{"id":66593,"date":"2025-04-23T09:37:28","date_gmt":"2025-04-23T16:37:28","guid":{"rendered":"https:\/\/energi.media\/?p=66593"},"modified":"2025-04-23T09:37:28","modified_gmt":"2025-04-23T16:37:28","slug":"opinion-banking-on-lng-exports-is-a-high-risk-gamble-for-canadas-future-growth","status":"publish","type":"post","link":"https:\/\/energi.media\/opinion\/opinion-banking-on-lng-exports-is-a-high-risk-gamble-for-canadas-future-growth\/","title":{"rendered":"Opinion: Banking on LNG exports is a high-risk gamble for Canada\u2019s future growth"},"content":{"rendered":"<p><em>This article was published by <a href=\"https:\/\/policyoptions.irpp.org\/magazines\/april-2025\/lng-exports\/\" target=\"_blank\" rel=\"noopener\">Policy Options<\/a> on April 23, 2025.<\/em><\/p>\n<p><em><strong>By <a href=\"https:\/\/policyoptions.irpp.org\/authors\/michael-sambasivam\/\" target=\"_blank\" rel=\"noopener\">Michael Sambasivam<\/a>\u00a0<\/strong><\/em><\/p>\n<p>As Canada\u2019s greatest ally has decided to break our trust and bare its teeth, Canadians have made clear a desire to reduce our reliance on the United States as a trading partner. One result of this turning point has been increased support for accelerating and expanding Canada\u2019s liquified natural gas industry, and cashing in on it as a potentially high-value export.<\/p>\n<p>Conservative Leader\u00a0<a href=\"https:\/\/www.theglobeandmail.com\/politics\/article-poilievre-promotes-reviving-lng-project-in-quebecs-saguenay-region\/\">Pierre Poilievre<\/a>\u00a0has called for the development of LNG infrastructure to deliver the energy resource to European buyers, while Liberal Leader\u00a0<a href=\"https:\/\/markcarney.ca\/pillars\">Mark Carney<\/a>\u00a0more broadly stated a need for Canada to \u201cdraw\u2026 on [its] vast resources of conventional and clean energy.\u201d<\/p>\n<p>This political push for LNG expansion is timely marketing, given Canadians\u2019 growing fear that the country is economically shackled to a U.S. political entity prone to erratic decision-making. Support for LNG appeals to the popular reasoning that Canada\u2019s economic strength is contingent upon its conventional energy industry, and it also fits within the climate lens, with\u00a0<a href=\"https:\/\/www.lngcanada.ca\/news\/living-up-to-climate-promises\/\">proponents of the sector<\/a>\u00a0framing LNG expansion as an emissions reduction opportunity.<\/p>\n<p>But all of these premises are fundamentally flawed.<\/p>\n<p>Developing direct access to global gas markets might decrease our dependence on American buyers, but it would further concentrate Canada\u2019s reliance on the stability of fossil fuel prices at a time when the global LNG market is becoming oversupplied. This shift would also divert capital \u2013 both political and monetary \u2013 away from sectors that are more clearly aligned with a transition economy.<\/p>\n<p>And there\u2019s one more significant factor: It is becoming increasingly clear that LNG\u2019s reputation as a \u201ctransition fuel\u201d is unfounded, with the potential for LNG to displace coal emissions unsupported both economically and scientifically.<\/p>\n<p>Making LNG a key part of Canada\u2019s energy exports is a long-term process that will lock in our role in a world where energy demand patterns are shifting rapidly. While backing LNG expansion may look tempting in the face of newfound American aggression, it would also increase the risk of our economy getting to the station after the LNG train has already left.