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Canada Looks To Capitalize As U.S. Pauses LNG Export Licenses






The Biden administration’s decision to pause approvals of new licenses to export liquefied natural gas (LNG) is making major waves both at home and internationally. While there is much hand-wringing about the economic implications of the deal for the United States and its energy trade partners, at least one man, Canadian Energy Minister Jonathan Wilkinson, sees an opportunity for his country’s natural gas sector.

On Friday, President Biden announced that during this pause the U.S. Department of Energy will review and assess whether the nation’s considerable LNG exports are “undermining domestic energy security, raising consumer costs and damaging the environment.”

For Canada, the pause in approvals and what is sure to be an ensuing slowdown in United States natural gas exports offers its own export sector an invaluable window of time to catch up. While the United States has busily built out it’s natural gas industry, and is just slowing down now to pause, reflect, and potentially move toward less emissions-intensive practices, Canada has taken the opposite approach. The growth of the Canadian natural gas sector has been much slower because they approached climate considerations early on thanks to much stricter national policies.

“I think there’s an opportunity,” he said when asked what Biden’s decision means for Canadian gas for an article published by Bloomberg Green on Tuesday. “But it’s on the basis of Canada offering the lowest carbon intensity natural gas in the world, and ensuring we’re linking it to the displacement of heavier hydrocarbons like coal.”

The hope is that some of the Asian nations that rely heavily on United States LNG imports to keep their own economies running may pivot to Canadian imports as they are temporarily frozen out by the Biden administration decision. In the wake of Biden’s announcement, LNG buyers in China and Japan rushed to review alternative options, “including new talks with already-licensed projects in the US or suppliers from other nations,” Bloomberg reports.

Where Wilkinson sees a silver lining, however, others see economic doom and gloom. “I think U.S. allies and trade partners will have some concerns about this, because in the past two years U.S. L.N.G. exports have been a real boon to global energy security,” Ben Cahill, a senior fellow in the energy security and climate change program at the Center for Strategic and International Studies, a Washington-based research institute, told the New York Times this week.

While Wilkinson’s stance suggests that Canada has already done much of the important climate-conscious legwork that the United States is just now addressing, and should now be bullish about taking a slice of exports, industry insiders question how that will be possible without the use of U.S. export terminals. “LNG facilities on the U.S. Gulf Coast are also offering Canadian producers an opportunity to export their natural gas globally,” said The Canadian Association of Petroleum Producers president and CEO Lisa Baiton in an emailed statement on Friday. “Given the highly integrated nature of the North American energy market, CAPP is disappointed in the White House decision.”
On the other hand, others feel that the U.S. pause places pressure on their neighbors to the north to follow the same tack. Already, a coalition of environmental groups has pressured Canadian leadership to adopt the same pause-and-reflect approach.

The Biden administration’s decision has already caused some anxiety in Europe as well. The European Union is still reeling from its energy sanction war with Russia against the backdrop of the ongoing war in Ukraine. When Moscow illegally invaded Ukraine in February of 2022, the EU was dependent on Russia for 41% of its natural gas. While the bloc has managed to pivot to alternative energies and LNG sources in the past two years, their newfound energy security is still wobbly. As such, any limitation to free-flowing U.S. LNG is viewed as a threat.

However, the United States’ controversial natural gas export pause may yield long-term economic benefits for all. In October, The International Energy Agency’s flagship annual World Energy Outlook report warned that the world is on track to create a global LNG supply glut, with an “unprecedented surge” in LNG projects slated to come online from 2025, adding more than 250 billion cubic meters (bcm) per year of new capacity by 2030. A pause, and perhaps a pivot, from the United States’ own large LNG sector may ease the severity of this outlook.

By Haley Zaremba for Oilprice.com



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