In 2013, 75% of the LNG produced across the globe was consumed in Asia. Across the Pacific Ocean, Canada is the world’s fourth-largest producer of natural gas, according to U.S. Energy Information Administration (EIA) statistics.

Christy Clark, the current premier of British Columbia, has thrown a huge amount of support behind the LNG industry in her province, promoting Canadian LNG in trips abroad while also proposing tax incentives favorable to the development of the industry.

So with major markets a relatively short shipping route away, plentiful domestic gas production and abundant support from the local government, why is Canada—particularly British Columbia—falling so far behind in the LNG export race?

There are several answers to that question.

Canada’s west coast, Australia and the U.S. Gulf Coast are the three regions with the largest potential growth opportunities for LNG exports. Australia has 61 million tonnes of liquefaction capacity currently under construction and several tens of millions of tonnes more in proposed projects. Many of the projects under construction, however, have been plagued by enormous cost overruns that have put completion of the projects in doubt.

The Gorgon example

Western Australia’s Gorgon LNG project is a prime example—the 15 million tonnes per year liquefaction terminal was initially estimated at between US$35 billion to US$40 billion in capital investment. The most recent estimates have the project requiring about US$60 billion.

Nearly every Australian project has experienced substantive overruns to initial cost estimates, making investors and owners of the planned projects wary of moving forward with more projects in the country.

The U.S. Gulf Coast has experienced a different set of issues from those of Australia. While cost overruns are less of a concern due to the brownfield siting of many of the export proposals, regulation remains the main obstacle for these exporters. Projects like Freeport LNG and Sempra Energy’s Cameron LNG have been able to dispense with some cost concerns because previously constructed storage tanks, pipeline access and other infrastructure are already available. With the liquefaction trains being the only major addition needed for these facilities, it would seem that these projects are in prime position to start producing LNG.

Several hurdles have cropped up, though, that are impeding the development of these American projects. Governmental and regulatory hang-ups at the hands of the Department of Energy and Federal Energy Regulatory Commission have been the major obstacle, as project owners are desperately seeking the necessary approvals so they can begin construction.

Questions surrounding the expansion of the Panama Canal have also made the economics of Gulf Coast projects uncertain as operators are unsure of when the canal will be ready and how great the cost will be to use it.

Canada’s chance

Out of all of this, western Canada has the chance to emerge as a key supplier for the burgeoning Asian market.

Even if Australia’s plants can account for a significant amount of supply, Asian export growth is expected to outpace that supply growth. China’s LNG imports doubled from 9 million tonnes in 2010 to 18 million tonnes in 2013, and some forecasts have the country importing as much as 60 million tonnes in 2020.

South Korean and Japanese imports are also expected to continue their growth patterns, albeit at a steadier pace. Other Asian nations are also expecting to begin or grow their imports, including Thailand, Vietnam and Indonesia, the latter of which is beginning to feel the strain of some of its exhausted gas fields.

In many ways, Canadian projects are much more similar to Australian projects than their American neighbors to the south. Whereas American projects have infrastructure and cost controls in place, most Canadian projects lack this in a big way.

The NIMBY factor

One of the main attractions of the British Columbia projects is that most of them have been proposed for locations not near population centers. The not-in-my-backyard or “NIMBY” factor is often cited by project developers as one of the most frustrating obstacles to finding suitable locations for their LNG plants. While residents of a region may be supportive of the idea of LNG export or import terminals from an economic standpoint, they often put up a fight at having it located anywhere near their residences.

That most Canadian projects do not encounter the NIMBY factor is a great asset, but it turns out to be a significant liability as well. While the U.S. Gulf Coast projects were built near enough to populated areas that constructing supporting infrastructure was more feasible, the Canadian projects do not have that advantage. Almost all of the infrastructure, from pipelines and storage tanks to roads and office space, needs to be built from scratch.

Just recently, TransCanada Corp. agreed to build a pipeline over 160 miles in British Columbia that would meet up with another proposed pipeline to supply an export terminal at Kitimat, British Columbia. This pipeline will add close to US$2 billion to the project, costs that were not considerations for many, if any, of the brownfield U.S. projects.

Another dissimilarity between the U.S. and Canada is the amount of support that British Columbia projects have received from their government. Clark has brought the issue of LNG exports from the province to the forefront, making several overseas trips to Asian nations to promote Canadian LNG projects as well as trotting out a new tax scheme specifically designed for LNG projects.

Premier’s support

The premier has fought rather ferociously for favorable treatment of these projects and has hitched her political career in no small way to their success or failure. In February 2013 she announced that “LNG development is poised to trigger approximately CA$1 trillion in cumulative GDP within British Columbia over the next 30 years and that means more than CA$100 billion will flow directly to the [provincial] Prosperity Fund. Province-wide LNG is expected to create on average of 39,000 … jobs during a nine-year construction period. As well, there could be as many as 75,000 full-time jobs required once all LNG plants are in full operation.”

Despite these job statistics, labor is also an issue for the Canadian projects. Rich Coleman, British Columbia’s deputy premier and natural gas development minister, said that the province would need up to 100,000 people to fill jobs along the coast for the development of LNG projects. Much like those in Western Australia, many of those laborers would have to be brought from outside of the region, and potentially outside the country altogether.

Coleman and other provincial officials have been pressing the federal government to be more lenient with temporary foreign workers as a result, fearing that a labor shortage would do irreparable harm to the growth of the industry.

Natural gas production, consumption and trade forecasts vary greatly depending on the source used but among the other concerns in Canada is gas supply. Despite being the fourth-largest current producer of gas in the world, EIA data ranks Canada a modest 20th in the world in terms of proven gas reserves. More than a handful of projects are proposing to export significant amounts of LNG; combined with domestic consumption and pipeline exports to the U.S., the long-term future of gas supply in Canada will need to be considered, too.

British Columbia and Canada as a whole have shown themselves to be fairly serious about the potential for LNG exports. If project developers can learn from their counterparts in Australia and the local and federal governments continue to stay largely out of the way of the progress of these proposals, the industry should have a future. In the meantime, players in this business will have to overcome some significant hurdles to make Canada a viable competitor in the global LNG export market.

George Popps is an LNG analyst for Zeus Intelligence, a division of Hart Energy. He can be reached at gpopps@hartenergy.com or 713-333-5766.