Canada’s Liquefied Natural Gas Potential

With advances in hydraulic fracturing and horizontal drilling, the U.S. drilling boom has led to a decreased reliance on Canada’s natural gas commodities. And with an increasing number of competitors, such as Australia and the U.S. to serve the Asia-Pacific’s energy demands, Canada needs to speed up the development of its LNG terminals.

Liquefied natural gas (LNG) is composed primarily of methane that is condensed to a liquid phase through a cooling process, making it easier to store and transport. In liquid phase, LNG takes up 1/600 of the volume and is odorless, non-toxic, and non-corrosive, making it extremely convenient to transport and an attractive solution for meeting the world’s natural gas demand. In more than 50 years of commercial LNG usage, there have been no major safety or security issues. With increased drilling in the U.S., gas exports have significantly dropped and are forecasted to decrease further, creating a race to ship liquefied natural gas to Asia. In Asia, LNG can be sold at a higher premium than it can be in the U.S.

LNG is nothing new, as the first patent was filed in 1915, and the first production began in 1917. But the slow development of Canada’s LNG industry is due to the high cost of treating and transporting it, as well as to the remoteness of the LNG plants. The production of liquefied natural gas begins with the transportation through a pipeline to a treatment facility. At the plant, the gas is first pretreated to remove CO2, condensates, hydrogen sulphide, and trace metals such as mercury. After pretreatment, the gas is condensed into a liquid phase near atmospheric pressure through a cooling process, making it more efficient to transport where pipelines are not present.

The natural gas must be condensed into LNG and stored in tanks before being shipped overseas; however, there are currently no LNG terminals in Canada. This is where Kitimat, BC, comes into play. Kitimat LNG is just one of the multibillion dollar proposals currently on the table that could potentially transport 10 million tons of LNG per year and completely reorientate Canada’s natural gas supply chains. This solution is financed by Apache Corporation and Chevron Canada Ltd., which have signed a joint agreement to build and operate Kitimat LNG and develop Canadian shale gas resources in the Liard and Horn basins in British Columbia.

Kitimit is being proposed to contain a single corridor for several pipelines or, alternatively, one pipeline branching to several areas due to its strategic location in serving the Asia-Pacific market. It could include an LNG storage facility as well as on-land loading facilities that will be supplied from unconventional natural gas plays in British Columbia and Alberta.

Supported by a secure supply of LNG from British Columbia and Alberta’s unconventional plays, the growth in the LNG market could be significantly greater than what is being predicted. BC has forecasted job numbers of over 60,000 construction jobs and 75,000 supporting jobs in the drilling and gas liquefaction plants for 10 potential plants built by 2021.

No other oil and gas market has seen the rapid growth that the LNG industry has undergone. The prediction is that 2014 will hold the construction boom this sector has eagerly awaited. With both the Chinese and Korean markets waiting to meet their energy demands, the LNG market is a lucrative opportunity for Canada. But analysts warn that the industry needs to proceed with caution as long-term preparation is needed for longevity in the world gas market. However, without ramping up its development, Canada could potentially loose the Asia-Pacific markets to its stiff competition, Australia and the U.S. among others.