Canada’s role in the global build-out of liquefied natural gas (LNG) capacity won’t be a major one. Note, however, that Marlon Brando won an Oscar for about 12 minutes of screen-time in the 1989 film A Dry White Season.

Key to Canada’s success in this burgeoning energy market will be its ability to move gas from British Columbia across the Pacific Ocean to Asian customers.

The Canadian government introduced legislation in the 2012-13 federal budget that made it easier to obtain an initial permit to export LNG. The National Energy Board no longer considers environmental and social criteria, focusing rather on whether a proposed project is in Canada’s best economic interests as well as whether the gas to be exported is surplus to domestic needs.

That’s not to say environmental considerations have been eliminated from the process entirely: Project sponsors must obtain permission from the federal Environmental Assessment Agency as well as provincial-level authorities, primarily British Columbia’s Environmental Assessment Office (EAO). Getting federal and provincial environmental OKs can take as much as two years.

However, British Columbia’s environment ministry in early 2013 asked now-former federal environment minister Peter Kent to allow the province to undertake much of the review under a federal-provincial memorandum and regulations that seeks to streamline project approvals.

Actual work on a liquefaction plant can’t begin until the project earns a facility permit from the BC Oil and Gas Commission. There are five different acts a facility must comply with, even after the EAO permit has been gained. BC’s process isn’t any more burdensome than any other jurisdiction’s, though with new and complex projects rules seem to be made up on the fly.

All that having been noted, British Columbia offers compelling advantages to aspiring LNG exporters versus other locales. Chief among them is the fact that the transport route from BC to Asia is only nine to 10 days, while getting LNG from the Gulf of Mexico to Asia takes more than 20 days.

LNG is also 30 percent more efficient in the cold weather of northwest BC compared to product shipped from hotter, more humid areas. And gas from Canadian fields generally contains high liquids content, including ethane and butane, which add value by increasing the fuel’s energy density. For much of the volume shipped from the US these liquids must be added.

The Specter of Australia

An August 2013 report from the International Gas Union (IGU) concluded that development costs for Canadian LNG projects could make it more difficult for Canada to compete with the US.

The IGU cited a much more liquid market for natural gas in the US. Other factors contributing to the US’ competitive advantage include the distance between the proposed export facilities on Canada’s west coast and the North American gas pipeline grid and the fact that existing connections are small in both capacity and number.

Projects in the US are likely to be more flexible because many are designed to take advantage of existing infrastructure and will therefore be cheaper to commission.

Research and consulting firm Eurasia Group estimates it could cost USD50 billion to convert existing import plants in the US into LNG export plants, while it could cost an additional USD60 billion to build such plants from scratch in Canada.

The US has approved four LNG export projects. The Canadian government so far has approved three, including projects led by Chevron Corp (NYSE: CVX) and Royal Dutch Shell Plc (London: RDSA, NYSE: RDS/A).

Four more projects filed in Canada during the summer of 2013 are pending, including one large-scale plant by Exxon Mobil Corp (NYSE: XOM) and two more major terminals by BG Group Plc (London: BG/LN, OTC: BRGXF, ADR: BRGYY) and Petroliam Nasional Berhad, the Malaysian national oil company better known as Petronas.

The IGU report notes that “despite numerous marketing leads for Western Canada’s slate of projects, there are currently no finalized agreements” with Asian Pacific countries to buy the gas.

But because a number of companies are competing for space on Canada’s west coast, the IGU concluded that “there may be (an) opportunity to aggregate resources and share infrastructure” in order to avoid the huge cost overruns experienced by Australia’s LNG developments.

Mr. Kent’s successor as environment minister, Peter Oliver, has advocated an accelerated approval process to enable speedy development of LNG facilities and infrastructure so Canada’s doesn’t lose out to rivals in supplying Asian markets.

Timeliness could be a critical factor as potential exporters of Canadian LNG grapple with cost issues.

First Service

A lot of capital is floating around the LNG space right now, whether it be committed or merely proposed. Of course “committed” and “proposed” are both long ways from “spent.” There is significant risk in making an investment decision based solely on the potential for participation in Canadian LNG.

We therefore favor companies with existing operations in the oil and gas and industrial spaces that will see a significant step-up in revenue, earnings and cash flow based on the realization of at least part of Canada’s LNG export potential but whose dividends can be supported by existing operations.

The amount of spending contemplated has significant implications for oilfield services companies that will build rigs and provide essential support services surrounding the build-out of infrastructure to support the eventual export of LNG from British Columbia to Asia.

Oilfield services is a solid way to play Canadian LNG because of the changing nature of the typical consumer: It’s getting much, much bigger, capable of supporting longer-term engagements, generating repeat business and driving margin expansion as well as earnings and cash flow growth.

The customer base is increasingly made up of national oil companies as well as the Super Oils; it’s no longer a junior just adding a rig or two when commodity prices rise.

Petronas is boosting its Montney Shale rig count from five to 25. Chevron as well as Apache Corp (NYSE: APA) are in the market for specialized rigs to be built and put into the field up in the Liard and Horn River Basins for very LNG-oriented type activity, gearing up for a very active 2014. And PetroChina Co Ltd (Hong Kong: 857, NYSE: PTR) is making significant moves in the Duvernay play.

