Canada has the potential to be a natural-gas powerhouse

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The world knows this, and they are simply pleading with Canada to unlock its full potential

Lisa-BaitonCanada’s natural gas producers and supporters have long touted that a strong liquefied natural gas (LNG) sector could provide two critical benefits: Canada would benefit economically by diversifying our buyers, and second, lower emissions Canadian LNG could potentially displace emissions intense coal consumption in Asia and help lower world emissions.

With the advent of the Russian invasion of Ukraine, there is a third reason to support exporting Canadian gas to international markets: increased energy security for Canada’s allies.

Those skeptical of these claims can look no further than the trade mission to Canada by Japan’s Prime Minister Fumio Kishida. Kushida’s visit – not unlike German Chancellor Olaf Schulz before him – to Canada was accompanied by what should be an uncontroversial ask: Kushida wants to replace their Russian natural gas imports with LNG imports from Canada. Canada, for its part, seems to agree that the proposal makes sense, with Minister of Natural Resources Jonathan Wilkinson highlighting the progress on LNG Canada and advocating for a further strengthening of the energy relationship between Canada and Japan.

lng gas oil tanker ship export trade
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For a country like Japan with minimal domestic gas production, a reliable natural gas supply is critical to its energy security. Japan imports more than 100 billion cubic metres (bcm) of natural gas per year, and, according to the IEA, these imports make up 90 per cent of their domestic consumption. With the need to secure natural gas access being so central to energy security in Japan, it is little wonder why Japanese companies are financial stakeholders in LNG export facilities all around the world. These partnerships include Japan’s involvement in Russia’s Sakhalin 2 LNG project north of Japan in the Sea of Okhotsk, which is likely seen as necessary to secure future supply.

Canada, which currently produces over 150 bcm of natural gas annually, presents an obvious solution to Japan’s gas needs. And Kishida’s proposal reflects this. His hope is to replace the approximately nine per cent (nine bcm) of Russian gas currently imported from Russia with gas from Canada.

The Japan-Canada LNG connection is, in many ways, the ideal match even beyond the obvious gas market synergies. Both countries have strong existing bonds, highlighted by integrated economies and similar value systems. But Canada has other significant advantages to serving the Japanese LNG market that other exporters do not share.

First, Canada’s west coast is closer to Japan than American export facilities. This reduced distance means reduced transport costs and lower associated emissions. It would also allow the American LNG industry to continue to serve European markets and reduce Japanese dependency on LNG exports from Qatar and Oman, LNG that could be rerouted to satisfy growing European and more easterly Asian demand.

There also exists a direct business connection between Japan and Canada: the Mitsubishi Corporation is a partner in LNG Canada – Canada’s largest LNG facility currently under construction – owning 15 per cent of the project. That means it has a strong commitment to Canada’s emerging LNG industry – and is committed to the long-term success of LNG Canada, which is expected to operate well into the mid-21st century.

LNG projects and their associated offtake agreements are, by nature, long-term. Late last year Germany – which also asked Canada for natural gas – recently entered a 15-year agreement with Qatar to supply LNG, and Japan entered a 20-year commitment to purchase LNG from a facility in Louisiana. If Japan and Canada can finalize a similar deal, we could be the reliable long-term provider of natural gas they need.

In a world where energy and natural gas demand is only expected to grow, such a deal would lend strong support for the continued development of LNG export facilities along Canada’s west coast. It could transform Canada’s LNG industry and grow our standing and influence in our capacity to provide the world with the natural gas it requires. A notable example is the approval and expansion of the LNG Canada facility; building the second phase of the project would allow the facility to double its exports to 28 million tons and, in turn, mean that Canada could satisfy even more world natural gas demand.

Canada has an economic opportunity to provide gas to the world and a meaningful opportunity to lessen Russia’s energy influence abroad. We can simultaneously meet our friend’s energy needs and grow Canada’s geopolitical influence. Prime Minister Kushida’s ask should be taken seriously by Canadians. We have the potential to be a natural gas super-power, the world knows this, and they simply just want us to unlock our full potential.

Lisa Baiton is President and CEO of the Canadian Association of Petroleum Producers.

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By Lisa Baiton

Lisa Baiton is president and CEO of the Canadian Association of Petroleum Producers (CAPP). She previously served for 11 years on the Global Leadership Team of the Canada Pension Plan Investment Board (CPP Investments), one of the 10 largest retirement funds in the world. An expert in geopolitical, political and regulatory risks and market access, Baiton led CPP Investments’ global public affairs and advocacy activities across 50+ countries initially as Vice President, Government & Stakeholder Relations (2010-2012), and then as Managing Director & Head of Global Public Affairs (2013-2021). Baiton was Vice President & Practice Lead, Government Relations for Environics Communications (2004-2010), a North American public affairs firm where she provided executive-level counsel to highly regulated large multinational corporate clients across a broad range of sectors of the economy. She also worked for one of Canada's largest industry associations, the Canadian Bankers Association, and has held critical leadership roles in three Canadian governments (Saskatchewan, Federal, Ontario) with oversight for the development and implementation of cornerstone legislative and regulatory priorities. Baiton has a solid understanding of the oil and gas industry. She holds a BA in Political Science from the University of Saskatchewan, an MBA from the Kellogg Graduate School of Management (Northwestern University) and Schulich School of Business (York University), and has an Institute of Corporate Directors ICD.D certification from the Rotman School of Management (University of Toronto).

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