Canadian investors are rolling the dice on LNG
While Canada has no major LNG exports today, between now and 2030 projects in various stages of development are expected to add up to 50.3 million tons per year (MTPA) of LNG export capacity, over ten percent of existing global supply.
But is LNG a good product for investors? And is it the climate-aligned investment that many financial institutions purport it to be? Our latest report suggests not.
Canada is Late to the Party on LNG
Canadian LNG export projects face a number of business risks, which taken together are cause for significant scepticism for long-term investors. These include:
- An overbuild of LNG supply, now underway globally;
- Uncertain demand for LNG in core markets targeted by Canadian LNG;
- Higher Canadian production costs; and
- Political risk that could end subsidies that make Canadian LNG viable.
Additionally, though often touted as a climate solution if used as a transition fuel — replacing coal on the path to non-emitting sources — on a lifecycle basis LNG can be worse than coal, and there are already enough LNG projects under construction to exceed what is needed to replace all coal consumption.
The more we know about the lifecycle emissions of LNG and about our carbon budget in a net zero world, the less sense that LNG makes as a transition fuel. Together with the economic risks, longer-term investors are correct to be sceptical about new projects. As the LNG gold rush ends, carpe diem has been replaced with caveat emptor for Canadian investors.