<strong>\u00a0<\/strong><\/p>\n<h3><strong>Canada is poorly positioned to compete in an LNG glut<\/strong><\/h3>\n<p>Canadian oil and gas companies have been pushing to expand LNG exports for the last decade. LNG Canada\u2019s new $40-billion shipping port at Kitimat, B.C., which just opened this spring, is Canada\u2019s first major LNG export project;\u00a0<a href=\"https:\/\/natural-resources.canada.ca\/energy-sources\/fossil-fuels\/canadian-liquified-natural-gas-projects\">six others<\/a>\u00a0are in varying stages of development. These would cumulatively add over 12 per cent to the\u00a0<a href=\"https:\/\/www.shell.com\/what-we-do\/oil-and-natural-gas\/liquefied-natural-gas-lng\/lng-outlook-2025.html#:~:text=Global%20LNG%20trade%20grew%20by,to%20constrained%20new%20supply%20development.\">existing global LNG supply<\/a>, aligning with a boom that is expected to show\u00a0<a href=\"https:\/\/ieefa.org\/sites\/default\/files\/2024-04\/Global%20LNG%20Outlook%202024-2028_April%202024%20%28Final%29.pdf\">40-per-cent growth<\/a>\u00a0in LNG availability between 2024 and 2028.<\/p>\n<p>It has been over a decade since the International Energy Agency (IEA) anticipated a \u201c<a href=\"https:\/\/iea.blob.core.windows.net\/assets\/8caa3d14-5005-437d-b180-06b8824d28c8\/WEO2011_GoldenAgeofGasReport.pdf\">golden age of gas<\/a>,\u201d and while suppliers have responded to the call, demand has faltered among Canada\u2019s potential buyers. The war in Ukraine spiked world gas prices, disincentivizing\u00a0<a href=\"https:\/\/ieefa.org\/sites\/default\/files\/2024-04\/Global%20LNG%20Outlook%202024-2028_April%202024%20%28Final%29.pdf\">South<\/a>\u00a0and\u00a0<a href=\"https:\/\/www.csis.org\/analysis\/clean-energy-and-decarbonization-southeast-asia-overview-obstacles-and-opportunities\">Southeast Asian<\/a>\u00a0markets from expanding their LNG intake capacity. And while European nations expanded their LNG usage in order to decrease reliance on Russian pipeline gas, the EU\u2019s energy regulator predicts that Europe\u2019s\u00a0<a href=\"https:\/\/www.acer.europa.eu\/monitoring\/MMR\/LNG_market_developments_2024\">LNG demand has peaked<\/a>\u00a0and will steadily decline over the back half of the 2020s.<\/p>\n<p>China has introduced\u00a0<a href=\"https:\/\/www.energypolicy.columbia.edu\/rising-production-consumption-show-china-is-gaining-ground-in-its-natural-gas-goals\/#:~:text=China%20continues%20to%20import%20more,importer%20on%20an%20annual%20basis.\">extensive policies promoting domestic procurement of gas<\/a>, to be potentially topped off by a\u00a0<a href=\"https:\/\/www.energypolicy.columbia.edu\/publications\/the-future-of-the-power-of-siberia-2-pipeline\/#_edn30\">massive new pipeline<\/a>\u00a0from Russia. Meanwhile,\u00a0<a href=\"https:\/\/world-nuclear.org\/information-library\/country-profiles\/countries-g-n\/japan-nuclear-power\">Japan<\/a>\u00a0and\u00a0<a href=\"https:\/\/world-nuclear.org\/information-library\/country-profiles\/countries-o-s\/south-korea\">South Korea<\/a>\u00a0are planning to expand nuclear capacity in order to reduce fossil fuel use for power generation.<\/p>\n<p>It all means that, globally, LNG suppliers will compete fiercely for customers, even in circumstances where the world does not quickly decarbonize. Projections for supply far outpace those for demand, even under the IEA\u2019s\u00a0<a href=\"https:\/\/www.investorsforparis.com\/wp-content\/uploads\/2024\/12\/LNG-report-v3.pdf\">least climate-ambitious scenario<\/a>.<\/p>\n<p>Given that context, Canada\u2019s\u00a0<a href=\"https:\/\/ieefa.org\/sites\/default\/files\/2023-01\/British%20Columbia%20LNG%20Project%20Costs%20Rising%20Again_February%202023.pdf\">high break-even prices<\/a>\u00a0spell risk.