Two-Coast LNG Strategy Taking Shape in North America

North America moved closer this week to becoming a swing LNG exporter with access to both Pacific and Atlantic markets.

The proposed Cedar LNG project in British Columbia (BC) moved two steps closer to a final investment decision (FID) following receipt of a key environmental permit and the signing of an initial commercial agreement. And on the Atlantic-facing US Gulf Coast, Venture Global took FID on the $7.8 billion Phase 2 of its Plaquemines LNG export terminal in Louisiana, becoming the first company to pull the trigger on new liquefaction capacity in 2023.

Canada's Pacific Coast

BC issued an environmental assessment certificate for the 3 million tons per year (0.4 billion cubic feet per day) Cedar LNG project being developed by the Haisla Nation and Pembina Pipeline at Kitimat.

Project sponsors also revealed they had signed a memorandum of understanding to hash out a liquefaction services agreement with Canadian producer ARC Resources. The deal would cover half of Cedar LNG’s capacity over a term of 20 years. The Haisla and Pembina are targeting an FID in the third quarter of this year with start-up anticipated in 2027.

Canadian developers are keen to capitalize on the West Coast’s proximity to Asia but also face challenges, including high costs, environmental opposition and a lukewarm reception from the government of Prime Minister Justin Trudeau.

So far, the only such project to reach FID is the massive LNG Canada development currently under construction in Kitimat. Cedar LNG will be nearby and using the same gas supply pipeline as its larger neighbor.

But market watchers see the tide turning for projects on Canada's Pacific coast in the wake of Russia’s invasion of Ukraine, which has diverted significant supplies to Europe and opened up an opportunity to tap Asian gas markets. “There's been a mindset shift,” Invest Alberta CEO Rick Christiaanse told Energy Intelligence at the CERAWeek by S&P Global conference in Houston last week.

And unlike earlier projects in Canada, many of the export developments in the works are supported or owned by First Nations. “I think there's a lot of support for that,” Christiaanse said.

The 14 million ton per year (2.1 Bcf/d) Shell-led LNG Canada project is slated to come online in 2025, with a second phase anticipated to double that capacity. The Cedar LNG project could take capacity in the region above the 30 million ton/yr mark.

Mexico's Pacific Coast

Meanwhile, Sempra continues to expect the Mexico-based Energia Costa Azul (ECA) Phase 1 to start operations in the summer of 2025. Sempra's ECA LNG Phase 2 and Vista Pacifico LNG, also in Mexico, continue to progress, the company has said, with preliminary offtake agreements already in place.

Exporting US LNG via Mexico is of significant interest to Japanese buyers, western US States and Native American gas suppliers, all of whom spoke to that effect at a Western States and Tribal Nations (WSTN) event in Washington, DC, earlier this month.

Citing an expected rise in worldwide gas demand through 2050, Hirai Hirohide, vice minister for international affairs at Japan's Ministry of Economy, Trade and Industry, asked the WSTN audience "who will fill the gap?" — noting that Russia or Iran would be pleased to do so if the US does not.

"Asia's energy demand for low carbon-intensity natural gas is increasing, and natural gas from tribal nations and the Rockies can provide energy security and carbon emission reductions to the US allies such as Japan, South Korea and Taiwan," said Melvin Baker, chairman of the Southern Ute Indian Tribe based in southwestern Colorado.
 
US Gulf Coast

Upon announcing the FID on Plaquemines Phase 2, Venture Global issued a full notice to proceed with construction to a joint venture between KBR and Zachry Group. combined with the 13.33 million ton/yr capacity first phase, which saw FID last May, the project represents $21 billion of investment.

Venture Global did not disclose the capacity of the second phase, but the company has previously said the terminal will produce 20 million tons/yr of LNG, suggesting the latest phase will add around 6.7 million tons of liquefaction capacity. Venture Global has signed long-term deals for 19.7 million tons of LNG from the terminal, according to Kpler data.

Meanwhile, Sempra appears on the cusp of giving the go-ahead to the 13.5 million ton/yr (1.9 Bcf/d) Port Arthur LNG Phase 1 project on the Texas Gulf Coast, having signed definitive offtake agreements for more than two-thirds of the capacity.