Canada Commits to Natural Gas As It Enters the LNG Export Business with Its First Shipment from Its Own Export Facility!

Guest Post from the Institute for Energy Research.

LNG Canada produced its first liquefied natural gas shipment for export to South Korea at its facility in Kitimat, British Columbia. The facility 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.

Construction on LNG Canada’s 14-million-metric-ton-per-year facility began almost seven years ago. The commercial startup of the $18-billion Shell PLC-led export terminal was long-awaited and LNG Canada’s joint-owners — Shell (40%), Malaysian energy giant Petronas (25%), PetroChina (15%), Mitsubishi Corp. of Japan (15%), and South Korea’s Kogas (5%) — are currently deciding whether to green-light Phase 2 of the facility.

The Kitimat plant is fed by the Coastal GasLink pipeline that runs over 400 miles. The investment in the LNG facility represents the largest private sector investment in Canadian history. Canada intends to become a significant player in the LNG sector by the end of the decade.

The Asian shipment comes nearly 15 years after the first application for a license to export LNG from the West Coast was submitted to federal regulators. Since that time, more than a dozen LNG projects wanting to capitalize on Canada’s shorter shipping distances to Asia and abundant supply of natural gas have been affected by issues dealing with pipelines, environmental standards, and shifting global market dynamics. At least six other LNG facilities are in the works, including Woodfibre LNG and Cedar LNG, which are expected to come online by 2028, and Ksi Lisims.

Alberta, an oil and gas producing province, wants more ports and the ability to run more pipelines through British Columbia to further its oil and gas market globally, rather than depend on U.S. markets. Increased U.S. gas production led to a decline in Canadian exports since 2010, when the fracking renaissance significantly increased U.S. gas production.

Alberta, however, is meeting resistance from British Columbia, which does not want more tanker traffic along its coastline or pipelines over its mountains. Environmental groups see exporting natural gas as incompatible with Canada’s commitments to reduce greenhouse gas emissions, and many Indigenous people are contesting a new federal law that accelerates approval of pipelines.

Energy producers in Western Canada and their investors have hoped to see a boost in returns with the LNG Canada facility as growing volumes of gas begin making their way to Canada’s West Coast for export. They hope for similar results to the increase in Canadian oil prices that resulted from the Trans Mountain pipeline expansion project. Canadian natural gas often trades at a discount to U.S. fuels, given that the Canadian product must travel long distances to reach American markets. Access to LNG shipping terminals is expected to reduce the discount.

Prices for Western Canada’s natural gas trade at a discount to the U.S. Henry Hub gas benchmark and have suffered from high storage inventories and pipeline flow restrictions that have kept the average price for Canada’s primary gas price benchmark below $1 per million Btu in June.

The Energy Information Administration’s (EIA) latest Short-Term Energy Outlook expects U.S. natural gas prices to strengthen in the second half of 2025 due to increasing demand for power and expanding LNG export capacity. The EIA projects the spot price of U.S. benchmark Henry Hub to average $3.81 per million Btu in 2025 and $4.58 in 2026, up from $2.28 per million Btu in 2024 (U.S. dollars).

The Alberta benchmark price, known as AECO, is expected to average $2.20 per million Btu in the second half of the year, up by nearly 62% over 2024 levels, and to increase further in 2026, with average prices rising to $3.50 per million Btu (Canadian dollars). As Canada increases its LNG capacity, the current discount on Canadian natural gas is expected to fall from about $2 today to between $1.10 and $1.30.

Canada’s LNG industry is expected to grow from the about 2.5 billion cubic feet per day currently under construction or operating to more than 6 billion cubic feet per day if existing projects proceed as planned by the end of the decade, which includes a Phase 2 expansion of LNG Canada which would double the facility’s capacity to 28 million metric tons per year.

According to Canadian Prime Minister Mark Carney:

“With LNG Canada’s first shipment to Asia, Canada is exporting its energy to reliable partners, diversifying trade, and reducing global emissions ­— all in partnership with Indigenous Peoples.”

Access to Canadian LNG comes at a critical time for many Asian economies due to the upheaval in global trade and unrest in the Red Sea and Strait of Hormuz through which many of Asia’s energy imports travel, putting a premium on having a stable and reliable energy supplier such as Canada.

Conclusion

Canada has entered the LNG export business with the first shipment from its LNG Canada facility.

The facility will halve shipment times to Asia, from 20 days via the Gulf of Mexico and Panama Canal down to 10 days. The commissioning of the LNG Canada export facility has Canadian gas producers hoping that the days of low Canadian gas prices compared to U.S. Henry Hub gas prices may finally come to an end.

The investment in the LNG facility represents the largest private sector investment in Canadian history. Canada intends to become a significant player in the LNG sector by the end of the decade, with over six other projects in the works.

#LNG #Canada #Alberta #MarkCarney #NaturalGas #BritishColumbia #Pipelines #Ports