Demand for natural gas is expected to increase 45% by 2040, driven by rapidly expanding markets in Asia, according to the International Energy Agency. Canada is uniquely positioned to meet this demand, as the world’s fifth largest producer of natural gas.
Canada’s natural gas resource base is large. The country has about 1,230 trillion cubic feet of natural gas resources, a 300-year supply based on current technology and consumption levels. This is more natural gas than Canadians need, and presents an important export opportunity.
While Canada is already a net exporter of natural gas, our only customer currently is the United States. The lack of diversity presents a significant challenge for Canada natural gas producers as our main customer has also become our biggest competitor.
Over the past decade, advances in drilling technology, such as hydraulic fracturing (fracking), have enabled the United States to increase its own natural gas production by 40%. According to the U.S. Energy Information Administration, the United States has been the world’s top natural gas producer since 2011. In turn, regional oversupply has led to lower prices and declining exports of Canada’s natural gas, particularly in the eastern U.S.
In those areas, it’s cheaper for buyers to purchase natural gas produced in the United States, due to shorter transportation distances. In addition, the U.S. has increased its own exports, including into Ontario and Quebec, displacing natural gas from western Canada.
But as one door closes, another could be opening. Canada can contribute to the global demand for natural gas by creating a West Coast-based liquefied natural gas (LNG) industry.
When natural gas is sent to overseas markets, it must be compressed so that large volumes can be shipped economically. The LNG process reduces the size of natural gas by a factor of about 600. With technical expertise and a proven track record for producing large volumes of natural gas, Canada is well-positioned to service markets in Asia from the West Coast, as most of Canada’s natural gas resources comes from B.C. and Alberta.
The world’s major energy companies are already pursuing LNG, primarily through LNG Canada, an industrial energy project to operate and build an LNG facility in the port of Kitimat, B.C. The project – costing an estimated $40 billion – was approved in 2018 and is scheduled for completion in 2025. LNG Canada will export liquefied natural gas produced in the Montney Formation natural gas fields in British Columbia.
Partners in LNG Canada include Royal Dutch Shell, Petronas, PetroChina, Mitsubishi and Korea Gas. Developing and exporting natural gas would not only help meet the growing global energy demand with cleaner-burning natural gas but would also provide significant benefits to the British Columbia and Canadian economies.