Canada makes first ever LNG shipment, buoying Asia's energy security
Asian giants Petronas, PetroChina, Mitsubishi and Kogas own 60% of $14bn project
TOKYO -- Canada has shipped its first ever cargo of liquefied natural gas, unleashing a source of the super-chilled fuel that could boost Asia's energy security in the face of tight global supply.
The cargo left LNG Canada's facility in the western province of British Columbia Tuesday morning Asia time. It was loaded on the vessel Gaslog Glasgow chartered by oil major Shell, according to ship tracking information from Kpler, a commodity data firm. The shipment comes more than a decade after the project was first announced in 2012.
Asian energy companies and traders expect the $14 billion project to play a key role in supplying their region due to its relative proximity and the ability to bypass chokepoints such as the increasingly congested Panama Canal. LNG Canada also offers further diversification options for the Asian buyers, which have historically sourced the fuel from Australia, Qatar, Malaysia and the U.S.
"Canada has what the world needs. With LNG Canada's first shipment to Asia, Canada is exporting its energy to reliable partners, diversifying trade and reducing global emissions -- all in partnership with Indigenous peoples," the country's prime minister, Mark Carney, said in a statement. "Canada can become the world's leading energy superpower with the strongest economy in the G7."
Shell, which holds a 40% stake in the project, declined to comment on the charter of the vessel.
Aside from Shell, LNG Canada's investors are all Asian. Malaysia's Petronas has a 25% stake, China's PetroChina holds 15%, Japan's Mitsubishi Corp. owns 15%, and South Korea's Kogas has 5%.
"LNG Canada is a very valuable project," Yukio Kani, global CEO of Jera, Japan's largest power producer and a major buyer of LNG, said at a recent news conference. Jera has a 15-year contract to import liquefied gas from the project. "It is very beneficial for Asian players, given its geographical proximity."
Investors gave the final go-ahead to LNG Canada in 2018. At full capacity, it is expected to produce 14 million metric tons a year, accounting for around 2.5% of global LNG trade.
The liquefaction facility in the coastal area of Kitimat receives natural gas via a 670-kilometer pipeline from inland wells.
The cargo takes only around 10 days to reach Japan. By contrast, LNG from the U.S. Gulf Coast, where most of America's export facilities are located, takes about 25 days to make it to Japan if it goes through the Panama Canal, or nearly 40 days if it avoids that waterway and instead goes around the bottom of Africa.
Given Asia is expected to drive demand for the fuel in coming years, "LNG Canada and its [joint venture partners] continue to explore pathways for a potential Phase 2 expansion," LNG Canada said in a statement. This may include the construction of two additional LNG processing units, resulting in a doubling of production capacity, it added.
Analysts expect LNG Canada to alleviate the tightness in the global gas market, which has continued since Russia cut off its pipeline supplies to Europe following its invasion of Ukraine in 2022. European countries were forced to rely on LNG to meet their energy and heating needs, putting them in competition with Asia for limited supplies of the fuel and driving up prices.
"The LNG market has remained tight this year with Europe competing against Asia this summer for spare cargoes needed to refill its storage after a colder winter," said Alex Froley, senior LNG analyst at commodity consultancy ICIS.
"That has kept spot gas prices in Europe and Asia relatively high this summer. Projects like LNG Canada will help to make the market more comfortable going into the next winter," he added.