In my most recent column I explained why attempting to replace fossil-fuelled electricity generation with wind and solar energy is “technically impossible and economically disastrous”. But is there anything Canada could do to reduce global CO2 emissions while also creating substantial economic benefits? Indeed there is: Exporting large volumes of liquefied natural gas (LNG) from Canadian gas fields to replace coal-fuelled electricity generation in other countries. If done on a large enough scale, this could cut emissions from coal-fired plants in half while creating tens of thousands of jobs and hundreds of billions of dollars in economic benefits for our country.
Here in Canada, the ongoing phase-out of coal has already yielded significant emissions reduction. The impact of replacing coal with natural gas is even more dramatically illustrated south of the border. The United States is the world’s emissions reduction leader, with a 14 percent cut since 2005, equalling the reductions of all European Union countries combined. Switching from coal to natural gas has also been the key driver of CO2 cuts in other OECD countries. Meanwhile, non-OECD emissions keep going up and now account for nearly three-quarters of the global total.
China is the worlds’ largest emitter of CO2. It derives 70 percent of its electricity from coal. And its emissions continue to rise. Plants fuelled by coal also emit toxic compounds and lung-clogging particulates that lower life expectancy by as much as ten years for the hundreds of millions of China’s citizens living in smog-darkened cities. It’s that health crisis, not CO2 emissions, that’s driving President Xi Jinping’s government to convert coal plants to natural gas.
China’s domestic natural gas production is substantial – slightly greater than Canada’s, in fact. But with 40 times Canada’s population, its needs are vastly greater than its production, while Canada has large surpluses of natural gas to burn, figuratively and literally. China will need to increase its LNG imports sharply to accomplish coal-replacement, but finding enough LNG is made even more challenging as China’s economic growth continues to drive its electricity demand. This makes the country’s thirst for LNG virtually limitless. China is already the world’s second-largest LNG importer, behind Japan, and plans to double imports over the next three years.
Canada’s enormous natural gas reserves, our innovative and efficient industry’s ability to produce that gas economically, and the relative proximity of our northwest coast to Chinese ports together make our country ideally suited to helping supply that demand. But currently, just as our “landlocked” oil is being sold to the U.S. at heavily discounted captive-market prices, so too is our natural gas. The Asian LNG market represents the only hope for Canada’s beleaguered gas producers to achieve international market prices.
After ten years and billions of dollars spent by more than one-dozen industry consortiums, that hope centres on one project. The $40 billion LNG Canada project, largest in Canadian history, is currently under construction in Kitimat, B.C. The Coastal GasLink pipeline from northeast B.C.’s gas fields, which will provide the needed gas supply, is also under construction. As LNG Canada’s mid-decade start-up date moves closer, economically stressed towns including Dawson Creek and Fort St. John are experiencing major economic uplift as drilling and construction of gas processing plants and connecting pipeline infrastructure intensify.
LNG Canada’s shareholders include state-controlled PetroChina. Replacing a portion of China’s coal-generated electricity with natural gas from this single project represents a global emissions reduction equivalent to taking up to 80 percent of all cars off Canadian roads. This is a vastly greater practical benefit than all of the Justin Trudeau government’s economically debilitating and nationally divisive carbon taxes, electric vehicle and green power subsidies put together. Tens of thousands of well-paying jobs, billions in tax revenues to all levels of government for many decades to come, along with important foreign exchange revenue, will be created.
For this project to finally be under construction after more than a decade of navigating Canada’s Byzantine and sluggish regulatory process, and while facing conflicting First Nations’ claims and determined opposition from well-funded international environmentalist organizations, is a testimony to the determination and resiliency of the project’s leader, South Africa-born engineer Andy Calitz. Without him, LNG Canada would have joined the crowded LNG project graveyard.
Ten years ago there were more than 20 projects proposed for the B.C. coast. The most significant were ExxonMobil’s $25 billion West Coast Canada project, Chinese state-owned CNOOC’s $28 billion Aurora LNG project and Malaysian firm Petronas’s $36 billion Pacific NorthWest LNG project. Given the global emissions reduction and economic benefits of just one project, imagine the impact if even a few of those 20 projects had crossed the finish line.
The only other major LNG export project left standing is Kitimat LNG, and its future is in jeopardy. Equal in size to LNG Canada, it is sponsored by American-owned Chevron Canada and Australian LNG pioneer Woodside Energy. Regulatory approvals had finally been obtained and site preparation was under way when, in late 2019, Chevron announced its intention to sell its 50 percent interest. Those close to the Chevron project believe that the federal government’s weak response to the blockades of LNG Canada’s gas supply pipeline led by non-elected Wet’suwet’en First Nations honorary chiefs that began in 2018 was the proverbial last straw for Chevron.
Other countries are not at all squeamish about pursuing the global LNG opportunity. Australia, long a global LNG player, has been constructing even more facilities and in 2018 became the world’s largest LNG exporter. The U.S., which not even five years ago exported no LNG at all, today has five major facilities sending out on average more than 8 billion cubic feet per day – equivalent to about 60 percent of Canada’s total natural gas production. These countries are benefiting while Canada virtually stands still. And Canada’s captive-market exports of underpriced gas to the U.S. are, ironically, facilitating the U.S. LNG trade by helping to keep their gas supply cheap.
Exporting LNG to displace coal could be a powerful, practical and profitable way for Canada also to become a leader in reducing global emissions. Yet one of the most perplexing barriers for LNG project sponsors is the fixation of Canadian regulators on the project’s own domestic emissions, which are minuscule in comparison to their enormous global reductions.
Prior to the December 2018 UN Climate Change Conference in Katowice, Poland, the federal Conservative Party urged the leaders of the Canadian delegation to put forward a motion that achievement of national emissions reduction targets include reduced foreign emissions from LNG exports. But this made far too much common sense for our Prime Minister and his Gerald Butts-led team of anti-fossil-fuel eco-zealots. It just wasn’t in the script for the Environment Minister’s speech in Katowice. Nor since. That needs to change.
Gwyn Morgan is the retired founding CEO of Encana Corp., formerly Canada’s largest producer of natural gas.