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Canadian Energy Centre

To reduce emissions, the world needs more LNG: report

Published

12 months ago

4 minute read

The LNG Canada export terminal is about 85 per cent complete. Photo courtesy LNG Canada

From the Canadian Energy Centre

By Deborah Jaremko

Wood Mackenzie says spending needs to rise by $400 billion over the next decade

An additional $400 billion investment in liquefied natural gas (LNG) projects around the world is needed over the next decade to ensure energy security and achieve emissions reductions, according to a new report by Wood Mackenzie.  

Without increased LNG supply, it said Asian countries in particular will continue to rely on high-emitting coal as they grow power generation. 

“On a global scale, limited supplies of LNG risks stalling progress towards 2050 net zero targets in the near term,” says the report by Wood Mackenzie and Petronas, one of the joint venture owners of the LNG Canada project.  

The fallout from Russia’s invasion of Ukraine rerouted LNG shipments from Asia to Europe, contributing to record coal consumption in 2022, analysts noted.  

“A key pillar of the energy transition is to reduce the consumption of coal. A critical step in that transition is to shift power production from coal to much lower-emissions gas. The shift helps drive immediate decarbonization while renewables, energy storage, and other clean energy technologies scale-up.” 

Power generation from natural gas reduces emissions by half on average, according to the International Energy Agency (IEA). LNG from Canada can deliver an even bigger decrease, reducing emissions by up to 62 per cent, according to a 2020 study published in the Journal for Cleaner Production. 

Global natural gas use is rising, driving increased demand for LNG. The U.S. Energy Information Administration’s latest outlook projects natural gas consumption will rise to 197 quadrillion BTU in 2050, up from 153 quadrillion BTU in 2022.  

“Gas can be used to not only replace coal for power generation, but also to provide fuel for blue hydrogen production, and as an essential source of flexibility as electricity grids incorporate increasingly large amounts of intermittent renewable generation,” Wood Mackenzie said.  

“Gas also plays a critical role in non-power sectors such as commercial and residential heating, as a feedstock for chemicals and fertilizers, and as an energy source for metals, cement, and other manufacturing processes.” 

Canadian LNG has advantages in a lower emission world, the report said.  

“Canada’s western ports are ideally positioned to supply growing Asian demand because its shipping routes aren’t dependent on an uncongested Panama Canal. The country is also poised to produce some of the lowest-emission LNG in the world,” Wood Mackenzie said.  

The low emissions per tonne of LNG in Canada come from shorter shipping distances to customers, a colder climate, the use of hydroelectricity, and methane emissions reduction from upstream natural gas production. 

Once it starts operating in 2025, LNG Canada will have emissions intensity of 0.15 per cent CO2 per tonne, less than half the global average of 0.35 per cent per tonne, according to Oxford Energy Institute.   

Proposed Indigenous-led project Cedar LNG would have emissions intensity of 0.08 per cent, and smaller-scale Woodfibre LNG would have emissions intensity of 0.04 per cent.   

“The gas and LNG supply and demand mismatch that spawned the current energy crisis and stalled energy transition progress can’t be repeated,” Wood Mackenzie said.  

“This will require a long-term commitment to expanding capacity to ensure reliable, increasingly low-emission, and affordable LNG that won’t be upended by future geopolitical and economic disruptions.” 

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Canadian Energy Centre

Oil and gas companies are once again the top performers on the TSX. Why do people still listen to the divestment movement?

Published on October 7, 2024

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From the Canadian Energy Centre

By Gina Pappano

The TSX30—the annual ranking of the top-performing stocks on the Toronto Stock Exchange—was recently released and, once again, oil and gas companies made up the lion’s share of the list.

Half of the top companies (11 producers and four energy service companies) are in the oil and gas sector.

Share prices have been driven up due to energy supply and security concerns and ever-increasing demand for oil and gas. The industry and its investors have enjoyed extraordinary three-year returns. The average share price return for the 15 oil and gas companies in the TSX30 was 210 per cent.

But what about the large endowment funds, pension plans, institutional funds and, more recently, banks that have bowed to pressure from divestment-promoting activists to stop investing in the natural resource sector?

In removing oil and gas from their investment pool, they have ignored their responsibility to their beneficiaries, who have missed out on these remarkable returns.

Trustees have a fiduciary duty to act in the best interest of their beneficiaries, which in this case means maximizing the risk-adjusted return for their clients.

But for ideological reasons, oil and gas companies are often being left out of the investment equation.

What’s more, the divestors aren’t even achieving their ideological goal.

Abundant energy is the prerequisite for modern life. Divestment does not stop oil and gas production because it does nothing to reduce demand. After more than a decade of divestment pledges, demand for oil and gas has only continued to go up. This demand is projected to continue to grow for years to come.

