INTERVIEW: Geopolitical tensions revive Asia's appetite for Canadian LNG: Alberta minister

Geopolitical tensions over Russia are drawing Asia's attention to Canada as a reliable clean energy supplier, with talks reviving some LNG projects and helping the North American country's first LNG project to expand this decade, Alberta's associate minister of natural gas and electricity told S&P Global Commodity Insights.

LNG Canada will be the country's first LNG export facility "so we have proved we can build infrastructure in the country in addition to geopolitical events that is creating a sense of urgency that we have not seen in this space before," Dale Nally said in an interview during a visit to Tokyo.

"They talk about the second [phase] even before the political events but I would suggest the geopolitical events happening in Europe right now actually make the business even stronger for getting that expansion up and running," Nally said ahead of his attendance at the World Gas Conference 2022 at Daegu in South Korea.

The increased interest in Canadian LNG supply comes at a time when Japan and other members of the G7 are accelerating efforts to reduce their dependency on energy supply from Russia following its invasion of Ukraine by securing alternative supplies.

It also marks a turnaround after a series of steps back in planned LNG projects in Canada, including the 2017 cancellation of the Pacific NorthWest LNG project in British Columbia as the global glut of LNG had made such a facility uneconomical.

Asked about a key challenge previously faced by Canadian LNG projects in the west coast, Nally said: "I think what was missing was the will, and that was missing. Geopolitical events today have changed that will and made it stronger."

LNG Canada

So far only LNG Canada reached a final investment decision in 2018 for startup in 2025 when another FID for the second phase is expected in the same year, said Nally, adding that there are very few regulatory hurdles to overcome for expansion.

Asked whether LNG Canada's expansion will start up in the current decade, Nally said: "I am cautiously optimistic that absolutely would" occur given the appetite from Asia for Canadian LNG.

"I am very optimistic that we will be able to get that phase up and running," he added.

The Shell-led LNG Canada project, along with Petronas, PetroChina, Mitsubishi and Kogas, is starting up the 14 million mt/year LNG export facility at Kitimat, British Columbia in the mid-2020s. Mitsubishi has sold 2.1 million mt/year of LNG supply from its 15% stake in LNG Canada to Japanese utilities JERA, Tokyo Gas and Toho Gas.

"We have to get the first [phase] up and running first but I can tell you that we are all having conversations about the second [phase], and we are excited about what that means for not just getting gas from Canada to Japan, and what would that mean for Japan to have access to clean secured energy from Canada," Nally said.

In addition to LNG Canada, Alberta aims to get "two or three more LNG export facilities on the west coast" by 2030, Nally said.

"There is incredible talk, and it's only becoming louder because of the geopolitical events," Nally said of planned LNG projects in the pipeline.

Cedar LNG is now scheduled to start up in 2027, while other projects making progress in the west coast include Woodfibre LNG and Ksi Lisims LNG, he added.

Hydrogen exporter

With its abundant natural gas resources, Alberta, meanwhile, is embarking on becoming a hydrogen exporter and start exporting 1 million mt/year of hydrogen carriers such as ammonia by 2030 as energy transition gathers pace, Nally said.

"I am happy to say that we believe we are going to exceed that number, and we are going to beat the time frame as well," he said, adding that exports could start closer to 2028.

Looking further ahead, Alberta has estimated it would be able to have a capacity to produce about 45 million mt/year of hydrogen based on its reserves, Nally said.

The 45 million mt/year hydrogen production capacity would require a pipeline to the west coast, where economics currently do not justify a pipeline, he said.

"But it does work to put it on train so both ammonia and methanol are excellent carriers of hydrogen, and we have economy of scale to put ammonia and methanol on train and ship that to the coast," Nally said.

"So that is the solution we are looking to have in place until we can get economy of scale to justify a pipeline."

Itochu is carrying out detailed studies with Petronas to produce blue ammonia and blue methanol produced in Alberta from fossil fuel with carbon capture and storage with an eye to export to Japan. The plants are slated to start commercial output in 2027.

Similarly Mitsubishi is working with Shell to consider producing around 165,000 mt/year of blue hydrogen near Edmonton, Canada, in the late 2020s with an eye to convert it into ammonia for exports to Japan.

Japan currently estimates the ammonia demand for power generation will be 3 million mt/year in 2030 and expects it to grow to 30 million mt/year in 2050 as it sees ammonia as a CO2 zero-emission fuel that will help cut its greenhouse gas emissions by 46% by fiscal year 2030-31 (April-March) from the FY 2013-14 level and achieve the 2050 carbon neutrality.

Asked whether Canada would face similar hurdles in LNG for exporting hydrogen and ammonia, Nally said: "I don't see it because the difference between LNG a few years ago, and hydrogen and ammonia today is the will is there."

"The will is to get you clean energy products sourced from a responsible, secured democracy like Canada," he added.