By Gary G. Mar and Carlo Dade
Published in the Calgary Herald
January 11, 2023
This week sees Japanese Prime Minister Kishida Fumio making his first visit to Ottawa in what represents a chance for the country to reset its relationship with Japan, the third-largest trading partner of Canada and Alberta.
It’s also a chance to make sure the embarrassment over energy that marred last year’s visit by German Chancellor Olaf Scholz is not repeated.
Like Germany, Japan is a top 10 global emitter of GHGs and is actively working to reduce emissions through increased use of renewables, energy efficiency and switching from oil to natural gas. As with Germany, not sending natural gas is counterproductive and works against global efforts to reduce GHGs. Yet, Canada is doing exactly that — harming global efforts to reduce carbon emissions.
This situation is not for lack of trying by Japan. Japanese businesses lost time, money and resources trying to get LNG out of Canada. But instead of turning its back on the country, Japan has continued to engage Canada.
Japanese trading company Itochu Corp., Malaysia’s state energy firm Petronas and Alberta’s Inter Pipeline have conducted a feasibility study and signed an MOU to build one of the world’s largest production and supply systems of low-carbon ammonia and methanol in Alberta. They aim to start construction in 2024 with commercial production to follow in 2027. This is a key step in exporting hydrogen and an important addition to reducing global GHGs. Mitsubishi Corp. and Shell Canada signed an MOU in 2022 to produce low-carbon hydrogen using CCUS near Edmonton for export to Japan as ammonia.
The business case for exporting all forms of energy to Japan is clear.
Then there is a security case. Japan, which produces over a third of its electricity from LNG, suffers from an overreliance on Russia for LNG and this dependency is increasing with a new contract for natural gas from Russia’s Sakhalin facility.
There is also a political case. On the prairies, we rely on exports for one out of every three dollars we earn. Given problems with our current leading export destinations, the U.S. and China, finding new partners is critical. Yet, the Indo-Pacific is a region that has multiple countries it can choose to import from. It also has concerns about the trustworthiness of potential partners. If Canada chooses not to share an abundant resource that Japan needs, we do not look trustworthy or reliable.
Other countries in North America export. The U.S. has 11 LNG export facilities and Mexico, which does not produce enough gas for its own use, is planning to build eight facilities. Canada struggles to get one facility online for political not technical or geographic reasons.
Canada is already in the reputational doghouse in Asia. Confidence in our country’s trade infrastructure has plummeted in recent years from top 10 in 2009 to 32nd in the latest ranking. The Canadian government’s apparent lack of awareness, let alone concern over the decline, makes this worse.
For the West, this isn’t only about energy. The reputational hit is to every business that exports beyond the U.S. and the jobs and communities that depend on them. In Saskatchewan and British Columbia, that’s about half of what those provinces export.
There’s a business case, a security case, an environmental case and a political case for exporting energy to Japan. But there’s also a self-interest case.
Japan is Alberta’s third-largest export partner. In a world where our top five partners include a protectionist U.S., a China that we are avoiding and a Mexico with a protectionist, populist president, safeguarding the one sane market we have is critical. That this partner pays top dollar and pays on time without problems makes how we treat them even more important, not only for the Japanese market but also for its neighbours in Asia that are watching.
In the end, the greatest damage done in not exporting energy to Japan is the damage done to Canada.
Gary G. Mar is president and CEO of the Canada West Foundation. Carlo Dade is the director of the Trade and Investment Centre at the Canada West Foundation.