\u00a0<a href=\"https:\/\/www.investorsforparis.com\/wp-content\/uploads\/2024\/12\/LNG-report-v3.pdf\">Our analysis<\/a>\u00a0found that Canadian LNG projects have infrastructure costs that far exceed industry norms, and break-even costs that are above the projected\u00a0<a href=\"https:\/\/www.mckinsey.com\/~\/media\/McKinsey\/Industries\/Oil%20and%20Gas\/Our%20Insights\/Setting%20the%20bar%20for%20global%20LNG%20cost%20competitiveness\/Setting-the-bar-for-global-LNG-cost-competitiveness-vF.pdf\">price of viability<\/a>.<\/p>\n<p>All told, Canada is late to the game and its LNG production and delivery costs leave it poorly positioned to compete for market share. A politically driven fever to counter U.S. trade aggression with LNG expansion may well backfire, creating billions of dollars of stranded asset risk while wasting resources and valuable time.<\/p>\n<div class=\"single__ad\">\n<div>\n<h3><strong>The climate argument for LNG has eroded<\/strong><\/h3>\n<p>LNG has been framed as Canada\u2019s opportunity to remain a major fossil fuel producer while meeting its commitments to reduce greenhouse gas emissions.\u00a0<a href=\"https:\/\/natural-resources.canada.ca\/corporate\/corporate-overview\/canada-s-liquefied-natural-gas-lng-industry-affects-you\">Natural Resources Canada<\/a>\u00a0suggests that LNG exports could bring emissions savings via displacement of coal, an observation echoed by major financial institutions like\u00a0<a href=\"https:\/\/thoughtleadership.rbc.com\/canadas-conundrum-three-ways-to-address-the-worlds-gas-climate-crises\/\">RBC<\/a>\u00a0and\u00a0<a href=\"https:\/\/about.bmo.com\/enabling-canadas-prosperity-in-the-21st-century\/#:~:text=Liquified%20natural%20gas%2C%20or%20LNG,energy%20equity%20and%20environmental%20sustainability.\">BMO<\/a>.<\/p>\n<p>However, emissions reductions from coal-to-gas switching via Canadian LNG is largely a myth. For one, the economics just don\u2019t make sense. The\u00a0<a href=\"https:\/\/iea.blob.core.windows.net\/assets\/47a9a222-78e4-4c43-9bab-977b4ad5326b\/WorldEnergyOutlook2024.pdf\">IEA<\/a>\u00a0suggests that significant growth in coal-to-gas conversion is dependent on very low gas prices \u2013 which means Canadian LNG exports would not be profitable. If anything, LNG expansion is competing more directly with\u00a0<a href=\"https:\/\/www.hbs.edu\/ris\/Publication%20Files\/7222_lng_and_renewable_power_-_risk_and_opportunity_in_a_changing_world_2b4c12d4-1a3b-407b-9c57-15b13dac8a64.pdf\">renewable power<\/a>\u00a0than with coal.<\/p>\n<blockquote><p><strong><a href=\"https:\/\/policyoptions.irpp.org\/magazines\/september-2022\/lng-boom-or-bust\/\">LNG\u00a0boom or bust?<\/a><\/strong><\/p>\n<p><a href=\"https:\/\/policyoptions.irpp.org\/magazines\/canadian-natural-gas-europe\/\"><strong>A day late and a dollar short: Exporting Canadian natural gas to the EU<\/strong><\/a><\/p>\n<p><strong><a href=\"https:\/\/policyoptions.irpp.org\/magazines\/july-2023\/supporting-canadian-lng-projects-is-good-for-the-economy-and-the-planet\/\">Supporting Canadian LNG projects is good for the economy and the planet<\/a><\/strong><\/p><\/blockquote>\n<p>In addition, the notion that LNG has lower emissions than coal is not rooted in science. Gas does burn cleaner than coal, but the lifecycle emissions of LNG are enormous. Supply chain emissions are high, and methane leaks across the supply chain mean\u00a0<a href=\"https:\/\/scijournals.onlinelibrary.wiley.com\/doi\/10.1002\/ese3.1934\">that LNG is, at best, on par with coal<\/a>. \u00a0The myth of clean LNG is based on\u00a0<a href=\"https:\/\/www.epa.gov\/sites\/default\/files\/2016-08\/documents\/8_equipmentleaks.pdf\">outdated methane leakage calculations<\/a>, with new research suggesting the real level may be\u00a0<a href=\"https:\/\/www.nature.com\/articles\/s41586-024-07117-5\">more than twice the old EPA estimate<\/a>.