Canada's LNG Dreams: A $ell-Out Mirage on a Vanishing Horizon?

TL;DR: Canada's betting big on LNG exports, but a new analysis says most projects won't get built, thanks to global oversupply and the unstoppable rise of renewables. Taxpayers might be left holding the bag for a fossil fuel pipe dream.

Meta: Analysis suggests most of Canada's LNG export projects are unlikely to be built or profitable due to global oversupply and rising renewables.

Alright, Canada, let's have a little chat! You got these big, beautiful dreams of becoming a global LNG superpower, right? You're lining up projects like they're the next big hockey star. But a recent analysis is throwing some serious cold water on that party, suggesting that most of these projects are nothing but a mirage, and your taxpayers might end up paying for a ghost town. It's like trying to bet on a horse race where half the horses are already limping and the finish line is moving!

The energy system, baby, it's changing faster than a fashion trend in Milan. The global LNG markets? They're already oversupplied, and we're talking about a glut that's gonna stick around through the late 2020s, with projects already under construction. By 2026-2027, the signs of LNG demand decline in Asia are gonna be clearer than a freshly washed window. Why? Because solar and batteries are expanding quicker than a fresh batch of sourdough, displacing gas in power generation and industry. By the early 2030s, LNG demand in Asia ain't just not growing; it's contracting! Meanwhile, financiers are getting smarter, shifting their cash away from risky oil and gas projects and into the sweet, sweet certainty of renewables and grid infrastructure. Canada's trying to enter a party that's already packed, with its projects showing up late and exposed to all the risks.

The Cost of Being Late to the Party

LNG is becoming the energy of last resort, the most expensive way to make electricity. Think about all the steps: production, processing, pipelines, liquefaction, shipping, regasification. Each step adds cost and capital. When solar and wind are cranking domestically, and batteries are stashing energy for later, LNG is at the top of the cost stack, only getting dispatched when cheaper options are chilling. That ain't a recipe for high utilization or stable long-term demand. Just look at Pakistan, baby! In 2024, they dropped 17GW of new solar, displacing gas-fired generation, and suddenly they had 24 LNG cargoes they didn't need, selling them off at a loss. Or China and India, installing hundreds of GWs of solar and wind, watching their LNG imports stall or even shrink. Renewables aren't just supplementing gas; they're straight-up displacing it!

Canada's got five LNG export proposals on the table. LNG Canada Phase 1 is going through ramp-up, sure. Cedar LNG and Woodfibre LNG have reached final investment decisions and are under construction. But LNG Canada Phase 2 and Ksi Lisims LNG? They haven't even broken ground yet. And here's the kicker: the cost of financing has gone up quicker than a celebrity's divorce settlement. Equity return requirements for LNG developers are up to 15-20%, from 10-12% a decade ago. Debt is pricier, shorter-term, and harder to get. Meanwhile, renewables are clearing with equity returns of 6-9% and much tighter debt spreads. Capital ain't waiting for political promises; it's chasing risk-adjusted returns, and LNG just ain't looking so hot.

Taxpayers Holding the (Empty) Bag?

For those projects that haven't reached final investment decision, like Ksi Lisims LNG, these higher capital costs are often fatal. The probability of them even getting built is in single digits. LNG Canada Phase 2? Probably deferred indefinitely. And for the ones that do get built, like Phase 1, Cedar, and Woodfibre, don't expect them to be running at full tilt forever. By the mid-2030s, utilization could fall, and by 2040, some, like Woodfibre LNG, face a high risk of being physically stranded. Mothballed, baby, mothballed!

And who's gonna pay for all this? Public money is already deep in the game. Federal and provincial governments have poured hundreds of millions into these projects. Grants are spent, loans carry credit risk, and regulated utility assets get paid for by ratepayers even if throughput declines. This isn't nationalization; it's socialized costs and shortened asset lives, leaving taxpayers and ratepayers on the hook. Just ask about the Trans Mountain Expansion pipeline – Canada's already shelling out billions in effective oil subsidies. Do you really want more of that? Politicians talk about jobs and revenue, but if the projects don't get built or don't operate at full capacity, those benefits are gonna be thinner than a supermodel's patience.

What’s Next

This analysis paints a clear picture: Canada's LNG strategy is fighting against global energy trends. Expect continued pressure for a pivot towards genuinely sustainable energy investments. The risk of stranded assets and wasted public funds will likely intensify, leading to calls for greater accountability and a re-evaluation of national energy priorities. The world is moving on, and those who don't adapt will be left in the dust, wondering where their LNG mirage went.

When the market's talkin', you better listen, or you'll be singing the blues all the way to the bank... or lack thereof!