The first shipment of Canadian liquefied natural gas (LNG) from the Port of Kitimat in western B.C. to Asian markets notches a major milestone for Canada – in both its longstanding desire to diversify trade beyond the U.S. and its commitment to strengthen relations with Asian economies, many of which are eager to boost their energy security and wean themselves off coal.
LNG Canada, the company leading the way in these new energy linkages, is a joint venture between Shell, with a 40 per cent stake, and four Asian investors – Malaysia’s Petronas (25%), PetroChina (15%), Mitsubishi of Japan (15%), and South Korea’s KOGAS (5%). The C$40-billion investment in the project in 2018 represents the largest private sector investment in Canadian history.
Now that this west-coast route is operational, it will halve shipment times to Asia – from 20 days via the Gulf of Mexico and Panama Canal down to 10 days – and will avoid transit through vulnerable chokepoints.
‘Watershed Moment’ for Canadian energy
The news of Canadian LNG being sold to Asia was welcomed by officials at both the federal and provincial levels. Tim Hodgson, Canada’s Minister of Energy and Natural Resources, described it as a “watershed moment” that happened to coincide with a trade war initiated by the only other major foreign market for Canadian energy: the U.S. B.C. Premier David Eby, during his trade mission to the region in June, touted the province’s LNG export potential, noting expressions of interest in Japan in future investments in the Kitimat project. Discussions about a Phase 2, which could double capacity, are already underway.
Access to Canadian LNG comes at a critical time for many Asian economies: the upheaval in global trade and unrest in the Red Sea and Strait of Hormuz – through which many of Asia’s energy imports travel – puts a premium on having a stable and reliable energy supplier such as Canada.
However, while Asia is expected to drive future demand for LNG, purchasing from Canada could be complicated by regional governments’ need to placate a tariff-focused Trump administration. Washington has urged Japan, which is trying to diversify its suppliers of natural gas, to purchase more U.S. oil and gas and invest in developing natural gas fields in Alaska.
As the Japan case highlights, Canada’s LNG opportunity will require deft and strategic thinking on the part of Canadian officials and private-sector partners.
