Taking action in support of our vital natural resource sector

A new report by the Canadian Chamber of Commerce has found that if 20% of Asia’s coal-fired power plants were converted to natural gas, global emissions would drop by more than Canada’s total emissions. In other words, converting just one-fifth of Asia’s power infrastructure would ‘save a Canada’ in greenhouse gases (GHGs).

Canada – with its relatively short shipping times, abundance of natural gas reserves, and environmentally responsible energy production – is the ideal candidate to displace coal-fired power in Asia.

Sure, there has been positive momentum lately with LNG Canada nearing completion, Cedar LNG’s approval, and Woodfibre LNG’s pre-construction expected to start this year. However, at one point, more than a dozen liquefied natural gas (LNG) export terminals were proposed on Canada’s west coast, with most cancelled due in part to an overwhelmingly slow and high-cost regulatory system that created significant uncertainty for investors.

Historically speaking, getting sustainable Canadian LNG to customers across the Pacific has been easier said than done. This is why we must not take these new projects for granted, and continue to pursue the up-and-coming Ksi Lisims LNG and others with all the support we can.

Highlighted in this report is the role that Canadian-made LNG can play in boosting Canada’s economy while providing global energy security and taking climate action – and the challenges it faces in doing so from competitive and regulatory standpoints.

Report Highlights:

Emissions Reductions

> Substantially reducing global emissions means converting high-emission energy sources to lower emission options. Currently, China and other parts of Asia continue to add coal-fired power generating capacity, while Europe has restarted or extended its coal-fired power infrastructure in the wake of the war in Ukraine.

> Canada should work to finance and convert coal infrastructure to run on Canadian natural gas as a pathway to a cleaner world.

> IHS Markit estimates that switching just 20% of Asia’s many coal-fired power plants to natural gas would prevent an estimated 680 megatonnes (MT) of CO2 emissions annually (IHS Markit, 2021). To put this in context, Canada’s annual emissions are 672 MT. In other words, switching just 20% of Asia’s coal-fired power plants would save the equivalent of “one Canada” in terms of annual emissions, while switching 40% would save “two Canadas”.

> If Canada is to make a meaningful contribution to decarbonizing other parts of the world, it should provide more financing for LNG solutions, not less. It can and should offer an integral approach that includes:

• Financing to convert coal-fired power plants to gas that is underpinned by long-term purchase agreements for Canadian natural gas.
• Support to get natural gas to tidewater and out to its intended market.
• Development of supply agreements for key materials, management systems and long-term servicing of the natural gas plants.

> Mainly created by coal, China’s emissions of man-made greenhouse gases exceed those of the United States, Europe and Japan combined (Bradsher and Krauss, 2022). Had environmentalists and the Canadian federal government supported serious development of natural gas export infrastructure on the West Coast 15 years ago, Canada would have been positioned to offer China LNG at scale — a much cleaner alternative to coal.

> Canada should not only encourage global partners to choose lower carbon options but should actively make natural gas available to them. This will take financing, diplomacy and creativity, but the impact on emissions would be significant.

First Nations

> Natural gas presents First Nations with opportunities to lead new projects and gain own-source revenues. The recently approved $3 billion Cedar LNG project, for example, will be the largest Indigenous-owned infrastructure project in Canada and go a long way in advancing economic reconciliation with First Nations.

> Today, Canada’s First Nations are at the forefront of Canada’s energy economy. A key goal is to drive reconciliation through economic opportunity — or, in the words of one First Nations leader, “to manage wealth not poverty.” To do that, First Nations have increasingly positioned themselves to knowledgeably engage with energy companies and participate in projects. This has been aided by setting up advisory, support and advocacy infrastructure.

> The First Nations Major Projects Coalition (FNMPC), a group of more than 130 Indigenous communities across the country, has facilitated seven major projects in three regions with combined capital expenditures of more than $17 billion. Each project has First Nations equity participation and will deliver long-term economic returns to these investors.

> One of the key projects facilitated is the Coastal GasLink pipeline. In total, 20 First Nations have signed agreements with lead project developer TC Energy. In March 2022, 16 of these First Nations agreed to buy a 10% equity stake in the pipeline. Of these, 11 are members of the FNMPC (CBC, 2022).

