U.S. has overtaken Canada in LNG race

British Columbia Premier Christy Clark once dreamed of wiping out her province's debt and creating a $100-billion Prosperity Fund from the riches generated by B.C.'s nascent liquefied natural gas (LNG) industry.

“The safe recovery and export of our abundant supply of natural gas presents an opportunity for prosperity unlike anything we have ever seen,” she boasted in 2013, comparing B.C.'s prospective LNG bounty to Alberta's oilsands wealth.

Clark figured LNG exports to energy-hungry Asian markets would boost B.C.'s economic output by an eye-popping $1 trillion or so over 30 years, and generate 39,000 full-time jobs annually over a nine-year construction period.

The first LNG plant was expected to be operating by 2015, with two more to follow by 2020.

Sadly, none of this happened, of course. B.C.'s LNG industry remains little more than a fantasy. Not a single one of the dozen-plus LNG export plants once proposed in B.C. is under construction, let alone operating. With LNG prices in the ditch, the odds of one being built anytime soon appear slim.

Meanwhile, it's a completely different story south of the border. The U.S., which has been far more adept at quickly approving, constructing and ramping up LNG export capacity by converting import terminals into export facilities, is on track to become an LNG powerhouse in just a few short years.

The first tanker load of LNG from the U.S. Gulf Coast is expected to pass through the expanded Panama Canal on it way to Asia on Monday, after loading its cargo at Cheniere Energy's Sabine Pass LNG plant in Louisiana.

Although Cheniere is currently the only U.S. LNG plant that is exporting to world markets, more are expected to follow soon. Within three years, the U.S. will be producing an estimated 60 million tonnes of LNG per year, according to industry estimates.

The US$5.3-billion Panama Canal expansion, completed in June, makes the vital waterway accessible to 90 per cent of the world's LNG fleet, up from just six per cent previously, and shrinks the time needed for tankers from the Gulf Coast to reach Japan by 40 per cent, to just 20 days.

According to the U.S. Energy Information Administration, the U.S. is set to become the world's third-largest LNG exporter by 2021, trailing only Australia and Qatar. Canada remains little more than a bystander, shut out of the action.

No wonder there was little or no talk of LNG when Canada's premiers held their annual summer gabfest this week in Whitehorse. Instead, the leaders focused on everything from beer taxes and carbon pricing to marijuana legalization.

Not exactly visionary stuff. Like Canada's endless debate over new oil pipelines, the failure of B.C.'s LNG industry to reach first base offers a vivid lesson in how Canada has squandered its resource wealth. Instead of “can do,” our national mantra has become “woulda, coulda, shoulda.”

The result? Capital investment has dried up and the Conference Board of Canada just cut its GDP growth forecast for 2016 to a measly 1.4 per cent. Canada is a country that increasingly resembles the sclerotic, debts-addled nations of the European Union.

Ironically, B.C. has been largely insulated from the LNG fallout thanks to its booming housing sector. A river of foreign cash, much of it from China, has pushed house prices in the Lower Mainland through the roof. The wealth effect has made B.C. Canada's fastest-growing economy. For now, at least.

Sales volumes have begun to slip in recent months, and that's often a tell-tale sign that a market peak is approaching.

The bottom line: unless Canada can get its act together, and find a way to get its resources to world markets, the longer term picture looks increasingly bleak. Other countries, notably the U.S., are simply eating our lunch.

Canada has become a virtual no-go zone for major energy projects. As Robert Johnston, CEO of New York-based Eurasia Group told me earlier this year, Canada is viewed as an increasingly risky place to invest.

The rest of the world has taken notice of our fractured regionalized politics, the lack of national leadership on key issues like pipelines, and the endless obstacles thrown up by the courts, environmentalists, First Nations and other anti-development activists.

“When we go to Beijing and Tokyo and Seoul to talk to clients and law firms there, even now they're expressing a lack of confidence in Canada's regulatory process, which some of this political infighting has caused,” Shawn Denstedt, an energy lawyer and co-chair of Osler Hoskin & Harcourt, recently told The Globe & Mail.

“The knock-on effect is there's less interest in Canada, less capital comes to Canada. It will simply move on elsewhere.”

In fact, the evidence shows that it already has.