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First Nations Climate Initiative Releases Landmark Study on Prospects for B.C. LNG Exports

By November 27, 2023June 18th, 2024News

Assesses commercial prospects as the global economy continues transitioning to climate change mitigation

The Respective Territories of the Haisla Nation, Nisga’a Nation, Metlakatla First Nation and Halfway River First Nation, November 21, 2023 – The First Nations Climate Initiative (FNCI) International Advisory Committee has released the results of its study,Western Canadian Gas Exports: Opportunities and Risks in a Low Carbon World.

The study is an independent investigation of if, and how, Western Canadian LNG can make meaningful contributions to GHG emissions reductions in Asia, and what the specific pathways are. A second phase of this work aims to activate one or more of these pathways based on partnerships—between producers and customers and their host country governments—that are transparent and verifiable.

Led by Dr. Robert “RJ” Johnston, the study is a practical, rigorous and thorough examination of significant, real-world opportunities from a global perspective. Three core factors were considered:

·       the growth outlook for LNG in those Asian markets that are the most likely offtake for Western Canadian LNG;

·       the competitive landscape among other LNG suppliers targeting this market; and,

·       the potential for resilient, longer-term pathways for Western Canadian gas value chains in a decarbonizing world.

 Among the pathways reviewed in the study are coal-to-gas fuel switching; blue ammonia blending; ITMOs and international carbon clubs; and industrial decarbonization. In addition, the study identifies and assesses the future potential of natural gas value chains in Asia and alignment with Canadian, global and Indigenous climate goals.

 More information about the study was shared in an overview by Dr. Johnston today.

Key Findings Shed Insight on Significant Opportunities and the Range of Challenges

The study sheds insight on both the significant potential opportunities associated with Western Canadian LNG and the broad range of challenges and questions that must be accounted for if projects are to achieve commercial viability and long-term resilience in a low-carbon economy.

Key findings from the study include the below.

Growth Outlook for LNG in Asia

·       Canada’s ability to win LNG market share in emerging Asian markets will not only be shaped by market forces but also be linked to government policy and G7-level support for coal phaseouts.

 ·       Asia is not one homogeneous market for gas, but rather contains several sub-regions with differing policy, economic and infrastructure suitability for Western Canadian LNG. Some countries, such as Vietnam, are including gas in their coal phaseout plans while many other Asian markets are focused on renewables and carbon capture, utilization and storage CCUS projects.

·       Despite relatively slower demand growth, Japan and Korea stand out as promising partners for Western Canadian LNG. Their governments align with Canada on climate and energy security policy; they have high levels of existing gas infrastructure and heavy investment in industrial decarbonization; heavy investments in blue ammonia and hydrogen; and are building carbon capture and storage that will provide longer-term partnership opportunities for Western Canadian gas exporters.

·       Carbon pricing will play a role in the longer term—adding cost to coal and bolstering gas competitiveness in markets like Korea and Japan—as well as creating incentives for ammonia and hydrogen markets.

Competitive Landscape for Western Canadian LNG in Asia

·       The most acute competition for Canadian LNG in Asia comes from Qatar and the US, which have the advantages of massive scale, deep existing customer relationships, and low costs.

o   Yet both Qatar and US LNG face challenges in the years ahead. Qatar has geopolitical risk linked to its proximity to Iran and growing regional tensions while the US LNG sector will face policy/regulatory uncertainty, particularly around the question of expanding midstream infrastructure and managing potential political backlash against a perceived relationship between higher domestic gas prices and LNG exports.

·       Russian gas will be a wild card. While pre-war supply to Europe is unlikely to ever recover, more Russian LNG and pipeline gas will eventually find its way to Asia, most notably in the form of an expanded Power of Siberia pipeline to China and higher LNG volumes to price sensitive markets in developing Asian economies. 

Resilient pathways for Western Canadian gas in a decarbonizing world

·       Future demand for Canadian gas in Asia will be shaped by the speed and trajectory of climate policy- with multiple pathways for unabated, low-methane intensity LNG in the short-medium term and for blue hydrogen, ammonia and abated gas in the longer term.

·       Low methane-intensity gas benefits of Canadian LNG will take on more importance, but it is imperative to build end-to-end transparency in gas value chains in partnership with shippers and offtakers in Asia so that the lower life cycle emissions of Canadian LNG can be measured and verified.

o   Without this level of aggressive methane mitigation and transparency, LNG will be vulnerable to accusations that its lifecycle emissions are no better than coal.

·       Coal-to-gas switching is promising but expectations should be tempered by the dominant incumbent role of coal in most Asian electricity markets.

o   Canadian LNG should target specific project-level opportunities for fuel-switching, linked to government coal phaseout plans (as in Vietnam) or fuel oil (where switching economics for LNG are more favourable) or as an intermittency solution for wind/solar projects where gas will compete favourably with battery storage and hydrogen in many markets.

