Canadian LNG:

Energy security, emissions reduction and Indigenous opportunity

The world needs more liquefied natural gas (LNG), and Canada has the resources to help.

Canada can supply reliable, responsibly produced, low-emissions LNG to Asia and beyond, strengthening world energy security and improving the lives of Canadians, including Indigenous Peoples, for decades to come.

“The world is waiting for Canada,” said Yamanouchi Kanji, Japan’s ambassador to Canada.

“Canada can and should play a very important role to support the energy situation not only in Japan and South Korea, but the world.”

Looming LNG shortage

Global LNG demand increased to 397 million tonnes in 2022, about 16 million tonnes more than 2021, according to Shell’s latest industry outlook. France, the U.K., the Netherlands, Spain, Belgium and Italy led the growth. Europe’s demand continues to grow as governments scramble to reduce reliance on energy imports from Russia. Germany alone has six new floating LNG storage and regasification terminals that are to come online by the end of 2023.

Shell’s analysts expect LNG to become a “pillar of energy security” in Europe going forward.

Meanwhile, demand in Asia will continue to rise as an alternative to coal in emerging economies. Without sufficient investment in new LNG projects, a shortage is expected before the end of this decade.

Total world LNG demand is expected to reach 700 million tonnes by 2040, a more than 75 per cent increase from 2022.

“Starting in 2027, we see there’s going to be a global supply/demand gap that is probably going to grow to 120 million tonnes per annum and about 150 million tonnes per annum by 2035,” said Matthias Bloennigen, Wood Mackenzie’s director of Americas upstream consulting.

“Developing western Canadian LNG would be helpful to alleviate the LNG demand that’s going to develop in the world.”

Indigenous leadership: Everyone wins

Indigenous communities are leading the future of Canada’s enormous LNG potential, with ownership positions in major proposed projects like Cedar LNG, Ksi Lisims LNG, and the Coastal GasLink pipeline when it is completed this year.

Everyone wins with the expansion of Canadian LNG development, said Karen Ogen, CEO of the First Nations LNG Alliance. There can be less international reliance on less responsible producers like Russia, and a reduction in the use of coal that will lower greenhouse gas emissions.

“Indigenous people are in support of major projects,” said Ogen, former elected chief of the Wet’suwet’en First Nation. “We must do this responsibly, continuing to make sure that we have the highest environmental standards.”

Of key importance to her is an increase in employment opportunities and the ability to effectively address social issues in Indigenous communities. LNG development benefits Indigenous communities and the world, said Crystal Smith, elected chief councillor of the Haisla Nation. The community is a 50 per cent owner of Cedar LNG, which would be the first Indigenousled LNG project in the world.

“Our territory is not in a bubble and protected from what is happening in Asia and India with coal burning,” she said. “Cedar is not only important from a Haisla perspective, [but from] a global perspective.”

Reducing emissions

Natural gas produces half the emissions of coal-fired power, according to the International Energy Agency (IEA). It is also a dependable baseload fuel that can offset the intermittent nature of renewables to fortify the reliability of energy systems.

LNG from Canada could reduce emissions in Asia by 188 million tonnes of CO2 equivalent per year – or the annual impact of taking 41 million cars off the road, according to Wood Mackenzie.

“It’s like taking all of the cars in Canada away, if we were able to build all of those projects,” Bloennigen said.

“It reduces emissions globally, so it’s for the good of everyone.”

Reducing climate impact

A 2020 study by Wood Mackenzie found Canadian LNG exports could reduce net emissions in Asia by 188 million tonnes per year through 2050 — the annual equivalent of removing:

100% of cars off Canada’s roads

Nearly 3x B.C.’s total emissions in 2020

29% of Canadian emissions

188 million people flying Vancouver to London

Canadian LNG is expected to have among the world’s lowest emissions per tonne, thanks to:

Colder climate making supercooled liquefaction easier

Shorter shipping distances to Asia & Europe compared to the U.S. Gulf Coast

With responsibly produced, low-emissions LNG, Canada can help meet growing demand, improve energy security, and help fight climate change. By replacing less environmentally friendly energy like coal with LNG, we could remove 188 million tonnes of carbon emissions every year through 2050.

Canada can lead the LNG industry with faster shipping times from our coasts, Indigenousled projects, hydroelectricity, and lower emissions from natural gas production.

Leading methane emissions reduction by upstream natural gas producers

Use of low-emission hydroelectricity

See how we’re charting our course at MadeTheCanadianWay.ca/LNG

The industry is addressing its methane problem, responding to the pressure placed on it with practical and promising initiatives and commitments. Beyond individual company targets, a number of voluntary industry initiatives have been formed. One example is the Oil & Gas Climate Initiative (OGCI), whose participants pledged in 2018 to cut their methane emissions intensity to 0.25% by 2025. When they surpassed that target in 2020, they raised their ambition to 0.2% by mid-decade.

There are also various voluntary gas certification initiatives in play, such as MiQ and Project Canary, which reward companies for addressing their methane emissions.

Low-carbon LNG

Since Shell delivered the first “carbon-neutral” LNG cargo to Tokyo Gas in 2019, there has been rapid growth in “low-carbon” LNG deals worldwide, driven mostly by end-users.

Low-carbon LNG allows buyers and sellers to counterbalance LNG emissions through carbon credits to offset emissions from the LNG supply chain, such as reforestation and renewable energy projects. But this trade is facing scepticism and could benefit from greater transparency and consistency, which can limit its value as a solution to emissions from the LNG industry, despite its appeal.

Carbon pricing is another factor that drives emissions reduction in LNG processes. This puts pressure on LNG companies to strike a balance between costs and emissions intensity.

Legislation, shareholder requirements and project financing terms increasingly require that LNG cargoes include extensive information about the CO2 emissions associated with their production and delivery.

This makes it important to reduce the CO2 intensity of gas operations. New greenfield projects can achieve this by incorporating energy efficient equipment, facilities that use clean electricity, lowering emissions of pipeline operations with electrification for compressor stations and improving efficiencies of liquefaction operations with efficient turbines and compressors, and use of CCS. For example, the Qatar LNG expansion project includes CCS and boil-off gas recovery systems.

It is estimated that life-cycle emissions for an average LNG cargo – including upstream production, liquefaction, shipping, regasification, and combustion – is 250,000 T of CO2 equivalent. Increasingly, with lower-carbon footprint set to have an advantage in the marketing of LNG, in an effort to improve measuring and reporting of the carbonfootprint of LNG cargoes, producers and suppliers are including emissions reporting within contracts and commercial processes.

As the need for LNG grows and pressure on companies to reduce their environmental and carbon footprint increases, so will the attractiveness of lowcarbon LNG, enabling LNG to realise its full potential in the global drive to reduce emissions.

As the need for LNG grows and pressure on companies to reduce their environmental and carbon footprint increases, so will the attractiveness of lowcarbon LNG, enabling LNG to realise its full potential in the global drive to reduce emissions.