Will Canadian LNG move markets?

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Just a decade ago, about 20 LNG projects were proposed in Canada, and the US had not yet emerged as an LNG player. Fast-forward to 2023, and the US has become the world’s largest LNG exporter ahead of Qatar and Australia (see earlier post, “If it’s profitable it scales”). And Canada had only minor LNG exports, such as from the Tilbury LNG facility via ISO containers. But things will change - and soon. 

Canadian LNG project status

LNG Canada’s plant construction was about 85% complete in July, with the feedgas pipeline, CGL, almost 95% complete as of September. At 14 mtpa nameplate capacity across its two trains, LNGC is the only mega-LNG project under construction in Canada. This nameplate capacity equates to about 2.1 Bcf/d gas exports.

Woodfibre LNG is also under construction, with nameplate capacity of 2.1 mtpa (0.3 Bcf/d) and an expected start-up in 2027. Other projects, most notably Cedar LNG and Ksi Lisims LNG, have not yet taken Final Investment Decision.

US LNG Project comparison

Comparing this to average US LNG exports of 11.6 Bcf/d in H1 2023 it certainly leaves the impression that Canada has lost the race. A more nuanced picture emerges however when scaling the exports to each country’s production. 

US Dry Gas Production is forecast to average 103.7 Bcf/d in 2023, with LNG gross exports averaging 11.6 Bcf/d*. US LNG exports thus amount to approximately 11% of US dry gas production this year.

Canadian gas production is forecast to rise to approximately 19Bcf/d by 2025**.

LNG Canada is announced to come on-stream “around the middle of the decade”. Using 2025 as an approximation, LNG Canada’s 2.1Bcf/d capacity would equate to approximately 11% of Canadian gas production - the same domestic market share as US LNG exports in 2023.

Implications

It is rather obvious that Canada will never catch up with US LNG exports in absolute terms. The more interesting fact though is that the same relative amount of exports will come not from seven distinct plants as in the US, but a single facility with two trains.  In other words, once LNG Canada starts up, 11% of Canadian domestic production will have a new market. And any time the plant trips or has a turnaround, 11% of production need to be shut in or find another market. How will AECO and Station 2 prices react? The impacts of Freeport LNG’s outage and re-start, Canadian gas market reactions to the Alberta wildfires of 2023, and Queensland’s domestic gas prices provide useful analogues - interesting times are ahead! 

More to come.

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* EIA Short-Term Energy Outlook, https://www.eia.gov/outlooks/steo/data/browser/#/?v=15, https://www.eia.gov/outlooks/steo/report/natgas.php

** Canadian Energy Regulator CER, https://www.cer-rec.gc.ca/en/data-analysis/canada-energy-future/2023/access-and-explore-energy-future-data.html