Skip to main content

LNG Canada's export terminal, including what will be a massive storage tank for liquefied natural gas, under construction in Kitimat, B.C., in January, 2021.Handout

Canada has ample reserves of natural gas but the country finds itself on the sidelines as a global coalition plans to boost shipments of the fuel in liquid form to Europe in case Russia halts its exports.

With Russian troops positioned for a potential invasion of Ukraine, European natural gas prices have surged this week on concerns over declining storage levels in Europe.

Russia has supplied nearly 40 per cent of Europe’s natural-gas requirements in recent years, mostly through pipelines and only a relatively small amount is shipped as liquefied natural gas.

The United States shipped a record amount of LNG to Europe in December, and the Biden administration has been holding talks with major producers such as Qatar and Australia about intervening to send more LNG to Europe in a bid to alleviate fears of running out of the fuel.

Only one Canadian export project, Shell PLC -led LNG Canada, is under construction. That $18-billion terminal in Kitimat, B.C., would ship LNG to Asia and won’t open until 2025 at the earliest.

“Canada can’t help that global coalition,” Dan Tsubouchi, chief market strategist at SAF Group, said in an interview from Calgary on Wednesday. “There’s nothing in Canada that can be done that could help them in 2022 or 2023 or 2024.”

Ambitious long-term plans to ship LNG to Europe from Nova Scotia, Quebec and New Brunswick have been either outright cancelled or suspended indefinitely.

Of the 24 Canadian LNG proposals tracked by federal authorities five years ago, there were three in Nova Scotia, two in Quebec and one in New Brunswick. The rest were in British Columbia, with all of those focused on exporting natural gas in liquid form to Asia.

Pieridae Energy Ltd.’s Goldboro LNG venture in Nova Scotia is among the projects that appeared promising five years ago. “The last one on the East Coast to have any hope was Goldboro, and they basically haven’t been able to make a go of it,” Mr. Tsubouchi said.

Natural-gas pipeline proposals in the U.S. Northeast and Canada’s East Coast never got off the drawing board while dreams of a new cross-Canada route never materialized either.

Only four proposals for LNG export sites remain active in British Columbia: Woodfibre LNG, Cedar LNG, Ksi Lisims LNG and expansion plans by a terminal called Tilbury LNG, which is currently focused on production for domestic use and storage.

Tight supplies of natural gas in Europe last October already had raised the prospect of energy shortages. Adding in the rising tensions between Russia and Ukraine, industry experts are warning of a full-blown energy crisis this winter, especially if there is a prolonged cold snap in Europe.

There also would be limitations to how much the United States, Australia, Qatar and other countries could contribute because natural gas for export would first need to be supercooled into liquid form and loaded onto Europe-bound LNG tankers.

The role of natural gas as a transition fuel has been increasingly questioned over the past three years, including at last fall’s United Nations climate conference in Glasgow, Scotland. But weeks after that conference ended, the European Union said this month that natural gas could be considered as a sustainable investment, under certain conditions.

In 2022, natural gas remains an important fuel for Europe, given the bumpy efforts to shift to a greener economy, Mr. Tsubouchi said. “The challenge for Europe is they need gas today,” he said. “The reality check is setting in. Natural gas will probably be a transition fuel, but grudgingly.”

Industry experts forecast that LNG will continue to play a crucial role globally for the next 10 years, though the uncertainty over supplies in Europe could disrupt shipments in Asia in the short term.

Gavin Thompson, vice-chairman of energy for Wood Mackenzie’s Asia Pacific unit, said Asia is already facing challenges meeting demand. “Despite ongoing pandemic restrictions, sky-high spot prices and rising competition from renewables, the region’s gas consumption will grow at almost 3 per cent a year over the next decade,” Mr. Thompson said in a research note.

“As Asian demand has climbed, new long-term LNG contracting rebounded to its highest level in five years in 2021, with Asian buyers accounting for 85 per cent of global contracting.”

The Institute for Energy Economics and Financial Analysis (IEEFA) said there are still chances for policies by governments to spur the development of non-fossil-fuel options, including in markets such as India.

“High and volatile LNG prices are an opportunity for India’s gas-dependent industries and the city gas distribution network to switch to cleaner, non-fossil-fuel alternatives like biogas and biomethane,” the IEEFA said.

Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.