The history of liquefied natural gas in Canada is littered with multibillion-dollar schemes that churn through years of development but eventually founder when backers realize a project’s economics don’t add up.
Recent examples are big and small.
Failing to attract billions of dollars from investors to build an LNG plant is typical, in Canada and elsewhere. The projects are complicated, the global market is intensely competitive and the outlook for future demand is modest.
In some ways, the story of Énergie Saguenay, a proposed $9-billion export plant north of Quebec City that would have shipped Alberta gas overseas, is the same. Backed by GNL Québec, another startup, it was struggling to drum up capital.
What’s different is, on July 21, the Quebec government rejected the plan.
The project, Quebec’s Environment Minister said at a press conference in Saguenay, “has more disadvantages than advantages.”
The political-regulatory rejection – rather than the quiet end of a plan because of a lack of money – highlights the environmental negatives of LNG.
The oil industry often touts Canada’s natural gas exports as good for the environment, on the theory they will displace coal burned for electricity in other countries. Royal Dutch Shell claimed this in 2018, when it undertook construction of Canada’s only LNG plant, in northwestern B.C., saying the project “will be critical as the world transitions to a lower carbon energy system.”
What oil and gas companies do not say is whether LNG exports simply perpetuate the burning of fossil fuels and slow the necessary jump to renewable energy, as urged by the International Energy Agency.
The thesis also ignores major shifts in the international market. In July, Japan said it aims to more than double its use of renewable energy in power generation, to 38 per cent, by 2030. The target is far higher than Japan’s previous 2030 goal of 22 per cent.
GNL Québec made the same claims as Shell. It said Énergie Saguenay would help reduce global greenhouse gas emissions, as its gas displaced coal.
Quebec’s environmental review did not come to the same conclusion. In March, the review found that the project’s benefits would not outweigh the negatives. It also questioned whether the claim of Canadian gas displacing coal elsewhere was real.
What is certain is Canadian GHG emissions would have shot higher had the project proceeded. The review said it would produce 7.9 megatonnes of annual emissions, from the drilling, the pipeline to move the gas and the plant to export it. This rivals the emissions from a large oil sands mine and bitumen upgrader.
Over all, Énergie Saguenay would have increased Canada’s total emissions by 1.1 per cent – the opposite direction of where they need to go. (The review estimated further annual emissions, beyond Canada’s borders, of 37.6 megatonnes from shipping the gas and burning it overseas.)
The regulatory rejection sharpens focus on tough decisions that will face Canada, and the world, in the years ahead.
Canada has for years benefited from its oil and gas industry. The sector’s contribution to economic growth has slowed since the mid-2010s oil price crash, but the business of fossil fuels – the source of many thousands of well-paid jobs – has been good for Canada’s bottom line.
To say no to potential money on the table comes with a cost. But to say yes, as the review in Quebec showed, also comes with a considerable cost. These are not easy decisions. But given the worsening spectre of climate heating – and the call from the IEA to stop investing in new oil and gas production – it is becoming more difficult for fossil fuels to win the argument based on economic growth potential alone.
Oil and gas greatly increased Canada’s wealth over the past two decades. LNG has been touted by industry and some governments as another windfall to come, one that could even help reduce global emissions. But the veracity of that promise, and the ever-increasing risks brought by climate heating, are rapidly changing the calculus.
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