On LNG, Canada turned away Germany, then Japan – this country cannot keep doing that

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Leslie Palti-Guzman is co-founder and CEO of Gas Vista, a predictive analytics provider focused on seaborne natural gas trade. Rachel Ziemba is founder of Ziemba Insights and adjunct senior fellow at the Center for a New American Security.

In mid-January, Prime Minister Fumio Kishida announced Japan’s interest in buying more Canadian energy supplies. Canadian Prime Minister Justin Trudeau lauded Japan for agreements to purchase from the soon-to-launch LNG Canada project, before quickly changing the subject to critical minerals and battery production, the newest focus of his country’s industrial policy. While those latter efforts can be positive for Canada, Mr. Trudeau’s messaging reflects a missed opportunity for Canada to use its energy not just for its own benefit but that of others.

To his credit, Mr. Trudeau avoided making the same statement he made some months ago, when he claimed, on German Chancellor Olaf Scholz’s visit, that there was “no business case” for meaningful increases in LNG exports. Still, much like with Germany, which ended up securing only a few agreements on hydrogen projects after Mr. Scholz’s visit, Mr. Trudeau gave Japan no promises of expanding LNG projects or encouraging new ones.

Of course, LNG decisions are not always Mr. Trudeau’s own and are reliant on market forces and other levels of government. But, given the way the world is changing, more trading partners will knock on Canada’s door, and this country should not find itself forced to say no.

Canada couldn’t do much to support allies in 2022 looking for new energy supplies, partly a result of timing; after all, new supplies don’t miraculously appear overnight. But Canadian projects have also been absent from the recent contract discussions with European buyers that set the rules and production over the coming decades.

Even in sustainability-conscious Europe, the war in Ukraine has brought energy risks into sharp focus and reinforced the benefit of alternate energy infrastructure and supply chains, including strategic energy reserves. EU utilities, long wary of long-term contracts, have begun signing agreements with Qatari and U.S. producers for LNG supplies that will begin after 2026. This reflects their commitment to move away from Russian gas even if the current invasion of Ukraine is resolved. The world is far from weaning itself off of natural gas.

Germany has invested in new floating LNG terminals in a matter of months. These and various conservation measures have alleviated the shock of Russian supply cuts. They should reduce revenues of Russia’s war machine, reinforcing the economic effect of the sanctions and export controls of which Canada has been a key driver.

Opponents of natural gas point to the risks of locking in fossil fuel infrastructure at a time when the global economy needs to use its limited carbon budgets carefully. Their concerns are valid, but Canada’s unwillingness to develop its resources is unlikely to shift the world’s reliance on LNG at a time when Asian demand is growing.

Instead, Canada has an opportunity to insist producers invest in the cleanest LNG supplies. That means capitalizing on the trend of tracking full life cycle emissions – which measure the carbon footprint of fossil fuels from extraction to end use – and ensuring such efforts are not greenwashing. Canadian LNG will displace coal in Asia, and has a shorter travel time to Europe than Gulf Coast or Qatari supplies. It also aims to use hydroelectricity as the power source in its extraction and processing, making it cleaner than that of some competitors. Regulators can help make that happen.

Buyers including Germany and Japan – the largest consumer of LNG, according to GasVista’s data – are focused on both meeting their climate goals and keeping the lights and heaters on. They also want to avoid making the same mistake of relying only on one supplier – especially a geopolitical rival – for their energy. Canada can play a role in making sure the supplies that come to market are as environmentally efficient as possible and are from a stable, dependable partner.

Some of the strongest future projects in Canada are those that are small and floating, including the offshore Woodfibre and Cedar LNG projects on the West Coast that may come to market over the next decade, followed later by projects on the East Coast. These projects will need to acquire customers and financing first, while getting full support from all levels of government and communities, including any relevant Indigenous groups. The recent trajectory of approvals for energy projects highlights the difficulties of bringing them to market, but that doesn’t mean Canadian officials should give up.

Canada’s economic opportunities go beyond the potential battery and processing technologies that Mr. Trudeau brought up when he’d deflected Mr. Kishida’s LNG request, or the hydrogen project discussions that resulted from Mr. Scholz’s visit. Canada’s economic opportunities could also include a role for other energy sources. Over all, Canada could look at the current global environment and embrace all of them in its approach to its energy production. Doing so could help reach economic and geopolitical goals.