Failing to build LNG export infrastructure in the 2010s could well be one of the largest missed economic opportunities in our history
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This week, the U.S. government announced that they were officially the world’s largest exporter of LNG in 2023. Every single day that year, U.S. ports exported the equivalent of 11.9 billion cubic feet of liquid natural gas. At current prices, that’s about $82 million worth of gas each day.
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In that same year, Canada’s LNG exports were the same as they’ve always been: Zero. There are no LNG ports on the Atlantic Coast, and no solid plans to build one. Of two LNG ports under construction in B.C., the first won’t be open until 2025.
As the world clamours for natural gas like never before, the official line out of Ottawa is that Canada is missing out on the windfall entirely due to market conditions. Permits were approved, plans fell through, and the “business case” never materialized. But the example of the United States shows that Canada didn’t just miss the boat on LNG; it may have missed out on one of the largest economic opportunities in its entire history.
In 2018, a little-noticed report out of the University of Calgary outlined how Canada could become “a player” in a lucrative new era of Europe sourcing its energy from freighters filled with liquid natural gas.
Two factors were driving the continent towards LNG: EU countries were shutting down coal plants in order to meet emissions targets, and they were actively trying to cut ties with an increasingly authoritarian Russia, which was supplying almost all of Europe’s natural gas via pipeline.
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What the authors didn’t know is that the latter factor would be massively accelerated by Russia’s all-out invasion of Ukraine in early 2022.
The report was also written at a time when the U.S. and Canada were much closer to being on an equal footing as regards LNG exports – although the U.S. did indeed have a head start.
It had been just two years since a U.S. port had sent off its first-ever export LNG freighter in 2016, and the country had others under construction. But both countries shared ambitious plans to expand. At the time of the University of Calgary report, the Government of Canada had granted permits to five proposed LNG projects: Two in Quebec, and three in Nova Scotia.
Six years later, the U.S. has now opened six Atlantic LNG ports, while all five proposed Canadian projects have fallen through. The most recent was in November, when the Alberta company Pieridae officially pulled up stakes on its proposed Goldboro LNG project in Nova Scotia.
If everything had worked out perfectly for Canada, the five projects would have started coming online in 2022, reaching maximum capacity in 2029.
In this alternate timeline, Canada would currently have an East Coast export capacity of at least 25 billion cubic metres of natural gas per year. Canadian production probably wouldn’t be able to meet the full export capacity, but at the LNG prices the Americans were getting last year, 25 billion cubic metres would have fetched between $7.8 billion and $11 billion.
By the end of the decade, the University of Calgary analysts projected that Canadian LNG facilities on the East Coast would be able to “serve up to approximately 40 to 45 per cent of European natural gas demand from non-Russian sources.”
There’s a few geographic reasons why it’s harder to ship LNG out of Canada than the United States.
Most of Canada’s natural gas production is in the West, requiring any product to be piped much farther than any of the gas being shipped to American ports, most of which are along the Gulf Coast. Even if Canada’s dream scenario of five East Coast facilities had occurred, the report suspected they would be “supplied predominantly by U.S. natural gas in the short to medium term.”
The U.S. also had the advantage of putting their LNG facilities in regions flush with established oil and gas ports. The Canadian ones were all going to be “greenfield” developments built from scratch.
“The outlook for Canadian projects, while not exactly grim, is certainly not rosy,” it concluded.
But the report’s gist was that Canadian gas could be attractive to Europe as a “geopolitically stable and environmentally responsible” source of gas, so long as it did some work on speeding up the regulatory process.
University of Calgary economist Kent Fellows was one of the authors of the 2018 report. In a comment to National Post he said “it is very fair to ask why there is (or was) a business case on the U.S. east coast but not the Canadian east coast.”
He also pointed out the contrast between Ottawa’s laissez-faire attitude to LNG and its extremely interventionist approach to EV factories in central Canada. Last year, Ottawa offered up an unprecedented $20 billion in subsidies and tax credits to secure the construction of just two EV battery factories in Southern Ontario.
“I don’t think the Federal government can throw up their hands and say they had nothing to do with it at all,” he said.
It emerged this week at Canada’s foreign interference inquiry that the Trudeau government has been successful at prior attempts to suppress information from social media. Allen Sutherland, an assistant secretary to the cabinet at the Privy Council Office, testified to the inquiry that during the 2019 election he made a request to Facebook that they suppress circulation of a story by The Buffalo Chronicle alleging that Trudeau had an inappropriate relationship with a student while a teacher at Vancouver’s West Point Grey Academy. It’s a longstanding internet rumour, but extensive investigations by the National Post (among others) have found no evidence to support it. Regardless, Facebook suppressed the story immediately upon request. “The content might have gained significant attention were it amplified, and therefore risked threatening the integrity of the election,” read Sutherland’s witness testimony.
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