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Canadian LNG Projects: Key Development and Financing Issues

North America is experiencing tremendous gas supply realignment. In 2000, Canada exported 3.5 trillion cubic feet (tcf) of gas to the United States. In 2013, Canada produced 4.6tcf gas, of which 2.9 TCF met domestic demand and only 1.7tcf was exported to the United States. With growing U.S. energy independence, Canadian gas exports to the United States are in decline and will decline further given the advent of massive U.S. domestic shale resources.

The National Energy Board of Canada estimates that 1,093tcf (or 238 years of production at current rates) of remaining marketable gas resources are situated in Canada. But where will this gas go? Liquefied natural gas (LNG) industry proponents and various levels of government in Canada hope that LNG is the answer, but investment is necessary to deliver gas to the export market.

With the LNG market being global, and Canadian projects competing with projects around the world, the key question is what is the appetite for major new capital LNG investment in Canada versus other jurisdictions?

This paper* examines the current state of LNG project developments in Canada, identifies development regulatory matters in Canada, along with management of aboriginal law issues, and offers observations on how such projects might be financed by reference to securing LNG off-takes for these projects and potential financing structures.

*First published in the Project Finance International Yearbook 2015 (Thomson Reuters).