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Commentary: Market access and Canada's natural gas industry

Canadian natural gas and the building of an LNG industry are a generational opportunity that would fuel jobs and economic growth.

Canada has an abundance of economically accessible natural gas resources. We are currently the fifth largest producer of natural gas in the world, and we have a 300-year supply based on current technology and consumption levels. This represents an enormous export opportunity: one that can fuel jobs, economic growth and public revenues for Canadians for decades to come.

We already are a net exporter of natural gas—but we export to only one customer: the United States. This lack of market diversity presents a significant problem for Canadian producers, as our best customer has now become our biggest competitor.

Over the past ten years, advances in horizontal drilling and multi-stage hydraulic fracturing have enabled the United States to increase its natural gas production by 48 per cent (source: EIA). The U.S. is now the world’s number one producer of natural gas. The result has been low prices in North America due to regional oversupply, and declining exports of Canadian natural gas, particularly into the eastern regions of the United States. In these areas, shorter transportation distances give American producers a decided cost advantage.

In addition, the United States is increasing its own exports—including into Ontario and Quebec, displacing natural gas from Western Canada.

When it comes to the development of LNG exports, we as a country have fallen behind the United States. The U.S. Federal Energy Regulatory Commission has approved five LNG export plant proposals, with the first cargoes already being shipped from the Sabine Pass LNG project located on the U.S. Gulf Coast. With more than ten additional projects at various stages of review, the U.S. is poised to become a major exporter of LNG. While it is certainly positive to see LNG export capacity developed in the U.S., as any natural gas leaving the continent helps Canadian producers move their own resources, the world market has become more competitive.

"We have an important opportunity—provided projects are approved and the necessary infrastructure built in a timely manner."

Canadians recognize the opportunity represented by overseas LNG exports. Nineteen projects are being proposed along the B.C. West Coast, and Canada has decided advantages, including a shorter sailing distance to markets in Asia and a generally cooler climate (meaning less energy is required to liquefy natural gas). We have an important opportunity—provided projects are approved and the necessary infrastructure built in a timely manner.

A West Coast LNG industry would be backed by our robust upstream natural gas industry. This industry has the technical know-how and a proven track record for producing large volumes of natural gas using hydraulic fracturing in a manner that is safe, cost-effective and environmentally responsible. Combined with our reputation as a reliable trading partner that observes rule of law, and that possesses world-leading environmental regulations, we are well positioned to become a trusted and preferred supplier of LNG to customers in Asia.

The long-term benefits would be significant. Even a modest West Coast LNG industry, exporting about 30 million tonnes per year, would grow Canada’s economy by an average of $7.4 billion per year over the next 30 years, according to a Conference Board of Canada study. Increased economic activity from natural gas development and exports would increase national employment by an annual average of 65,000 jobs. Increased international trade would generate substantial new government revenues through royalties, taxes and land tenure payments.

The global impacts would be beneficial as well. Natural gas is the cleanest burning hydrocarbon. Exports into China, for example, would help displace the use of coal to generate electricity—resulting in lower levels of smog and decreased GHG emissions.

Natural gas and LNG exports are a generational opportunity. Our industry is committed to ensuring that this opportunity is realized, to the benefit of all Canadians.

Tim McMillan
President and CEO
Canadian Association of Petroleum Producers