U.S. President Donald Trump may be helping to revive Canada’s dream of a liquefied natural gas export industry to supply growing markets in Asia.

The tariffs Trump formally ordered against $50 billion in Chinese goods threaten to raise construction costs for LNG projects in Texas and Louisiana and provide a leg up to rival projects on Canada’s Pacific shore.

With a global gas glut tightening faster than expected, Royal Dutch Shell Plc and its partners in a proposed British Columbia complex are closing in on a final investment decision.

“We’ve got this world-class resource that can produce at very low costs,” said Jackie Forrest, senior director at the ARC Energy Research Institute in Calgary. “I think eventually we’ll see a project go forward. Economics always talk.”

LNG Canada -- an estimated C$40 billion ($31 billion) project backed by Shell, PetroChina Co., Korea Gas Corp. and Mitsubishi Corp. -- envisions an export facility in Kitimat that could eventually ship 26 million tons a year of super-chilled gas.

The twice-postponed final investment decision is now expected by the end of this year. The partners are already interviewing prospective engineering contractors and on Thursday the provincial government announced tax breaks and other cost-reducing measures to nudge the companies into formally committing to the project.

Big Chunk

That development alone has the potential to ship a quarter of the gas currently produced in Western Canada, Forrest estimates. That’s critical because the lack of an outlet to overseas markets means Canada’s energy exports are sold almost exclusively into the U.S. at depressed prices.

Canadian producers are hopeful. “From what I can see, I think there’s a lot of optimism that they’ll make a positive final investment decision,” said Cenovus Chief Executive Officer Alex Pourbaix, whose company extracts gas at its Deep Basin deposit straddling British Columbia and Alberta.

A price-killing oversupply threw the economics of LNG exports from Australia to Russia to Mozambique into question in recent years. Malaysia’s Petroliam Nasional Bhd. and Chinese state-controlled producer CNOOC Ltd. canceled developments worth tens of billions of dollars last year, decisions that all but suffocated Canada’s dream of becoming an LNG heavyweight.

Yet that glut may not be so big after all. With demand growing at the fastest pace since 2011, the projected oversupply is retreating, according to Bloomberg New Energy Finance. Wood Mackenzie Ltd. sees the market for new gas suppliers opening around 2022, two years earlier than earlier estimates.

In Jeopardy

Protectionist trade volleys could complicate which projects capture the opportunity.

Tellurian Inc. warned last week that steel tariffs could “significantly increase” the cost of its proposed $15.2 billion Driftwood LNG plant in Louisiana. Freeport LNG’s project under construction in Texas is far enough along to escape the duties, but CEO Michael Smith said he worries that if the tariffs spark a trade war with China, the project could suffer because China is a potential long-term buyer of the gas.

In Houston, the energy capital of the Western Hemisphere, officials also voiced concerns about retaliation over the tariffs.

LNG terminals “are the types or projects that could be in jeopardy with these sanctions,” said Bob Harvey, CEO of the Greater Houston Partnership, a pro-business civic group. “China can simply go to Russia, Australia or the Middle East for their LNG.”’

© 2018 Bloomberg L.P