Canada's LNG emerging as Middle East alternative in Asian markets

Demand for liquefied natural gas (LNG) in Asia is rising. At the same time, importers are looking for alternative sources to reduce their dependence on the Middle East. In this situation, Canada is moving towards becoming a major supplier in Asia's LNG market.

Five international energy companies have recently taken a final investment decision on the second phase of the LNG Canada expansion project. They are Shell, Malaysia's Petronas, China's PetroChina, Japan's Mitsubishi Corporation and South Korea's Kogas.

The project is located at Kitimat in British Columbia, Canada. Once the second phase is implemented, annual LNG production capacity will rise from 14 million tonnes to 28 million tonnes. It will add two new processing units, a storage tank and additional infrastructure for loading gas onto ships. Commercial operations of the expanded section are expected to begin in the early 2030s.

The project's location on Canada's Pacific coast gives it an added advantage in the Asian market. From here, LNG can be shipped to Japan and other Asian countries in comparatively less time. In particular, while gas from the US Gulf of Mexico region has to pass through the Panama Canal to reach Asia, ships can sail directly from Canada's Pacific coast.

The trend of diversifying sources to ensure energy supply security is growing among Asian importers. Conflict in the Middle East, disruption to shipping in the Red Sea and uncertainty over supplies through the Strait of Hormuz have further strengthened this trend.

According to a Wood Mackenzie forecast, Asia's LNG demand could rise from about 260 million tonnes now to 500 million tonnes by 2060. That could open up a large market for Canada.

The Canadian project could also benefit on the environmental front. The Cedar LNG project plans to use renewable hydroelectric power from British Columbia. That would create an opportunity to cut carbon emissions compared with conventional gas-fired power systems.