(Reuters) — The start-up of LNG Canada, the country’s first such export terminal, is likely to strain its natural gas supplies for multiple years and force producers to reduce exports to the U.S., where demand for the fuel is record high, companies said.
Shell-led LNG Canada has begun testing its C$40-billion British Columbia terminal ahead of commercial operations starting in mid-2025. The terminal will process up to 2 billion cubic feet per day (Bcf/d), representing 11% of current Canadian gas output.
Like Canada, the U.S. is building more liquefied natural gas (LNG) terminals as it produces more gas than it consumes. However, even as the world’s top gas producer, the U.S. does not drill enough to meet both its domestic consumption plus rising export demand.
Western Canadian producers historically have been able to raise average production by up to 0.5 Bcf/d year-over-year, indicating a temporary supply gap for U.S. and eastern Canadian markets at the outset of LNG Canada’s full operations, Jamie Heard, vice president of capital markets at Tourmaline Oil TOU.TO, Canada’s biggest gas producer, told Reuters.
That estimate is based on new capacity, not year-to-year fluctuations due to outages.
“It’s going to take, in our view, up to four years to satisfy the pull that LNG Canada by itself is providing to the market,” Heard said.
Canada exported about 8 Bcf/d of gas by pipeline to the U.S. in 2023, compared with an average of 7.5 Bcf/d over the prior five years, according to the U.S. Energy Information Administration.
ARC Resources, Canada’s third-largest gas producer, expects periods of lower Canadian exports to the U.S. when supply and demand are mismatched, but those periods are likely to be short-lived as the market re-balances, CEO Terry Anderson said in an email.
Satisfying demand hinges on how prices compare among global gas hubs and differentials look to be more volatile, he said.
ARC will supply gas to the Cedar LNG project, one of several on British Columbia’s Pacific coast, which is close to Canada’s vast Montney shale field and has a short shipping distance to Asian markets.
Cedar is expected to receive final investment decision mid-year for construction of a plant using 0.4 Bcf/d of gas after opening in 2028 and Woodfibre LNG will use 0.29 Bcf/d after completion in 2027.
Source: Trade Finance
