LNG Canada: Canada's First LNG Export Terminal and What it Could Mean for the Future
Written by: Sonja Matthews
Edited by: Kyra Odell
What is LNG?
LNG is a liquefied natural gas, a fossil fuel that is often marketed as being a more sustainable energy source for its lower emissions intensity compared to fossil fuels such as coal. Currently, around 30% of Canada’s energy mix is produced via natural gas, surpassed by coal at around 50% (Statistics Canada, 2021). Breaking it down by province and territory, the Alberta and Saskatchewan energy grids are the most reliant on natural gas and emit the most (Canada Energy Regulator, 2023). In Canada, LNG is mostly used residentially to heat homes or generate electricity.
About the LNG Canada Project
Although there have been many proposed projects in the past, LNG Canada, located in Kitimat B.C, will be Canada’s first LNG export terminal upon its completion in 2024. LNG Canada is a joint venture partnership between 5 major energy companies: Shell, PETRONAS, PetroChina, Mitsubishi Corporation and KOGAS. Natural gas will be supplied to the terminal via the Coastal GasLink Pipeline project (expected completion by the end of 2023) and will then be cooled to be shipped as LNG to Asian markets.
Image: Coastal GasLink Project Approved Route and connection to LNG Canada in Kitimat (Source: Coastal GasLink)
LNG Canada is currently approved for construction of Phase One, costing $43.8 billion, thus making it Canada’s largest private investment (National Observer, 2023). Phase 1 will see the exportation of 6.5 million tonnes per annum (mtpa) of liquid natural gas. However, as the project’s CEO discusses in the company’s most recent quarterly report, there is a proposed Phase 2 in which they hope to expand exportation to 28 million mtpa (IEA 2022). However, this expansion faces some controversy from professionals in the green energy community. While Phase 2 hopes to find electrification solutions to the terminal’s energy demands, LNG Canada will initially be burning its own gas to power itself, making Phase 1 already British Columbia’s largest emitter of carbon pollution (Simmons 2023). Phase 2 will produce approximately 13 megatons of emissions annually, which is over 20% of British Columbia’s emissions from 2020.
So, what’s the case for LNG Canada? As LNG Canada’s website states, their business case centers around two main arguments for the importance of the terminal: the economic case and the environmental case.
The case for LNG Canada
According to the International Energy Agency (IEA), Canada’s LNG sector is “poised to take off”, with Canada set to forge energy ties with Asia and create value from the west’s large shale gas resources. This echoes a statement made by Jason Klein, LNG Canada CEO, who stated in an interview with the Globe and Mail last year that “Canada is on the cusp of becoming the next big supplier of LNG and we are going to be providing reliable, responsibly sourced LNG to the world at a time when many of our allies and partners are looking for that” (Jang 2023).
Since 2012, Canada has been looking to begin construction on LNG terminals, but all except LNG Canada, and most recently a smaller terminal in Woodfibre, B.C, have been denied approval to do so. Canada looks to capitalize on these gaps, providing to Asian markets and to the global market left by the exit of Russian gas, while simultaneously boosting the economy.
However, the contention against LNG Canada becomes more pronounced when scrutinizing the assertion that the new terminal will bolster the energy transition in Asia. In a statement on their website, LNG Canada claims that their terminal can “greatly reduce those countries' greenhouse gas emissions, resulting in significant net global greenhouse gas reductions while significantly improving air quality”. Can this really be the case when a new report based on Intergovernmental Panel on Climate Change (IPCC) data concludes that the global consumption and production of oil and gas needs to be reduced by 30% by 2030 (IISD, 2022)?
Does LNG have a role in Canada’s energy transition and the global pathway to net-zero?
Despite global demand for natural gas having been increasing for many years at a rapid pace, the IEA forecasts that this trend will decrease in the next couple years, even with global supply ramping up by 2026. In fact, they project that natural gas consumption will reach its peak this year, in 2023, before declining (IEA, 2023).
In an LNG conference this past summer in Vancouver, officials remarked that not only is the gas shortage caused by the Ukraine War unlikely to extend past 10 years, but that increasing renewable energy production will slash demands of LNG past 2030 (Global News, 2023).
The IEA’s new pathways report, which discusses how the world can reach net zero by 2050, puts these statistics in perspective. To reach net zero, global renewable power capacity needs to be tripled by 2030 (IEA, 2023). The report remarks that in their most recent forecasting for net zero, policy-driven ramping up of clean energy capacity is required, which would decrease fossil fuel demand by 25% by 2030 and reduce emissions by 35%. Contrasting this with global emissions reaching an all-time high last year, it’s hard to see where natural gas can fit into the world’s future energy transition.
Natural gas, as the IEA acknowledges in the same report, will play a “limited role” in the global energy transition. Natural gas currently provides a source of baseline power for renewable energy and is used in many places as a fuel to heat homes.
However, under the IEA’s projected pathway, the report states that to achieve net zero by 2050, “no new long-lead-time upstream oil and gas projects are needed” (IEA, 2023). Even under their more conservative Stated Policies Scenario that follows stated government policies, the momentum behind gas in developing countries, particularly South and Southeast Asia, has slowed. This poses a potential blow to the use of gas as a transition fuel – a narrative pushed by many new LNG projects, including LNG Canada itself.
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Simmons, M. (2023). LNG Canada eyes electrification as planned expansion would send B.C. emissions skyrocketing. The Narwhal. https://thenarwhal.ca/lng-canada-project-emissions-bc/
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