5 Key Takeaways from the McCarthy Tétrault Key Insights for Canadian LNG Panel

On October 27, 2020, McCarthy Tétrault virtually hosted the Key Insights for Canadian LNG panel, which focused on the present state and future potential of Canadian Liquefied Natural Gas (“LNG”). This blog describes the top 5 takeaways from the panel.

1. Canada is well positioned to become a global leader in LNG

Canada has an immense wealth of clean energy to power projects, and massive capabilities to enable carbon sequestration. This provides Canada with the ability to provide large carbon credits to incentivize both domestic and international participation in the Canadian LNG space. Furthermore, countries such as China and India are still highly dependent on coal power sources. With significantly shorter routes (than U.S. Gulf Coast LNG projects) to Europe and Asia from the Canadian East and West Coast respectively, Canada can continue to expand exports of LNG.

Although Canada is late to participate in LNG efforts, a Canadian LNG industry has the advantage of learning from the mistakes of previous LNG efforts in other countries (such as Australia, which suffered from cost overruns and project delays). Additionally, more countries around the world are committing to achieving net-zero emissions. These factors are further indicators of the existence of an opportunity for Canada to become a global leader in the LNG market.

2. Canadian LNG projects are critical to Canada’s energy future and ability to financially recover from COVID-19

The oil & gas industry was critical in helping the Canadian economy recover following the 2008 Global Financial Crisis. A functioning Canadian LNG industry can provide similar sources of revenue and employment in a post COVID-19 Canadian economy. Alberta’s recently released Natural Gas Vision and Strategy (the “Strategy”) outlines positive and long-term economic impacts that LNG can have on the Canadian economy. Some estimated impacts include:

  1. an average increase of approximately $11 billion per year (from 2020-2064) in Canada’s Gross Domestic Product; and
  2. national employment growth by adding 96,550 jobs annually.

The Strategy also notes that as Canadian LNG projects would likely produce and consume natural gas in Western Canada, such projects would increase upstream investment, price uplift and royalty revenues in Alberta.

3. Consistent Canadian regulatory processes will attract international investors

There is a wide-held belief that Canadian regulatory standards are too high and make it impossible for oil & gas projects to receive approval. However, Canadian energy regulations are intended to hold projects to higher standards. As the world becomes increasingly environmentally conscious, Canada has a golden opportunity to shine a positive light on Canadian regulatory standards. This could garner positive responses from the general public and encourage investment from both domestic and international investors. As the first set of projects move through novel regulatory processes imposed by laws such as Bill C-69, the Impact Assessment Act, SC 2019, c 28, s 1, and the Environmental Assessment Act, SBC 2018, c 51, the federal and provincial governments in Canada have an opportunity to illustrate that energy projects can and will receive approval in an efficient and fair manner.

A significant point of concern for international investors stems from the rationale that because the Canadian regulatory space is highly political rather than technical, it is possible that regulatory standards will undergo constant and drastic changes. If Canadian regulatory authorities can demonstrate a consistent, efficient and long-lasting application of their rules and processes, then more international investors will be attracted to LNG projects in Canada.

4. Sustainable Canadian LNG projects are attainable and active

There is a public misconception that all LNG is the same and equally harmful to the environment. However, Canada is considered to have the world’s best LNG. Canada is uniquely positioned to build low and net-zero LNG projects as Canadian LNG proponents have already committed to doing so. It is important that resources are committed to educate Canadians and the international market about the realistic attainability of sustainable Canadian LNG projects. Furthermore, if LNG proponents and the Canadian government both express a positive and consistent view towards Canadian LNG, it will create both internal and external opportunities.

5. Indigenous partnerships must be a priority in LNG efforts in Canada

Support of LNG projects from Indigenous communities seems to be mixed. However, sustainable LNG represents a unique opportunity to bring employment opportunities and revenue to Indigenous communities. Efforts must be made to establish and maintain real partnerships with Indigenous communities to ensure they can benefit from LNG projects in the short and long-term. Partnerships with Indigenous communities should include opportunities for such communities to acquire equity ownership of LNG projects. Governments are uniquely positioned to provide fair and condition-free capacity for Indigenous communities to invest in LNG projects.

For further information on LNG or if you have questions about the impact of COVID-19 on your business, please contact your McCarthy Tétrault trusted advisor.