·       International cooperation is possible through climate clubs that create preferred markets for low methane intensity gas and longer-term abated natural gas value chains around blue ammonia and hydrogen. These value chains will complement emerging carbon border adjustment mechanisms and methane-intensity standards for gas and power imports, as recently implemented in the EU.

 Quotes

Dr. Robert “RJ” Johnston, Study Lead Author

“Western Canadian LNG must be anchored by appropriate strategies that ensure consent and shared benefits for impacted Indigenous groups, and alignment with Canadian Federal and Provincial climate policy.

However, without a viable commercial pathway, questions of indigenous benefits and environmental license for proposed projects are effectively moot. Similarly, discussions of potential economic and energy security benefits from Western Canadian LNG depend on actual projects with actual customers moving forward. While that may seem obvious to some, much of the debate around Western Canadian LNG at times bypasses the question of project viability including questions of competition with other energy fuels and technologies, energy geopolitics, as well as industrial, trade, and climate policy in gas importing countries. This study aims to identify risks and opportunities for Western Canadian LNG within this external landscape.”

Crystal Smith, elected Chief Councillor of the Haisla Nation (FNCI founding leader)

“GHGs don’t have borders; the emissions of other countries negatively impact our communities and our lands. This is why we must work with Asian nations to provide them with low to zero-carbon alternatives to the energy they currently depend upon, which then helps us continue to build our own decarbonized economy and recover our climate.

The Haisla Nation will start exporting net-zero LNG from our Cedar Facility in the near future. Together with the economic and social benefits we have derived from the construction and partial ownership of the Coastal Gas Link Pipeline and our business relationship with LNG Canada, our Cedar LNG project is revitalizing our community. We are leading the way in showing how decarbonization and decolonization go hand in hand.”

Eva Clayton, elected President of the Nisga’a Nation (FNCI founding leader)

“To achieve true climate action, we must work together on an international scale. The First Nations Climate Initiative knows that the net-zero LNG that First Nations projects will export can help other countries to decarbonize their economies. At the same time, we must have a just energy transition that supports economic self-determination for First Nations.

 Like the Haisla, the Nisga’a are building a net-zero LNG facility on our lands. Our communities need this development to help us alleviate the poverty that has plagued our people. This report has identified the pathways to help Asia decarbonize using our low carbon LNG. Now, we have to work together to make them real. Partnerships with Asian countries are an opportunity to provide climate solutions to the world while creating a prosperous economy and thriving ecosystems at home.”

Darlene Hunter, elected Chief of Halfway River First Nation (FNCI Nation)

“The First Nations Climate Initiative has determined that it is possible to develop net-zero LNG exports in B.C. that help pay for the protection and recovery of ecosystems critical to our cultural identity—ecosystems that have been destroyed due to the oil and gas developments that degraded our lands and were done without our consent.

Nature-based solutions to climate change, and the development of carbon credits as a financing tool, gives us more opportunity for traditional activities and provides economic opportunities. We can sell these credits to natural gas producers, pipeline companies and LNG producers to help them achieve net-zero. In turn, through our Nature Based Solutions, we will protect and restore critical carbon sinks, which will contribute to climate action locally and globally.”

About First Nations Climate Initiative

The First Nations Climate Initiative (FNCI) is an Indigenous-led collaborative forum dedicated to fighting climate change; alleviating First Nations’ poverty; restoring ecosystems in First Nations’ traditional territories; and, enabling Indigenous people to be leading actors in the decarbonized economy. By bringing together First Nations, other governments, climate experts, industry and other key stakeholders, FNCI is accelerating the development of climate solutions for B.C. and Canada, and growing economic opportunities for First Nations.

FNCI was founded in 2019 by the Haisla Nation, Metlakatla First Nation and Nisga’a Nation. In 2022, Halfway River became a signatory to the Initiative. The FNCI invites participation from all First Nations—and all others—who share its vision. For more information, visit https://www.fncionline.com/.

About Dr. Robert “RJ” Johnston

Dr. Johnston has over 20 years experience looking at Canadian energy and climate policy through the lens of global geopolitical, policy, technology, and macroeconomic trends. Since 2021, he has been the Executive Director at the Center on Global Energy Policy at the Columbia University School of International and Public Affairs in New York. Previously, he was the managing director of the Energy, Climate, and Resources practice at Eurasia Group, as well as the firm’s CEO from 2013 to 2018.  Dr. Johnston has a Ph.D. in International Relations from American University in Washington DC and is a native of Peterborough, Ontario.  The work in this paper is independent from Columbia University and represents Dr. Johnston’s personal views.