Canada’s LNG ‘business case’ grows as US trade wars disrupt Asian markets

Coulda, shoulda, woulda. 

If Canada only had functioning LNG terminals built years ago, it would be in a prime position to capitalize on US president Donald Trump’s escalating trade wars in Asia as well as this side of the Pacific Rim, according to emerging market trends.

Despite Prime Minister Justin Trudeau’s insistence that there is no “business case” for Canadian LNG, Asian buyers are increasingly looking to diversify their supplies away from producers in Trump’s ‘Gulf of America’. 

The shift comes amid tariffs on Chinese imports and threats of new duties on Canadian energy. Meanwhile, Japan, the world’s second-largest LNG buyer after China, is signalling that its demand for the fuel may increase by more than 10% by 2040 if renewable energy expansion fails to meet expectations.

According to Yuya Hasegawa, a senior official at Japan’s Ministry of Economy, Trade and Industry (METI), the nation’s gas demand could still rise to 74 million tons by 2040 — or nearly 20%.

“If we do not have a huge expansion of renewable energy, or if we cannot reduce the cost of hydrogen, ammonia, or carbon capture (CCUS), our gas demand will increase,” Hasegawa told a conference in Tokyo.

Canada, which currently exports no LNG, is now entering the market at a pivotal moment. LNG Canada, a $40 billion mega-project in Kitimat, BC, will begin shipping LNG to Japan and South Korea this year, with future expansion plans that could double production. 

Japan’s Mitsubishi is a major investor in the project, alongside Shell, Malaysia’s Petronas, and South Korea’s Kogas.

Alberta, which supplies much of the natural gas for LNG Canada, is already doubling down on production in anticipation of growing demand. Rebecca Schulz, Alberta’s environment minister, emphasized that Canada’s geographic advantage makes it an ideal LNG supplier for Japan.

“Just the shipping time, half that of LNG from the US Gulf Coast, makes us a perfect partner for Japan,” Schulz said.

While Canada has dithered in getting LNG Canada across the finish line, the US has rapidly grown into the world’s largest LNG exporter. But Trump’s trade policies are introducing volatility. 

Chinese tariffs on US energy imports, including a 15% levy on American LNG and coal, threaten to disrupt billions of dollars in planned LNG projects south of the border. China is one of the biggest US buyers of US, but retaliatory tariffs could push Beijing to secure alternative suppliers, including Canada.

Analysts warned that China’s retaliatory tariffs may complicate efforts to secure financing and make US gas less competitive on the global market.

Venture Global, a leading US LNG exporter, has already warned its investors that trade tensions could “adversely affect our ability to market our projects.” 

No surprise, its stock fell nearly 5% after China announced its retaliatory tariffs.

As the US faces hurdles in securing long-term LNG contracts, Canada would seem to be primed to seize the moment. 

Along with LNG Canada, Haisla Nation-led Cedar LNG project is also under construction in Kitimat and expects to begin exports by 2028. Meanwhile, the Nisga’a Nation’s $10 billion Ksi Lisims project, is undergoing environmental assessment and, if approved, will add another 12 MTPA of capacity.

Despite Trudeau’s past claims that there is “no market opportunity” for Canadian LNG, the global energy landscape is proving otherwise. Teresa Waddington, a vice president at LNG Canada, highlighted the urgency of securing new, diversified energy supplies in the face of global trade uncertainties.

Canada’s long-overdue entry into the global LNG market may finally be underway, just in time to capitalize on growing demand in Asia and the turbulence of U.S. energy policy.

“As world events continue to demonstrate, a reliable supply of responsibly produced energy should never be taken for granted,” Waddington said. “We’re proud to be part of the effort to deliver that energy while helping Canada diversify its export markets.”