Canadian complacency could risk a once-in-a-generation LNG opportunity

BC LNG faces competition on all sides as Alaskan and Mexican projects move forward.

US President Joe Biden, whose energy department recently approved a major Alaskan LNG project. Photo from Reuters.

When it comes to foreign competition for Canada’s natural resource opportunities, we often find ourselves looking south. Now, BC LNG might find itself challenged within its own backyard.

To the south, the US has seven active LNG-for-export plants, three more under construction, and another 15 at various stages in planning or approvals processes.

Meanwhile, the Globe and Mail reports that Mexico’s new LNG ambitions are set to eclipse Canada. That country plans eight LNG plants, and four of them would be on Mexico’s west coast.

In the US, the major plants are in the Gulf of Mexico. These days, they are overwhelmingly focused on shipping LNG to Europe, (including some Canadian natural gas processed into LNG by the US).

The Gulf Coast plants are still sending some shipments to Asia and may begin later this year to send more. But the Gulf plants (and Mexico’s) will have to compete with our natural advantages on the northwest coast.

Those BC advantages:

  • BC plants will be only 10-12 days sailing for an LNG carrier to reach Asian buyers. From the Gulf Coast, though, it’s 20-24 days, meaning more money spent on the vessel and the voyage, and more emissions.
  • Gulf Coast producers face hefty costs for moving an LNG carrier through the Panama Canal to reach Asian markets. Canal fees now run more than US$500,000 for a loaded Asia-bound carrier and more than US$420,000 for a carrier returning empty. BC shippers don't have to pay those extra days of sailing time or require the use of the canal.
  • Because of BC’s cooler climate, its production costs in chilling natural gas will be a little lower than in Gulf Coast.

But with all its advantages, BC faces a potential threat from a proposed US$39-billion LNG-for-export plant in Alaska.

Right now, that plant at Nikiski, near Anchorage, and a potential 1,290-km gas pipeline to feed it, are still proposals on paper from the state-owned Alaska Gasline Development Corporation.

But the US Department of Energy recently gave the project a green light for exports, following a 10-year environmental permitting process. The US Federal Energy Regulation Commission and the State of Alaska had already given the go-ahead to build and operate the facilities.

The LNG would be exported mainly to countries in Asia to compete with Russia. But – critically – that means also with BC.

One of the first things the developers noted is that an Alaska plant would be only 7-9 days shipping time away from Asian markets compared to 10-12 days from BC.

The proponents hope the facility will be operational by 2030 if they get investment money and all required permits. That’s a much faster schedule than anyone in Canada has been able to execute, thanks to onerous red tape from provincial and federal regulators.

The Nikiski plant would produce 20 million tonnes of LNG a year, compared with 14 million from Phase One of LNG Canada, which hopes to be in production in mid-2025, or from Woodfibre LNG’s planned 2.1 million tonnes a year. The Haisla Nation’s Cedar LNG proposal, in addition, would produce three million tonnes, while the Nisga’a Nations Ksi Lisims project proposes 12 million tonnes.

LNG Canada made history as the largest investment made in a major project in Canadian history. Not only does the Nikiski plant plan to be over 25 percent larger, but it also proposes to produce nearly as much LNG as that project combined with all of its competitors.

Our governments need to take all this into account: The harder they make it for Canadian LNG development and exports, the easier they make it for the competition.

That means lost jobs, investment and government revenue – especially at a time of what some are calling shrinking state capacity. Simply put, Canadian governments are running out of money. Without growing energy exports, especially LNG, expect to see shrinking government services and longer wait times.

It also means turning back the clock on perhaps the most notable Indigenous economic development opportunities this century: Indigenous-supported or led projects like Cedar LNG or Ksi Lisims LNG. These projects and others like them could provide desperately needed own-source revenue that would allow these Nations to pursue a brighter, more independent future within Canada.

If the BC and the federal government won’t loosen the red-tape choking domestic LNG proposals, they may find themselves losing out on a once-in-a-generation opportunity to fight climate change, contribute to meaningful economic reconciliation and secure a bright economic future for their citizens.

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