> Canada’s LNG opportunity is made possible in large part by the constructive relationships built between First Nations and energy companies over the past few decades. As these partnerships grow and expand, the economic benefits flowing to First Nations and the broader Canadian economy should increase considerably.

Global Competition

> On a comparative basis, the U.S. energy position has been transformed over the past 15 years. It is now the world’s largest natural gas producer, and in 2022 was tied for the position of top gas exporter. Historically, all of Canada’s natural gas exports have gone to the United States via pipeline.

> While Canada continues to supply some exporters along the Gulf Coast and certain end-users elsewhere, the U.S. seems structurally poised to import less natural gas in the future. Canada must therefore get its natural gas to markets where demand is growing, which means LNG export infrastructure must be created.

> Comparing the U.S. to the Canadian response to Europe’s energy crisis, it is hard not to conclude that Canada is failing to capitalize on its natural gas deposits. This hurts Canada’s economy, global reputation and allies, as well as the global environment since countries in need of energy often choose dirtier fuel sources whose carbon is not subject to a price regime. All of this suggests that Canada needs to undertake a serious re-examination of its energy policies.

> Environmental campaigners demand a shift to renewable energy sources while often failing to address the cost and complexity of these changes. They frequently demand that Canada leave natural gas, oil and other resources “in the ground” without acknowledging that this would do little to address the issue of global demand. If Canada does not supply these resources sustainably, countries with much lower environmental standards will gladly do so. Together, this leaves both the Canadian economy and the global environment worse off.

> Over the past 15 years, 18 new LNG export terminals were proposed: 13 in British Columbia, three in Nova Scotia and two in Quebec (NRCan, 2020). Of these, only LNG Canada is close to completion. Had Canada supported the construction of even a fraction of these terminals, it would have been at the centre of support for growing Asian and European markets that are in desperate need of LNG, and would be actively contributing to the displacement of coal.

Economic Opportunities

> When assessing the value of natural gas projects to the Canadian economy, it is important to
remember that most jobs in the sector flow through thousands of service providers… From coast to coast to coast, the Canadian natural gas sector supports tens of thousands of jobs and creates billions of dollars in economic activity.

> In terms of total global LNG trade, Shell estimates that demand will grow from 380 million tonnes in 2020 to more than 700 million tonnes in 2040 (Shell, 2022). This offers plenty of room in the global market for new supplies that other countries will gladly provide should Canada decline to.

Future Demand & Energy Transition:

> While the energy transition is real and seems to be gathering pace, the word “transition” is instructive. As a first principle, 100% reliability must remain at the core of North America’s energy system, even as feedstocks change. In most jurisdictions today, there is nowhere near enough installed capacity in wind, solar and other renewables to seriously displace existing energy feedstocks. Moreover, wind and sun are not consistent, so those energy systems require robust backstops to be fully reliable.

Recommendations

The Canadian Chamber of Commerce summarizes its report with several recommendations on Canada’s natural gas sector and the opportunities and challenges it holds. It highlights many important facts, such as:

> Canadians should be proud of their world-class companies that take economic, social and environmental obligations seriously

> Canada’s regulatory regime is both robust and inclusive, which is unfortunately not the case in most countries abroad

> If Canada leaves its resources in the ground, other countries will not produce or consume less energy. Instead, this would worsen global emissions by making way for dirtier sources and suppliers.

> Not every natural resource or sector is the same. Natural gas has the lowest carbon footprint of all non-renewable fuel sources.

> Natural gas that is subject to a carbon price – like in Canada – should be viewed as superior to that which is not.

To learn more, read the full report here.

The World Needs More Canadian LNG

Canadian LNG can be a force for good in the world – if we let it. That means supporting the responsible development of LNG export facilities on our coastlines, which in turn help boost Canadian and Indigenous economies, global energy security and climate action.

Let’s support the healthy development of Canada’s LNG sector for a cleaner, better, safer world!

SOURCES:

_{1 – Canadian Chamber of Commerce – Canada and Global Energy Security: The Role of Natural Gas in a Lower Carbon Future – Date Accessed: April 2023 (https://chamber.ca/wp-content/uploads/2023/04/Canada_and_Global_Energy_Security_March_2023.pdf)}