Energy executives believe Canadian LNG has huge Asian potential despite carbon taxes, red tape

CALGARY — Energy executives have said Canada has vast potential to become a long-term liquefied natural gas (LNG) supplier to Asia, but also warned carbon taxes, regulations, and high costs continue to undermine the country’s competitiveness on the global stage.During a panel moderated by Calgary Chamber of Commerce CEO Deborah Yedlin on Thursday, Kentaro Toyokawa, CEO of Diamond Gas Management Canada Ltd. told the audience that Canadian LNG is increasingly seen in Asia as more than a replacement for coal and could play a much broader role going forward.“The Canadian resource can help offset the declining conventional gas supply to Asia,” Toyokawa said.“Montney has the strong potential to replace those conventional gas supplies in Asia.”He also pointed to Japan’s ongoing energy challenges following the 2011 Fukushima disaster, noting that only 15 of the country’s 54 nuclear reactors have restarted due to local opposition, increasing demand for alternative energy sources such as LNG..“Canada has a lot more growth to do, so we expect more investment in Canada,” he said.Japanese investors have previously said that Western Canadian LNG has significant geographic advantages for Asian buyers.LNG shipments from British Columbia can reach Japan in roughly 10 days — about half the transit time of shipments from the Middle East or the US Gulf Coast — while also avoiding strategic chokepoints such as the Strait of Hormuz amid growing instability tied to the Iran conflict.However, Toyokawa also acknowledged there is growing frustration in the international community over Canada’s red tape and difficulties building major energy infrastructure projects.“One of the key challenges is carbon pricing,” Toyokawa said.“Very few energy-exporting countries impose a carbon tax on LNG. So Canada needs to reinforce its competitiveness in some other areas, and the other challenges include harsh natural conditions, which raise the cost of construction, and a shortage of skilled labour.”.Another panelist, Scott Burrows, president and CEO of Pembina Pipeline Corporation, said Canada already faces numerous structural disadvantages — such as the difficulty of building through the Rocky Mountains — before carbon taxes are brought into play.He also disagreed with Prime Minister Mark Carney’s past statements that buyers were willing to pay for low- carbon energy, “because in this five minutes, they’re not.”Referencing the Cedar LNG project — which he said was among the world’s lowest-emitting LNG proposals — Burrows said international buyers showed little interest in paying extra for lower emissions.“Talking to global players all over the world, I can tell you that not one person cared or was willing to pay for lower-carbon LNG,” Burrows said.“‘What is your toll? What's your all-in landed cost? When are you gonna be in service? Will you be in service given the history of Canada?’ No one wanted to pay for it. They [just] want the molecules.”While agreeing with the other panelists, Corey Code, executive vice-president and CFO of Ovintiv, also warned Canada’s abundant gas reserves alone are not enough to guarantee success.“We assume that having the resource means it will get to market,” Code said.He did, however, add that recent progress, such as the launch of LNG Canada and work on Cedar LNG, gave some cause for optimism.“Once you start to see things actually come on, it gives you all the reason that we can get more done,” Code stated.“I think we just gotta be careful that we don't get complacent and think that having the resource itself is enough.”

Energy executives believe Canadian LNG has huge Asian potential despite carbon taxes, red tape

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