Shell PLC-led LNG Canada, the country’s first LNG export terminal, started shipping last June to Asia from Kitimat, B.C.Jesse Winter/Reuters
Canada could bolster supplies of liquefied natural gas to Europe by increasing exports from British Columbia to Asia, TC Energy Corp.’s chief executive officer says.
François Poirier describes it as a domino effect in the world’s supply chain, with a circuitous but economically effective way to help quench Europe’s thirst for LNG – Canada targeting Asia instead of physically exporting to Europe.
In response to the Middle East turmoil, which has upended energy exports, Mr. Poirier’s logic is that by concentrating on the West Coast supplying more LNG to Asia in the future, Canada would then free up other countries to send additional fuel to European markets.
“There are dominoes in that whole global supply chain, and so it does absolutely help Western Europe,” the CEO of the energy infrastructure company said in an interview.
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Shell PLC-led LNG Canada, this country’s first LNG export terminal, started shipping last June to Asia from Kitimat, B.C.
The Coastal GasLink pipeline, operated by Calgary-based TC Energy, is transporting natural gas from northeastern B.C. to Kitimat.
LNG exported from B.C. to Asia takes eight to 10 days, with a much shorter route across the Pacific Ocean when compared with shipments originating from the U.S. Gulf Coast to Asia taking 18 to 20 days, via the Panama Canal.
Qatar, the second-largest LNG exporter after the U.S. last year, halted its production in early March after the U.S. and Israel began assaults on Iran on Feb. 28, resulting in the virtual shutdown of the Strait of Hormuz. About 20 per cent of world’s LNG normally passes through the strait and most of it is en route to Asian markets.
“With the Strait of Hormuz being the choke point that is so significant to the world, from the West Coast of Canada to Asia is eight days instead of 18 days from the U.S. Gulf Coast, and it stays away from that choke point,” Mr. Poirier said.
Sailing from B.C. to Western Europe could take roughly 30 days, depending on bottlenecks at the often-congested Panama Canal. By contrast, it takes half that amount of time for shipments from the U.S. Gulf Coast to cross the Atlantic Ocean to Europe.
In the European market, LNG traders seek to optimize shipping routes, said Shannon Joseph, chair of Energy for a Secure Future, a coalition backed by the Canadian natural gas industry.
“They don’t want to send a boat all over the place,” Ms. Joseph said. “The name of the game is to shorten the travel distance.”
Canada must seize opportunity to ramp up LNG exports to Asia, TC Energy CEO says
Two smaller facilities in B.C. that are also planning to deliver to Asia – Woodfibre LNG near Squamish and Haisla Nation-led Cedar LNG in Kitimat – are under construction. Woodfibre expects to finish construction by late 2027 and Cedar by late 2028.
If LNG Canada forges ahead with its Phase 2 expansion plan, it would double the Kitimat terminal’s capacity to 30 million tonnes a year by the early 2030s.
LNG Canada’s co-owners expect to make their final investment decision (FID) by the end of this year on whether to forge ahead with constructing Phase 2 at the Kitimat site.
“They’ve also said that the war in Iran has – in terms of a macro backdrop – increased the attractiveness of the expansion project,” Mr. Poirier said.
Joe Calnan is the vice-president of energy at the Canadian Global Affairs Institute, a charity and independent think tank. He said energy traders can arrange financial swap contracts globally that trigger the de facto delivery of LNG to Europe, instead of having Canada physically export to European markets.
“You don’t necessarily need to have that specific supply going to that specific demand,” Mr. Calnan said.
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Financial swaps have an important role to play in the market, Federal Energy Minister Tim Hodgson said during a trade mission to Germany last August. “Many of the buyers are prepared to buy LNG off the West Coast of Canada and trade those products in the international market for LNG,” he said.
During the Middle East conflict, benchmark LNG spot prices doubled during March, but the rally fizzled even as the Strait of Hormuz’s turmoil lingered. Still, recent Asia-Pacific spot LNG prices were 40 per cent higher than before the war in Iran started, while the European prices were up 24 per cent.
For years, Asian LNG buyers have been paying a premium to obtain supplies from Louisiana and Texas, where shipments have to navigate the Panama Canal.
Ksi Lisims LNG, a project backed by the Nisga’a Nation in northwest B.C., would create an export facility for the fuel to be shipped to Asia from Nisga’a territory.
Ksi Lisims expects to decide later this year whether to proceed with construction of the facility. If it goes ahead, the planned Prince Rupert Gas Transmission pipeline would supply the natural gas.
Paris-based TotalEnergies SE and a unit of London-based Shell have signed agreements to buy LNG from Ksi Lisims, accounting for a combined one-third of the project’s planned capacity of 12 million tonnes a year.
More such agreements are anticipated later this year. “There’s been interest in Ksi Lisims LNG from buyers all around the world,” Ksi Lisims spokesperson Rebecca Scott said.
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Climate activists say the focus on fossil fuels such as LNG ends up delaying the global transition to renewable energy.
They point to a recent report by Laura Minet, an assistant professor at the University of Victoria. She obtained regulatory documents showing that for the four-month period ending Jan. 31, LNG Canada’s volume of flaring from the combustion of natural gas was 40 times higher than what the project’s permits allow, harming the environment.
“The flare stack is not well-designed, and they have to flare a lot higher than normal,” Prof. Minet said.
The high level of flaring is at odds with Ottawa and the B.C. government touting LNG Canada as being cleaner for emissions intensity than most facilities in the world when measuring the amount of carbon dioxide equivalent for each tonne of LNG produced, she said.
In a series of community notices to Kitimat residents over the past 10 months, LNG Canada has cautioned local residents about increased noise and smoke stemming from unplanned and planned flaring.
Since early March, LNG Canada has posted 13 notices of unplanned flaring and two for planned.
Asked about the high level of flaring, LNG Canada spokesperson Paul Hagel said the facility is operating safely and responsibly.
“The LNG Canada facility is in its early operations phase, and we continue to tune the equipment to real-world conditions,” he said in a statement.