Exporting natural gas to Asia a realistic opportunity

Contributed to Vancouver Sun
Tim McMillan
President and CEO
Canadian Association of Petroleum Producers
February 28, 2016

Technological innovation has radically changed North America’s natural gas market and left the continent flush with a resource that only a decade ago was thought to be in short supply.

This is Canada’s new reality: our No. 1 customer for natural gas, the United States, is now our No. 1 competitor. This is a challenge for Canada’s natural gas resource owners and producers, particularly in British Columbia. But it is also an opportunity. Despite low natural gas prices, Canada’s abundant natural gas can be part of a solution to the world’s climate challenge.

World demand for natural gas, the cleanest-burning fossil fuel, is expected to increase 46 per cent by 2040, driven primarily by the rapidly expanding Asian economies, according to the International Energy Agency (IEA).

This is an opportunity for B.C. producers to export natural gas overseas. In doing so, we can help fuel cleaner power generation in countries that rely on coal.

Take China as an example.

The vast majority of China’s primary energy demand is met by coal, and demand is growing. This makes it reasonable to think that more affordable natural gas from Canada could help displace coal to make electricity in China.

Making more Canadian natural gas available to China will lower the amount of carbon in its energy mix – a positive Canadian contribution to address global climate change.

It will be challenging to tie any emissions reductions in China directly back to any individual liquefied natural gas (LNG) project in Canada, but in total there will be an unambiguous improvement in global emissions. Natural gas can therefore move Canada towards its goal of a lower-carbon energy future, at home and abroad.

This benefit stems from the fact that natural gas, used in power generation, emits about half the carbon dioxide compared to coal. It also emits far fewer air pollutants and can significantly reduce smog when used instead of coal to make electricity.

Yet natural gas represented only five per cent of China’s primary energy consumption in 2013, according to IEA, while coal represented 68 per cent. This mix is changing, as the Chinese government plans to cap coal use at 62 per cent of its total primary energy consumption by 2020. Over the same period, China plans to double its use of natural gas. As a result, China is now the world’s third largest importer of LNG.

To participate in the global LNG market, Canadian natural gas producers must be cost-competitive and environmental performance must be strong. Industry broadly agrees with the goal of competing environmentally with other natural gas suppliers to Asia because we believe Canada is coming from a position of strength.

B.C. was the first jurisdiction in North America to introduce a $30-per-tonne carbon tax that is broad-based and revenue-neutral. The carbon tax, in conjunction with upstream emission regulations and a greenhouse gas intensity benchmark that will establish B.C.’s LNG facilities as the cleanest in the world, has driven and will continue to drive emission reductions across industry.

These stringent Canadian rules and policies serve as the model for other places around the world of how to do it right.

Finally, the economic benefits of selling Canadian energy overseas are significant.

Even a modest West Coast LNG industry, exporting about 25 million tonnes per year, could double B.C.’s natural gas production to 7.5 billion cubic feet per day by 2030. This increased international trade would generate substantial new government revenues, economic growth and permanent jobs for British Columbians.

Exporting natural gas to Asia is a realistic opportunity to tackle climate change globally and reap the economic benefits from responsible production at home.

It is an opportunity for Canada to export both its resourcefulness, its environmental leadership, along with its energy resources.