Red tape has left Canada on the sidelines to step up LNG exports
By Elmira Aliakbari Director, Natural Resource Studies and Jairo Yunis Junior Policy Analyst, Fraser InstituteNews LNG natural gas Russia Ukraine
Europe is suffering its worst energy crisis since the 1970s. European natural gas prices have risen more than 600 per cent over the past year, including 30 per cent since Russia invaded Ukraine.
While the United States, Australia and other countries have already started to boost shipments of liquified natural gas (LNG) to Europe, Canada remains on the sidelines. Unfortunately, despite being the world’s fifth-largest producer of natural gas, Canada has missed the opportunity to expand our supply of LNG to overseas markets due to a lack of export infrastructure, largely due to regulatory barriers and environmental activism.
Consider that in January 2022, in response to high energy prices, the U.S. exported a record amount of LNG to Europe and became the world’s largest LNG exporter for two months in a row. According to the U.S. Energy Information Administration, the U.S. will have the world’s largest LNG export capacity by the end of 2022 and LNG exports have become an engine of economic growth and tool for strengthening the country’s foreign policy.
Canada, despite having ample reserves, have not stepped up to export desperately needed natural gas to Europe. Why?
Simply put, despite producing 16.1 billion cubic feet of natural gas each day, Canada does not have any LNG export facilities — an astonishing fact for such a resource-rich country. According to Natural Resources Canada, 18 LNG export facility projects have been proposed in Canada since 2011 (specifically, 13 in British Columbia, two in Quebec and three in Nova Scotia).
One export facility in B.C. is under construction. For comparison, between 2014 and 2020, the U.S. built seven LNG export facilities and approved 20 more (five are currently under construction).
The culprit? Canada’s arduous regulatory system — and fierce opposition from interest groups — has led to the cancellation of several critical LNG projects. For example, in 2017, oil and gas company Petronas cancelled its $36 billion Pacific NorthWest LNG project due to “delays and long regulatory timelines” coupled with poor market conditions. In 2020, Warren Buffet pulled out of a proposed $9 billion LNG project in Quebec amid concerns over regulatory challenges and railway blockades.
Last year, joint venture partners Chevron and Woodside Energy stated their intention to sell their shares of the Kitimat LNG project in northern B.C. after more than a decade of slow progress.
Moving forward, Canada’s glaring inability to export natural gas should be a wake-up call for governments across the country to ease regulations for energy infrastructure projects. By missing an opportunity to export natural gas to Europe (and Asia), we’re missing an opportunity to benefit Canadians, our allies and the environment.