Construction workers look on at the FortisBC Tilbury LNG expansion project in Delta, B.C., on Nov. 16, 2015. LNG shipments from Canada’s West Coast to allies and like-minded countries in Asia could do a lot of good for each side.JONATHAN HAYWARD/The Canadian Press
Scott McKnight, PhD, is a research associate at the Lupina Innovation Policy Lab at the Munk School of Global Affairs and Public Policy, University of Toronto. Giancarlo Da-Re is a master of global affairs candidate at the Munk School and a Lupina-IPL Fellow in Innovation.
In late November, Canada unveiled its Indo-Pacific Strategy, aiming to reposition Canada in the region in the face of an increasingly hostile China. The five-year, $2.3-billion strategy was released amid high inflation, crushing energy prices and a slowing global economy that threatened net-zero emission plans.
Despite this, the strategy made no mention of liquefied natural gas, something which Canada could potentially export in abundance and which many Asian economies already import in great quantities.
LNG could do many things that the strategy attempts to achieve. It could deepen trade by supplying allies with reliable and affordable energy for long periods of time, generate revenue from a key export as Canada decarbonizes its own energy sources and reduce Canada’s dependence on China and the United States. Canada has a rich history of using its natural resources to build relationships with other countries and LNG diplomacy can be the latest chapter of that story.
It’s been a long and bumpy road for Canada’s LNG projects to come to fruition. Despite being the world’s fifth largest producer of natural gas, the country does not – and physically cannot – export liquefied natural gas, lacking the sophisticated infrastructure to get gas piped to the coast and chilled for shipment overseas.
That will change when the LNG Canada project in Kitimat, B.C., now nearly complete and with an eventual export capacity of up to 28 million tonnes per year, starts exporting. These physical constraints became painfully evident after Russia’s invasion of Ukraine sent gas prices skyrocketing for our European and Asian allies, and led both German Chancellor Olaf Scholz and Japanese Prime Minister Fumio Kishida to ask Prime Minister Justin Trudeau for LNG, to no avail.
Canada’s Indo-Pacific Strategy puts a heavy emphasis on lessening this country’s reliance on China – for good reason. China has been increasingly disruptive: federal election interference, espionage charges, human-rights violations, supplies of critical minerals, and so on.
This does raise an issue when we consider LNG exports. After all, China is the world’s second largest economy and became the world’s largest LNG importer in 2021, with plans to build 34 coastal terminals by 2035. But China isn’t the only big market for LNG. Canada has other – less complicated, more friendly – options.
In total, Asia buys about three-fourths of global LNG cargoes. Chief among these buyers are some of Canada’s most important allies. Japan, South Korea, India, and Taiwan collectively purchase about 45 per cent of all LNG cargoes. That doesn’t include another half-dozen Asian buyers who buy in smaller quantities – all with whom Canada is attempting to deepen ties.
LNG shipments from Canada’s West Coast to allies and like-minded countries in Asia could do a lot of good for each side.
First, it could ensure reliable and affordable supplies to friendly countries. Second, natural gas could help these countries shift to lower-carbon sources of energy.
Third, the use of long-term contracts (how most Asian importers prefer to buy LNG) could shield both exporter and importer from whiplashing natural gas prices, while ensuring a market for capital-intensive LNG projects that take many years to turn a profit. Fourth, turning natural gas into a major export makes use of a resource Canada possesses in abundance, while generating revenue and allowing Canada to more actively pursue its own decarbonization.
For Canada, LNG cargoes could help extend influence in Asia, while giving Canada some breathing space from the U.S. and side-stepping landmines with China.
Exporting LNG here serves three of the five strategic objectives of Canada’s Indo-Pacific Strategy: trade and investment; a sustainable and green future; and partnerships.
It also holds promise for Canada’s own decarbonization efforts, while generating revenue, earning friends and breaking political deadlock around the future of our resource endowment. This is a chance for Canada to do more – for its friends and for itself.