<\/p>\n<p>LNG expansion is ultimately incompatible with Canada\u2019s climate commitments. Existing and proposed LNG projects\u00a0<a href=\"https:\/\/iopscience.iop.org\/article\/10.1088\/1748-9326\/ac71ba\/pdf\">already exceed the emissions<\/a>\u00a0allotted to all gas under the UN Intergovernmental Panel on Climate Change\u2019s 1.5 C scenario. As our trading partners develop more comprehensive transition strategies, selling LNG as Canada\u2019s climate strategy exposes us to even more risk.<\/p>\n<h3><strong>Invest in the future<\/strong><\/h3>\n<p>Canada has already learned hard lessons about relying on fossil fuel markets for economic health. The 2014 crash of world oil prices weakened our dollar and stunted foreign investment in our economy, significantly harming economic growth. Pivoting to gas expansion requires balancing our economic strength on a pin, with zero margin for error. Sustained high prices and high demand, extremely unlikely, would be essential for the sector\u2019s viability.<\/p>\n<p>Rather than betting on a future that we can already see is improbable, Canada should be playing to our strengths. Global demand for critical minerals \u2014 of which Canada is extremely well positioned to supply \u2014 is set to\u00a0<a href=\"https:\/\/www.canada.ca\/en\/campaign\/critical-minerals-in-canada\/canadas-critical-minerals-strategy\/canadian-critical-minerals-strategy-annual-report-2024.html#:~:text=Critical%20minerals%20are%20the%20elements,International%20Energy%20Agency%20(IEA).\">double by 2040<\/a>, while renewable energy is set to account for as much as\u00a0<a href=\"https:\/\/www.irena.org\/Digital-Report\/World-Energy-Transitions-Outlook-2023#:~:text=The%20share%20of%20renewable%20energy,energy%20consumption%20by%202050%2C%20respectively.\">77 per cent of the global energy<\/a>\u00a0mix by 2050.<\/p>\n<p>That is where we need to be.<\/p>\n<p>LNG expansion represents shortsighted appeal to outdated perceptions, and risks leaving our economy to languish in an uncertain and dirty industry. If Canadians want to decouple ourselves from our neighbours to the south, we need to seek growth opportunities that are the future.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<div class=\"mh-excerpt\"><p>This article was published by Policy Options on April 23, 2025. By Michael Sambasivam\u00a0 As Canada\u2019s greatest ally has decided to break our trust and bare its teeth, Canadians have made clear a desire to <a class=\"mh-excerpt-more\" href=\"https:\/\/energi.media\/opinion\/opinion-banking-on-lng-exports-is-a-high-risk-gamble-for-canadas-future-growth\/\" title=\"Opinion: Banking on LNG exports is a high-risk gamble for Canada\u2019s future growth\">[Read more]<\/a><\/p>\n<\/div>","protected":false},"author":6,"featured_media":66594,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"give_campaign_id":0,"footnotes":""},"categories":[6],"tags":[13,2144,2502,14,95,2587,2964],"class_list":{"0":"post-66593","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-opinion","8":"tag-canada","9":"tag-canadian-election","10":"tag-critical-minerals","11":"tag-featured","12":"tag-fossil-fuels","13":"tag-government-policy","14":"tag-natural-resources"},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.5 - 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