Global LNG markets have been in overdrive this winter — it seems the world just can’t get enough of the super-cooled natural gas. Moreover, with long-term LNG demand growth in Asia appearing robust well into the next decade, the time would seem ripe to reconsider expanded export opportunities from Canada’s West Coast, one of the closest and potentially largest sources of LNG for Asian buyers. With one major LNG export project already under construction, at least one more awaiting the final go-ahead, and two more serious proposals having emerged last year, Canada’s outlook for additional LNG sales to Asia is clearly bright. In today’s RBN blog, we discuss recent developments regarding Canadian LNG projects.
The prospects for exporting LNG from British Columbia’s West Coast have been waxing and waning over the past decade. At one point in the early 2010s, more than a dozen projects were on the drawing board with a combined liquefaction capacity of 25.2 Bcf/d, or 50% higher than all of Canada’s current natural gas production (see Slip Sliding Away). In the years since, North American gas and global LNG markets have evolved, BC’s regulatory and environmental hurdles have been higher, and Western Canada has faced a period of very weak natural gas pricing (from 2017 to 2019). With the passage of time, all but one project fell by the wayside, leaving just the Shell-led LNG Canada export project, which has been under construction at Kitimat, BC, since late 2018 with commercial start-up slated for mid-2025.
Over the past 12 months, global LNG markets have been much tighter, pushing prices to record highs. Lately, most of the focus has been on the increased demand for LNG in Europe (see Upside Down), particularly since Germany scrapped the Nord Stream 2 gas pipeline from Russia. With Europe sourcing an increasing portion of its gas as LNG, it has been bidding higher for cargoes that might have gone to Asia otherwise. Meanwhile, natural gas demand on the U.S. West Coast — a significant market for Western Canadian gas — is expected to wane in the long-term as the region increasingly eschews hydrocarbons. On top of that, BC’s natural gas production has been near record highs.
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