Canada: Canadian LNG: Kicking The Can Down The Road

The dream of creating a globally significant Canadian LNG industry, initially based on the West Coast of BC, effectively died in July 2017, at least for the immediate future. But like the global LNG business itself, we may be better served by judging Canada's LNG prospects over a longer term – potentially measured in decades rather than in months or year-by-year. Through that lens, Canada's LNG prospects may not be nearly so bleak: indeed they may even be hopeful.

Canadian LNG: Status

In early July, the NEB published Canada's Role in the Global LNG Market, a fairly tough assessment of Canada's current opportunities in LNG. Shortly after that, the Petronas-led Pacific Northwest LNG syndicate cancelled its plans to develop a $36Bn LNG project near Prince Rupert, BC. It had been the major Canadian LNG project considered most likely to proceed. Two months later, CNOOC's Nexen and INPEX ended the feasibility study for their proposed Aurora LNG project on Digby Island, BC.

The status of the five Canadian LNG projects once closest to a FID, or Final Investment Decision, is now as follows:

LNG Project Lead Sponsor Capacity (MTPA) Status
Woodfibre Pacific Oil & Gas 2.1 Pre- Construction
Kitimat LNG Chevron 10.0 Deferred
LNG Canada Shell 24.0 Deferred
Douglas Channel AltaGas 0.55 Cancelled
Pacific Northwest Petronas 18.0 Cancelled

US LNG: Status

In contrast to the situation in Canada, the US LNG industry has one plant actually operating and five more under construction. The most advanced and largest are all on the Gulf Coast (Sabine Pass, Corpus Christi, Freeport and Cameron). Two smaller projects are also under construction– one in Maryland (Cove Point) and one in Georgia (Elba Island). Together they represent 66 MTPA in LNG capacity and on completion will place the US in a position rivalling Qatar and Australia for global LNG leadership.

For the most part, the leading US LNG plants are so-called "brownfield conversions", where older re-gassification plants designed to import LNG are repurposed to provide liquefaction capacity for LNG export instead – at a considerable cost saving compared with constructing new "greenfield" facilities.

Cost Problems

The NEB concluded that the problems of the struggling Canadian LNG industry reflect structural rather than transient challenges. The NEB noted that Canadian LNG projects:

  • are generally costly (NEB: p. 1, 10 and 18) at least compared to projects on the US Gulf Coast: Canadian LNG plants are generally greenfield facilities in remote locations, while US Gulf Coast facilities have been largely brownfield conversions and are being operated or are under construction in one of the most sophisticated and best connected petrochemical complexes on earth;
  • generally require entirely new infrastructure (NEB: p. 18) including, at least for all the BC LNG projects, new pipeline capacity to move gas supply, often in the range of 1000km over difficult terrain; and
  • have generally not been able to secure sufficient long-term gas purchase contracts (NEB: p. 18) as the global gas markets transition to shorter-term and/or spot-market arrangements.

Global LNG prices have declined significantly in recent years, largely as a result of the decline in oil prices to which LNG prices have historically been linked. As well, the emergence of substantial new capacity, most of which is in Australia and the US, added to an already depressed global LNG market where supply has recently been out-running demand. As in any market, the resulting pricing and margin pressure has generally precluded higher cost plants, such as those in Canada, from proceeding and has tended to limit new market entrants to those facilities previously committed to or which are at the very lowest end of the cost range.

In its prescient 2013 Global LNG Survey, Ernst & Young noted the cost advantage enjoyed by the US Gulf Coast facilities. New greenfield projects in Canada and elsewhere were expected to cost upwards of $2Bn per MTPA (E&Y 2013: p. 12) while brownfield conversions on the US Gulf Coast were expected to cost as little as $550M - $650M per MTPA (E&Y 2013: p. 9). When a midsize LNG plant is in the range of 10 MTPA and a large LNG plant is in the range of 18 to 24 MTPA, this represents a material – maybe even a decisive - cost advantage in favor of the Gulf Coast facilities.

Future Prospects

Still, there are some encouraging longer term trends for LNG in Canada:

  • global LNG trade has grown substantially in recent years: from just over 100 MTPA in 2000 to over 300 MTPA in 2016 (NEB: p. 14);
  • prospects for LNG growth generally are good: in its 2016 World Energy Outlook the International Energy Agency expects gas to grow by 1.5% annually through to 2040 and for LNG to grow even faster – to essentially double over current levels (IEA 2016: p. 7);
  • Canadian LNG – at least on the West Coast – enjoys relatively good proximity to abundant and relatively low cost gas supply from the Montney, Deep Basin and Horn River gas plays (NEB: p. 4-5 and 18); and
  • Canada has enduring locational advantages among North American LNG producers in that BC is 5000 miles closer to major LNG markets in Asia than the Gulf Coast while no US West Coast facility has been approved yet and Canadian East Coast LNG is 2000 miles closer to Europe than potentially competing US sites (NEB: p. 18).

Moreover, Shell recently suggested that a Final Investment Decision on its massive LNG Canada project could come as soon as the next 18 months or so and may coincide with LNG markets starting to tighten again. It would normally take at least 5 years to construct, test and make an LNG plant fully operational suggesting the earliest in-service date would be roughly in or just before the mid-2020s.

In order to participate in the next wave of LNG development, sponsors of proposed Canadian LNG projects will have to:

  • work on getting costs down;
  • nurture and maintain government commitment to the industry;
  • maintain and enhance existing partnerships with key stakeholders, particularly affected Aboriginal peoples; and
  • proactively seek ways to further reduce the carbon profile of the LNG industry.

Depending on market conditions and on the nature and extent of additional competition, there is still an opportunity for Canadian LNG to emerge as a meaningful participant in the global LNG markets – albeit sometime in the middle of the next decade rather than toward the end of this one.

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.

In association with
Related Topics
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