Canada: Continental Divide: Comparing Canadian And American LNG

Over the last five years, as the shale gas revolution has massively increased the estimated gas reserves in North America, various proposals have been made to construct LNG export facilities, both in Canada and the US.  There have been over 20 proposals advanced in Canada and over 30 in the United States.

We are now at the point where final investment decisions (or FID) are being made and construction is starting, at least in the United States, with certain Canadian projects possibly not far behind.

Speaking recently at an energy conference in Houston, the US Secretary of Energy, Ernest Moniz, summarized the state of LNG export construction in the United States by noting there are five major liquefaction plants already under construction. Secretary Moniz then went on to say:

"[W]e anticipate becoming big players...we're going to influence the whole global LNG market...certainly in this decade there's a good chance that we will be LNG exporters on the scale of Qatar...which is today's largest LNG exporter."

The situation is different in Canada, at least for now. No LNG export facility in Canada has made an unconditional final investment decision to proceed, nor are any under construction. The following table shows the status of the leading Canadian LNG projects: 


Lead Sponsor



First Gas


Pacific Oil
& Gas




Douglas Channel





Pacific NorthWest



Satisfaction of FID Conditions


Source:  Government of British Columbia's "LNG in BC" website and Company Announcements.

Woodfibre is currently undergoing an environmental assessment under the BC Environmental Assessment Act and it will likely not make a final investment decision or commence construction until sometime in or after Q3 or Q4 of 2015.

Douglas Channel either has all significant environmental and construction-related approvals or it is not required to obtain them due to its small size. It also has all off-take arrangements in place that are needed to make a final investment decision and to commence construction by the end of 2015. Douglas Channel is only waiting for the National Energy Board to issue another export licence (the first one was revoked as a result of proceedings under the Companies' Creditors Arrangement Act affecting its predecessor), as well as a commercial determination to proceed.

The Petronas-led Pacific NorthWest LNG has made a final investment decision, albeit a "conditional" one tied to the approval of a Project Development Agreement by the BC Legislature in the fall of 2015 and the receipt of an environmental assessment certificate under the Canadian Environmental Assessment Act. The environmental assessment is still underway, but it has been delayed as a result of concerns regarding the project's impact on fish habitat. There are also still issues that have to be resolved with affected First Nations.  Pacific NorthWest LNG remains hopeful that these issues can be resolved by the end of this year so that construction can commence.

The following table shows the status of the leading projects in the US, all of which have made final investment decisions.


Lead Sponsor



First Gas

Sabine Pass






G. Smith










Sempra Energy


Under Construction







All of these US projects, except for Corpus Christi, are brownfield conversions of existing LNG import and re-gasification facilities. And all, except for Dominion's Cove Point project, are located on the US Gulf Coast, in the middle of the largest, most sophisticated petrochemical infrastructure on earth.

These US LNG projects have several advantages compared to their BC counterparts, which at least partly explains why they are under construction while the BC LNG projects are not – at least not yet.

First, brownfield conversions of existing LNG import facilities can re-use or modify much of that pre-existing LNG infrastructure. As a result, costs for a brownfield conversion can run as low as $500 million to $750 million per million tons per annum (MTPA) of LNG produced and appear to have a median cost of no more than $800 million per MTPA.  By contrast, costs for a greenfield liquefaction facility are generally in the range of $900 million to $1.4 billion per MTPA.

Second, in contrast to all of the significant BC projects that have been proposed (including the projects led by Petronas, Shell and Chevron), the early stage US projects are not integrated – i.e. the project proponents generally do not own the gas reserves to be fed through the liquefaction facility or the export terminal, nor do they own or have to finance the construction of new pipelines to connect gas reserves with their projects.  Instead, the early stage US projects are usually merchant facilities providing only liquefaction and processing services on a fee for service or tolling basis, and their customers usually own the gas to be processed and are responsible for any transportation of the gas that is required.

The structure and pricing of these types of merchant LNG processing contracts has allowed project proponents to tie prices to the cost of gas rather than index the LNG to the price of oil, as is the case in BC. These arrangements have proven to be attractive to many of the world's major gas buyers. Each of the early stage US projects has been able to secure off-take arrangements with a number of highly creditworthy and experienced buyers. All of this has made the US projects bankable far sooner and with greater ease than the various BC projects.

Moreover, the US projects have been able to focus on building a liquefaction facility or converting a regasification facility along with some relatively minor ancillary infrastructure. By contrast, the major integrated projects on the BC coast require the acquisition of massive gas reserves, the exploration and development of those reserves and the construction or financing of new pipelines covering the better part of 1,000 km from gas reserves in northeast BC – often over several mountain ranges, in hostile climates and with access to only a relatively constrained and expensive labor force.

This is reflected to some extent in the capital costs for the different kinds of projects.  The early stage US projects generally have capital costs of between $5 to $10 billion, which is approximately $550 million to $1 billion per MTPA.  In contrast, the Globe and Mail recently pegged the likely capital costs for the first phase of the Pacific NorthWest LNG project at approximately $36 billion, broken down as follows:

  • $5.2 billion to acquire Progress Energy, and its northeastern BC gas reserves, in 2012
  • at least $12 billion to drill for gas in northeastern BC
  • $11.4 billion for the first two trains of a liquefaction facility on Lelu Island, BC, with an initial estimated capacity of approximately 12 MTPA of LNG
  • $6.7 billion in related pipeline projects.

Whether calculated just for these initial phases, or at full build-out, this would imply capital costs for the Pacific NorthWest LNG project somewhere between $2 billion and $3 billion per MTPA.

Of course, the integrated LNG projects proposed for Canada, once fully developed, have the potential for a significantly greater return compared to the merchant LNG projects in the US, but there is also more risk involved. We do not know which of these models will be superior over the long term; however, what we do know now is that, over the short term, the US merchant model has proven to be cheaper, more attractive to off-takers and demonstrably easier to execute.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Stikeman Elliott LLP
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions