Climate Commitments, Indigenous Matters Key For Asian, Japanese LNG Buyers

Canada’s LNG exports definitely should count towards the country’s emissions targets, says Associate Natural Gas Minister Dale Nally, and it is very important Canada is recognized for the work it does in reducing downstream emissions as negotiators at COP25 work to adopt rules and guidelines for implementing Article 6 of the Paris Agreement.

“At the end of the day, it’s the right thing to do — converting coal-fired power plants to natural gas,” the Alberta minister told a Canadian LNG event in Calgary on Wednesday. “That is how we are going to reduce our emissions globally.” He added: “We just need to keep advocating, and we need to educate some of these ministers at the federal level.”

In its national statement at COP25 in Madrid, Spain, Canada said in regards to Article 6 (regarding the rules for nations to reduce emissions using international carbon markets) the country is committed to ensuring environmental integrity — by avoiding double counting, ensuring transparency, and promoting sustainable development — so that “international co-operation can help all of us increase our ambition.”

Shawn Tupper, associate deputy minister for Natural Resources Canada, assured Wednesday’s event that Canada has a team in Spain that is participating in Article 6 conversations. He said: “Our goal is to ensure we have a process in place that benefits Canada, and that we get the mechanism right. That is the goal of our negotiators as well in Spain.”

In his COP25 statement this week, federal Environment Minister Jonathan Wilkinson also highlighted Canada’s strong support for respecting human rights and the rights of Indigenous Canadians when it comes to implementation of the Paris Agreement, including in Article 6.

Regarding Wednesday’s Canadian LNG event in Calgary, its purpose was to highlight investment and supply opportunities following recent events held on behalf of the Alberta government in Tokyo and London to discuss the scope of Canadian LNG growth.

According to Tupper, while in Japan for that event he was surprised with how much time he spent discussing with the Japanese government, industry representatives and investors the topic of ESG, notably in regards to Indigenous matters, including whether First Nations communities benefit from development of a Canadian LNG industry.

“That’s just big on their agenda,” he said. “They surprised me with the amount of interest and, frankly, amount of poking they did with respect to Indigenous issues, and what we’re doing in Canada to find ways to bring forward that concept and that sense and make real that sense of economic reconciliation — the ability to engage with Indigenous communities and find ways to create that environment in which investment can move forward.”

Japan, for one, is also deeply concerned with addressing its Paris Agreement commitments, said Gregory John. A few weeks ago he was invited to the East Asian nation as one of four Indigenous leaders to discuss some of Canada’s complexities in terms of energy project development.

“That was a really cool moment for me personally, just because they brought us there to have a conversation on Indigenous participation in energy,” the Four Peaks Business Development Ltd. president told Wednesday’s event. “For me, that really makes me believe there is hope, because the Indigenous voice has been determined as critical, if not essential, to the business development environment in Canada.”

Finding an energy partner to increase energy security is critical for the Japanese, who are “truly committed to finding an energy way forward that acknowledges their Paris Agreement targets,” John said, adding despite Japan’s domestic energy consumption decreasing, lack of domestic energy means its carbon emissions are increasing.

“They’re looking to Canada as their solution, not only based on our ESG, but also ‘well-to-wheel’ import. It takes 10 to 12 days [for LNG] to come from Canada and almost double from the Middle East, and they acknowledge that is a way for them to address some of their Paris Agreement.”

Having a secure, clean and ethically-sourced LNG supply “is landing very well” in Asia, noted Nally, particularly in Japan due to its nuclear energy. “They realize the importance of diversity of supply, and that absolutely includes gas from the western Canadian basin. They are desperate for our gas.”

Rockies LNG CEO: ESG takes more than being ‘green’

Nobody is really interested in paying more for ‘green’ LNG, suggested Greg Kist, as plenty of alternatives are available around the world for buyers. As such, said the Rockies LNG Partners president and chief executive officer, OECD countries should start embedding ESG performance into their compensation structures.

“Then we’ll start to see the ‘rubber hit the road,’ and people will be prepared to pay up for LNG, in my view,” he added. “This is an important piece of ensuring Canada has a big role to play in reducing emissions globally by growing its natural gas and LNG portfolio.”

Rockies LNG aims to advance a producer-led LNG project that (among other things) supports, collaborates and partners with Indigenous communities, promotes sustainable, as well as lasting economic development opportunities for its partners, while also identifying opportunities to reduce emissions.

“We think it’s critical our audiences out there understand that LNG can make a significant contribution to reducing emissions globally,” Kist said. “Certainly, natural gas produced in Western Canada in Alberta and British Columbia is produced to the highest standards anywhere in the world. We know that and we must continue to talk about this story.”

For its part, Rockies LNG’s proposed West Coast project is engineered around a barge-based liquefaction solution, which the CEO sees as clearly responding to the environmental challenges the partnership faces.

“If any of you have ever flown up over northwest British Columbia, it’s absolutely pristine and beautiful, which means it’s also extremely challenging to build in,” he said on Wednesday. “We think that floating LNG is the answer. You significantly reduce site preparation costs, you significantly reduce the costs associated with labour and weather risk, and all those sorts of things.”

Further, he added, generally such a floating project can be built overseas and brought to the location, which further reduces the associated risks of construction. However, Kist noted, the cost of doing that is it also impacts the amount of local employment that can be expected from developing the project.

“Obviously, we have to address that. It’s the balance between addressing environmental challenges and addressing economic issues. But we think floating liquefaction, storage and offloading is the answer to some of the environmental challenges. And so, where are we at today and how are we moving forward? There’s a significant amount of work that is going on, and we certainly have not been as public as people maybe would like us to be, but that’s by design.

“We’re working very hard with the Indigenous nations to develop the partnerships that will provide that economic outcome they’re looking for and that really works for us in advancing the project.”

Also, the partnership is in “heavy-duty discussions” with LNG off-takers in relation to co-operation, and Kist would like to see a potential off-take consortium — an idea Rockies LNG has discussed with the Japanese. He added: “I think there is significant capital to build infrastructure that obviously generates an appropriate rate of return.

“The biggest challenge as it relates to capital is the at-risk development capital at the front end of these projects. It’s not huge in the context of these overall projects, but people generally are very averse right now to putting at-risk capital to work in Canada. Right now, that’s on the producers’ backs to do that.”

How Alberta government helps Canadian LNG

Canada’s energy sector is currently struggling to raise capital for projects such as LNG facilities, noted Nally, and in terms of his role in addressing this challenge, the associate minister sees it largely as advocating on behalf of Alberta natural gas to Asian markets — serving as a “natural gas salesman” on behalf of industry.

“For a lot of these Asian companies, it’s important to have government at the table, because they won’t come to the table unless they see there’s an official there,” he said. However, Nally does not support a direct government financing, as Alberta is on a trajectory to be near $100 billion in debt and likely cannot afford to backstop these LNG projects.

He added: “But I’m confident in the viability of them, and if there’s a role for me to help bring people together so the financing can be arranged, then I’d absolutely be receptive to doing that.”