Canada missing the boat on LNG as U.S. sails ahead

Canada "missed the first LNG window" as the United States rapidly established itself as a formidable exporter of liquefied natural gas, according to Al Monaco. But the Enbridge (ENB.TO)(ENB) president and CEO thinks the industry in Canada can "catch up" under the right circumstances.

The head of the Calgary-based North American pipeline giant is calling on Ottawa to provide clearer guidelines for infrastructure projects, and better coordinate its energy policies with the United States, where Enbridge has more than half of its assets. This, he says, will help Canada address the "global energy crisis" that's been exacerbated by Russia's invasion of Ukraine.

"Our regulatory framework does cause problems. And it’s not that the standards are too onerous. It’s that we need more clarity in terms of how we are able to execute,” Monaco said in a conversation on Wednesday with former Newfoundland and Labrador premier Brian Tobin. The two spoke before an audience at an event hosted by the Canadian Club of Toronto.

“Infrastructure projects can take anywhere from 10, 12 years, maybe even longer to execute. If you think about the amount of effort and capital that need to go into the development of a regulatory application, it could take literally hundreds of millions of dollars. We experienced this with Northern Gateway. Teck Resources experienced it over an even longer period, investing literally hundreds of millions of dollars to get regulatory approval,” he added.

In 2020, Teck (TECK-B.TO)(TECK) withdrew its application to build the largest oilsands mine ever proposed in Alberta. In a letter to then-Environment Minister Jonathan Wilkinson, the company warned that Canada will struggle to attract future investment until governments agree on how to address climate change in the context of the energy sector. Teck said it would incur a $1.13 billion write-down on the carrying value of the project.

However, last month, the federal government approved a $12 billion offshore oil project proposed by Norway's Equinor ASA, after an environmental assessment concluded it would not cause significant adverse effects.

Monaco, who has led Calgary-based Enbridge since 2012, and overseen significant investment in renewable energy, says Canada would benefit from “more coordinated policy integration around energy” with the U.S. The neighbouring nations are currently at odds over Enbridge’s Line 5 pipeline. Some in Alberta, including outgoing-Premier Jason Kenney, continue to hold a grudge against the Biden administration for its cancellation of the Keystone XL pipeline.

Despite these challenges, Monaco says he remains optimistic about the natural gas industry in Canada, given rising demand from Europe and Asia, and growing U.S. exports.

“We have a continental energy system here. What happens when you grow U.S. exports, it’s a great opportunity for Canada to jump in and fill that gap,” he said.

“Canada missed the first LNG window. So we are behind. No doubt about that. But we can catch up. That’s the good news. Canadian companies are every bit as good as U.S. companies in terms of developing natural gas, technology, costs, and sustainability wise. And proximity to Asia gives us a two to four-week shipping advantage.”

He notes the breakeven price to produce and export LNG in Canada and the U.S. is $8 per [million British thermal unit], compared to $30 in Asia and Europe during the first quarter.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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