WoodMac sees larger role for Canada in global LNG

VANCOUVER, July 10 - Although Canada has yet to see its first shipments of LNG from the under-construction LNG Canada project on BC’s northern coast, it could play a bigger role in the global market, consultancy Wood Mackenzie said today.

Speaking on the sidelines of the LNG2023 conference in Vancouver, Dulles Wang, WoodMac’s director of Americas Gas & LNG, pointed to the potential for additional Canadian LNG beyond the first 14mn tonnes/year phase at the Shell-led LNG Canada project in Kitimat.

“There will certainly be challenges in building out new LNG capacity in Canada, but the country has much in its favour and could play a larger role in meeting global demand in the near future, especially in Asia,” Wang said. “Canada could be well-positioned due to its strategic location for shipping advantages to Asia, support from Canadian First Nations, and forward-thinking emissions regulations.”

Three more west coast Canadian LNG projects – the 2.1mn tonnes/year Woodfibre LNG project at Squamish, the 3mn tonnes/year Cedar LNG project, also near Kitimat, and the 12mn tonnes/year Ksi Lisims project north of Prince Rupert – are all at various stages of development, with Woodfibre LNG expected to begin construction in September.

The US and Qatar account for 40% percent of global LNG supply, and with their abundance of supply, infrastructure and commercial partnerships, WoodMac forecasts their combined market share to exceed 60% by 2040. The US will continue to cement its position as the largest LNG supplier in the world, building on the record-breaking commercial momentum from 2022.

Underpinned by robust LNG demand growth, WoodMac projects that another 100mn tonnes/year of capacity will be needed to meet demand growth by the mid-2030s, a 25% uplift to current supply and in addition to projects that are currently under construction. Much of this demand will be in Asia, where China and several other emerging economies are looking to rely more heavily on gas as they switch away from coal.

“Sustained LNG demand in Asia will drive new opportunities in the market and Canada is well-positioned to capitalise,” Wang said. “It does have challenges, as construction costs are high for new pipelines, but support from First Nations will be critical to secure social license, and the potential is quite high. Canada can produce LNG with some of the lowest emissions intensity in the world thanks to its access to hydroelectricity, emissions regulations and goals. Countries that are looking for low emissions resources to meet their own climate goals will be attracted to this supply.”

With shipping costs spiralling higher and the emission intensity of the LNG fleet coming under closer scrutiny, Canada’s proximity to Asian markets, compared to Gulf Coast liquefaction terminals, adds to its advantage.

That proximity will also impact the price at which Canadian LNG can be landed in Asia, Wang said.

“The Canadian LNG landscape is evolving to tackle the high-cost perception,” he said. “With its key proximity to north Asia markets, its exports can avoid the constraints of the Panama Canal and cut shipping costs by more than US$2/mn Btu compared with US Gulf Coast projects going the long way round. The industry’s adoption to near shore FLNG technology, Canada’s carbon advantage, and LNG portfolio diversification could all increase the attractiveness of Canadian LNG in the global market.”