June 28, 2023
LNG Exports are the largest driver of Canadian natural gas demand growth.
The Shell-led 3.2 Bcf/d LNG Canada project is currently under construction, having received NEB export approval and both federal and provincial environmental assessment certificates. First exports are expected in 2025. Completion of LNG Canada’s second train moves their LNG demand to 3.6 Bcf/d by 2030 and remains at this level through the forecast period.
A smaller lower mainland project (Tilbury) is expected to begin exports in 2023 with Woodfibre starting in 2027 resulting in overall Lower mainland exports reaching 0.3 Bcf/d.
Incorrys does not expect any further LNG exports from Canada before 2035 as we continue to miss significant growth opportunities as the world demand for LNG continues to increase.
LNG Canada Impact on Canada Gas Supply/Demand
Western Canada pipeline connectivity provides North American gas markets with a valuable continental link, giving consumers security-of-supply tools to mitigate seasonal energy supply disruptions such as low snowpack in the Pacific Northwest (affecting hydroelectric generation) and Gulf of Mexico hurricanes (cutting gas supply).
Western Canada pipeline exit capacity was expanded to the US Pacific Coast, Midwest, and Northeast (to more than 15 Bcf/d), and gas storage infrastructure was enhanced (withdrawal capacity now 7 Bcf/d).
West Coast BC LNG will benefit from accessing robust low-cost western Canada supply.
Incorrys believes producers can quickly respond to increased LNG export demand by drilling highly productive shale gas wells, thereby preventing a return to supply-constrained market conditions and muting sustained upward pressure on natural gas prices. Increases in demand can be quickly matched by increased production, which will mute large AECO-NIT price swings.
However, our forecast shows slight widening of 2024 AECO-NIT basis as producers drill to meet LNG requirements in 2025. Followed by narrowing of AECO-NIT basis as LNG projects compete within the AECO-NIT market for natural gas supply to fulfil export requirements for 4 LNG trains over the forecast period.
Map of Western Canada Pipelines Supplying LNG Projects