This week, Canada marked a milestone as the first tanker set out from northern B.C. carrying liquefied natural gas bound for markets in Asia.
Industry members billed the export as a “truly historic moment” in comments to Reuters.
And while Canada is rich in natural resources, including those like natural gases, which can be used for producing electricity, there are still differing views about the long-term benefits for the economy.
Natural gas is currently produced and distributed within Canada and to the United States mainly via pipelines, but new technology means it can also be processed into a liquefied form, which makes it possible to ship it to other parts of the world.
Although LNG Canada highlights the benefits for economic and job growth in Canada, others warn that the industry’s current trajectory may not be the best way forward if the government is set on meeting its own emissions goals.
At the same time, Canada is in the midst of work to broaden its trading to make the country less reliant on the United States amid U.S. President Donald Trump’s trade war.
“Canada is the fifth largest producer and the fourth largest exporter of natural gases in the world,” says Adam Fremeth, professor of energy policy at the Ivey Business School.
“The only customer from our exports has historically been the U.S.”
So what is liquefied natural gas, and what does this signal about the industry in Canada?
Liquefied natural gas (LNG) is the result of processing natural gas from pipelines into a form that is easier to store and export via cargo ship.
The technology to make LNG in Canada has been in the works for the better part of a decade, and aims to help expand exports to other markets beyond the U.S.
The main processing facility is located in Kitimat, B.C., which is set to expand its capacity in the coming years with investments from the federal government as well as international stakeholders.
On Monday, LNG Canada said its first cargo ship stocked with liquefied natural gas left B.C. and is due to arrive in Asia by the end of the week, with more ships expected to set sail soon.
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According to Natural Resources Canada, which cites the Conference Board of Canada, exporting 30 million tonnes of LNG per year would generate $6 billion in revenue for the federal and provincial governments.
“What I see here with these LNG projects are actually opportunities to have net new growth for our economy. Some estimates put this one LNG project as increasing Canadian gross domestic product by just under half a per cent. That’s significant. This is material gains to our economy,” Fremeth says.
Canada’s economy is facing mounting pressure for Ottawa to diversify trading partners amid the trade war. But this LNG project dates back long before talk of tariffs.
“The pipeline that had to get placed took years of negotiation and consultation with Indigenous groups to be finalized, and this one project was $40 billion in the ground,” Fremeth says.
“While this is the first time we’re actually exporting (LNG) product, it’s just a coincidence that it happens to be at the time that we face new trade pressures with the main trading partner that we have to the south.”
Prime Minister Mark Carney is working towards a new trade deal with Trump, with an eye to finalizing that by July 21.
It’s not yet clear what could be in that deal but Carney has said it focuses on trade and security, and vows to diversify Canada’s trading partners to make the economy less reliant on the U.S.
“I’d see no reasons that we wouldn’t be continuing to sell natural gas to the U.S., as companies like Enbridge and TC Energy have investments in pipeline systems that are very well integrated into the U.S., and so I don’t see that going anywhere,” Fremeth says.
Pressure on Canada to speed up LNG projects also began before the current trade war, after Russia invaded Ukraine.
At the time, sanctions on Russian exports, including those of energy like natural gas, meant some European countries were looking at whether Canada could help fill the gaps.
With LNG projects at the time in the early stages, it may have been a lost opportunity for Canada.
“About three years ago, soon after the Russian invasion of Ukraine, the German chancellor had come over for meetings with Justin Trudeau, the prime minister at the time. Some of the conversation had to do about getting energy products to western and eastern Europe, and we didn’t have an answer for the Germans,” Fremeth says.
“Right now, there’s sustained effort to get projects built and I think that could help. There’s premium that comes from LNG and being able to sell our product to broader markets around the world.”
Trudeau said at the time that Canada would need a “strong business case” to get LNG shipments to Europe, given the distance.
Further expansion of Canada’s natural gas production and export capabilities, including for LNG, could mean more business opportunities with Asian and European markets.
However, there may be more hesitancy and skepticism about the long-term outlook for the industry that could mean delays for some of these projects.
As of now, the Carney government is still moving forward with Canada’s goal to reach net-zero emissions targets by 2050.
“The Paris Agreement goals that we have set for ourselves limit to a great extent our ability to produce natural gas, given that it’s still a fossil fuel that needs to be phased out, ultimately, same as coal and oil. A great increase in production and export of LNG would be incompatible with these goals,” says economist and senior advisor Renaud Gignac at Investors for Paris Compliance.
Gignac, though, cautions that in the longer term, development of other natural resources like Canada’s critical minerals will likely be a more strategic investment as global demand soars.
“From a long-term perspective, LNG investments are not the best that we can make with our limited resources. The outlook is more favourable in other sectors like critical minerals that will respond to a need in a transitioning economy,” Gignac says.
“We have to remember that even if Trump is in power, the transition to lower-emission sources of energy is not going away. So that’s why the economic outlook for fossil fuels is not favourable.”