If Canada does not supply the oil and gas the world wants and needs, it will be supplied from elsewhere, including by authoritarian regimes in poorly regulated, undemocratic countries that are less responsible and less environmentally friendly.

It would be better if Canadian companies like those on the TSX30 were the ones to step up and meet the world’s ever-growing energy needs.

It would be better for Canadians as well. Canada is blessed with abundant natural resources, and oil and gas is central to our prosperity. All of the companies on the TSX30 list rely on the oil and gas sector to fuel their business, from industrials to mining, to aviation, technology and yes, even to renewable energy.

Investing in the Canadian oil and gas sector means investing in energy companies that can and should be the suppliers of the energy demanded by our power-hungry world.

These companies have high environmental and governance standards, are driven to innovate—an essential process for emissions reduction—and have had some of the strongest returns on the TSX in recent years.

Can our banks and fund managers possibly continue to ignore the significant value in the energy space? Only time will tell.

Gina Pappano is the former head of market intelligence at the Toronto Stock Exchange and TSX Venture Exchange and executive director of InvestNow, a non-profit dedicated to demonstrating that investing in Canada’s resource sectors helps Canada and the world. Join the movement and pass the InvestNow resolution at investnow.org.

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Alberta

Alberta rail hub doubling in size to transport plastic from major new carbon-neutral plant

Published on October 4, 2024

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Haulage bridge at Cando Rail & Terminals’ Sturgeon Terminal in Alberta’s Industrial Heartland, near Edmonton. Photo courtesy Cando Rail & Terminals

From the Canadian Energy Centre

By Will Gibson

Cando Rail & Terminals to invest $200 million to support Dow’s Path2Zero petrochemical complex

A major rail hub in Alberta’s Industrial Heartland will double in size to support a new carbon-neutral plastic production facility, turning the terminal into the largest of its kind in the country.

Cando Rail & Terminals will invest $200 million at its Sturgeon Terminal after securing Dow Chemical as an anchor tenant for its expanded terminal, which will support the planned $8.9 billion Path2Zero petrochemical complex being built in the region northeast of Edmonton.

“Half of the terminal expansion will be dedicated to the Dow project and handle the products produced at the Path2Zero complex,” says Steve Bromley, Cando’s chief commercial officer.

Steve Bromley, chief commercial officer with Cando Rail & Terminals.

By incorporating carbon capture and storage, the complex, which began construction this spring, is expected to be the world’s first to produce polyethylene with net zero scope 1 and 2 emissions.

The widely used plastic’s journey to global markets will begin by rail.

“Dow stores their polyethylene in covered railcars while waiting to sell it,” Bromley says.

“When buyers purchase it, we will build unit trains and those cars will go to the Port of Prince Rupert and eventually be shipped to their customers in Asia.”

A “unit train” is a single train where all the cars carry the same commodity to the same destination.

The expanded Cando terminal will have the capacity to prepare 12,000-foot unit trains – or trains that are more than three-and-a-half kilometers long.

Construction will start on the expansion in 2025 at a 320-acre site west of Cando’s existing terminal, which 20 industrial customers use to stage and store railcars as well as assemble unit trains.

Bromley, a former CP Rail executive who joined Cando in 2013, says the other half of the terminal’s capacity not used by the Dow facility will be sold to other major projects in the region.

The announcement is the latest in a series of investments for Cando to grow its operations in Alberta that will see the company spend more than $500 million by 2027.

The company, which is majority owned by the Alberta Investment Management Corporation previously spent $100 million to acquire a 1,700-railcar facility in Lethbridge along with $150 million to build its existing Sturgeon terminal.

Cando Rail’s existing Sturgeon Terminal near Edmonton, Alberta. Photo courtesy Cando Rail & Terminals

“Alberta is important to us – we have 300 active employees in this province and handle 900,000 railcars annually here,” Bromley says.

“But we are looking for opportunities across North America, both in Canada and the United States as well.”

Cando released the news of the Sturgeon Terminal expansion at the Alberta Industrial Heartland Association’s annual conference on Sept. 19.

“This is an investment in critical infrastructure that underpins additional growth in the region,” says Mark Plamondon, the association’s executive director.

The announcement came as the association marked its 25th anniversary at the event, which Plamondon saw as fitting.

“Dow’s Path2Zero came to the region because of the competitive advantages gained by clustering heavy industry. Competitive advantages are built from infrastructure that’s already here, such as the Alberta Carbon Trunk Line, which transports and stores carbon dioxide for industry,” he says.

“Having that level of integration can turn inputs into one operation into outputs for another. Competitive advantages for one become advantages for others. Cando’s investment will attract others just as Dow’s Path2Zero was a pull for additional investment.”

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