and Enbridge (ENB CN), at 30%. It will add 0.28 Bcf/d in LNG export capacity upon expected completion in 2027.
The two other projects await a final investment decision (FID). That is the point where financing has been secured and construction can begin. Cedar LNG, a partnership between Pembina Pipeline Corporation (PPL CN) and the Canadian indigenous Haisla Nation, aims to reach an FID by year-end. However, that could be pushed to early 2024. Cedar LNG will be a floating LNG facility, expecting to export up to 0.39 Bcf/d. Ksi Lisims was launched by the Nisga’a Nation, Rockies LNG, and Western LNG. Construction on the project, which has a proposed capacity of 1.58 Bcf/d, could begin in 2024. It will be operational by 2027 or 2028.
If all four projects proceed, export capacity would be around 4.1 Bcf/d. That is significant, considering 6.4 Bcf/d of natural gas is expected to be produced in BC in 2023. However, building LNG capacity in Canada comes with some challenges related to environmental regulations. In March, the BC government issued a new framework for proposed LNG facilities, which introduced an emissions test and mandated that new projects have a credible plan to reach net-zero emissions by 2030.
The development of LNG export facilities also requires midstream investment in gas pipeline capacity between production fields in eastern BC and the Western Coast. TC Energy’s (TRP CN) Coastal GasLink Pipeline is a newbuild, 2.1-Bcf/d gas pipeline that is expected to be completed this year. Coastal GasLink, which could be expanded to up to 5 Bcf/d with added compression, will initially supply gas to LNG Canada. A connector is being built to Cedar LNG. Additionally, Ksi Lisims signed an agreement with TRP related to its previously shelved Prince Rupert Gas Transmission project for potential gas supply to the export facility.
Asia Eyes Canada as a Low-Carbon LNG Supplier Closer to Home
Asian markets are a natural destination for Canadian LNG given geographic proximity. It can take around eight days for vessels to reach northeast Asian markets from Canada. That compares to roughly 20 days from the U.S. Gulf Coast via the Panama Canal. Transportation has become more challenged by a bottleneck at the Panama Canal. That’s causing some shippers to choose alternative routes to Asia, which are longer and extend transportation times.
Asia is the largest destination for LNG exports and has over 80 Bcf/d of import capacity. That is more than Europe and North America combined. Additional import capacity is being built, primarily in China. Although the Philippines and Vietnam (which began importing LNG in 2023) are also developing incremental regasification capacity.
Nearly all the LNG export capacity being developed in Canada is expected to be sold to Asian markets. At LNG Canada, the JV partners are responsible for arranging the input gas as well as the offtake for their share of the project. Four of the five partners are based in Asia. They include state-owned energy companies of China, South Korea, and Malaysia. In March, Cedar LNG signed a memorandum of understanding with ARC Resources for about half of its capacity in long-term liquefaction services. ARC Resources will supply 0.2 Bcf/d of gas to Cedar LNG and plans to market the LNG targeting Platts Japan Korea Marker price. Ksi Lisims also aims to export its LNG to markets in Asia. The output from Woodfibre LNG, which is fully contracted by bp (BP), will likely all end up in Asia as well.
In addition, Canadian LNG expects to be less carbon-intensive than the global average. This can be attractive for buyers like Japan and Korea that are seeking lower carbon LNG. Woodfibre LNG aims to be carbon neutral by the time the project is operational. Ksi Lisims LNG plans to achieve net-zero emissions within three years of startup. LNG Canada and Cedar LNG will also be producing low-carbon LNG. Overall, the projects will be reducing emissions largely through carbon offsets and the use of hydroelectric power.
Some of the companies developing Canadian LNG export capacity or marketing the offtake are included in the Alerian Liquefied Natural Gas Index (ALNGX). These are SHEL, ENB, PETRONAS, and KOGAS (read more). Canadian midstream companies ENB, TRP, and PPL are among the top 10 constituents of the Alerian Midstream Energy Select Index (AMEI).
Bottom Line
Canadian LNG projects are moving forward. The first LNG exports are anticipated in 2025. Canada’s proximity to Asia, ample natural gas reserves, and low-carbon energy sources represent distinct advantages for these projects.
Related Research
U.S. LNG Projects Advance Even as Global Prices Slump
Global LNG Market Poised for Long-Term Growth
ALNGX is the underlying index for the Roundhill Alerian LNG ETF (LNGG). AMEI is the underlying index for the Alerian Energy Infrastructure ETF (ENFR) and the ALPS Alerian Energy Infrastructure Portfolio (ALEFX).
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