Demand for specialized rigs and pumping gear is on the rise. Although the overall rig count indicates a deficit of about 100 rigs versus year-ago figures, there is underlying strength in rigs that can drill deep, horizontal wells. Well licenses are up close to 70 percent for the deeper, 5,000-meter wells.

This favors drillers with Tier 1, high-horsepower equipment that specialize in deep drilling, including Trinidad Drilling Ltd (TSX: TDG, OTC: TDGCF). Precision Drilling Corp (TSX: PD, NYSE: PDS) will also play a significant part in this story, as two recent contract wins could tie in to providing feedstock for liquefaction facilities.

Trinidad Drilling is a buy under USD9.50. Precision Drilling is a buy under USD11.

And for every Tier 1 rig that goes to work there’s a multiplier effect of well completions, whether it be pressure pumping (or hydraulic fracturing) or coil tubing.

Essential Energy Services Inc (TSX: ESN, OTC: EEYUF) operates Canada’s biggest deep-coil tubing service well fleet.

Development of reserves in the Montney, Horn River and Duvernay basins will drive demand for oilfield services to complete the wells. These wells, including “long-reach” horizontals, are complex, requiring larger-diameter casing and the ability to withstand higher pressures and temperatures while withstanding higher acid gas content.

Essential’s new Generation III and Generation IV deep-coil tubing rigs are well-suited to complete and maintain these wells. There are few deep coil tubing rigs in the industry suitable to work on these wells.

Essential also has experience with and has earned the trust of many of the super majors venturing into the Canadian LNG market. Essential Energy, which is yielding 4.4 as of this writing, is a buy under USD2.65.

Mullen Group Ltd (TSX: MTL, OTC: MLLGF) is a solid play on long-term growth in Canadian oilfield services with or without the upside potential of LNG-related activity. The company consistently ranks among the very best oilfield services companies in terms of return on invested capital.

Mullen is the dominant oilfield hauling and logistics services provider in Western Canada, and the proposed LNG projects won’t come to fruition without a tremendous amount of transportation and logistics support in all the operating areas.

In other words, Mullen is ideally positioned to manage what could be multi-year, multi-area workflow. Indeed, management noted on its second-quarter conference call that “LNG will be a step change” for the company. Mullen Group, which is yielding 4.8 percent, is a buy under USD25.

ShawCor Ltd’s (TSX: SCL, OTC: SAWLF) specializes in products and services for the pipeline and pipe services industries and the petrochemical and industrial segments of the oil and gas industry. North America remains its primary market, and it’s well positioned to benefit from many facets of the LNG build-out.

ShawCor’s pipecoating division, Bredero Shaw, has extensive experience providing coatings and related products and services for flowlines and tie-in tools for LNG projects around the world.

Bredero Shaw provides specialized coating systems and related services for corrosion protection, insulation and weight-coating applications on land and marine pipelines including highly engineered corrosion and insulation systems for deepwater applications.

ShawCor is a buy under USD45.

In June 2013 Petronas announced it expects to spend up to USD16 billion on its LNG export facility in British Columbia. The key infrastructure includes up to USD11 billion worth of liquefaction plants to be built near the BC port of Prince Rupert. And it includes a USD5 billion, 750-kilomter pipeline to be constructed by TransCanada Corp (TSX: TRP, NYSE: TRP).

Much more than just the notorious Keystone XL project, TransCanada owns or has interests in approximately 42,000 miles of natural gas pipelines that move approximately 14 billion cubic feet a day, or about 20 percent of North American demand.

It also has about 400 billion cubic feet of natural gas storage capacity and 21 power plants with a total generating capacity of nearly 12,000 megawatts.

TransCanada has announced a dividend increase along with first-quarter results every year since 2004. During this time the quarterly payout has grown from CAD0.27 per share to the CAD0.46 it will pay to shareholders on Oct. 31.

Buy TransCanada for long-term growth and income up to 47.

Longtime CE Portfolio Holding AltaGas Ltd (TSX: ALA, OTC: ATGFF) announced in early 2013 a partnership with Japan-based Idemitsu Kosan Co Ltd (Japan: 5019, OTC: IDKOF, ADR: IDKOY) to deliver LNG for export.

AltaGas owns and operates the only natural gas pipeline that ties western producers to Canada’s northwest coast. Proposed LNG exports could begin as early as 2017, subject to consultations with First Nations and the completion of a feasibility study, permitting, regulatory approvals and facility construction.

AltaGas and Idemitsu each own a 50 percent interest in the AltaGas Idemitsu Joint Venture LP, which is currently conducting feasibility studies on the LNG project and a related liquefied petroleum gas project. The LNG study is expected to be completed in early 2014.

Management anticipates the venture will drive “significant” growth in the medium and long term. AltaGas is a buy under USD37.25.

Clean-Up Hitters

Oilfield services firms are also seeing new growth from old wells. As volumes of waste and completion fluids rise in mature Western Canada plays, Secure Energy Services (TSX: SES, OTC: SECYF), which we’re adding to How They Rate coverage this month, is growing by helping customers find environmentally friendly ways to dispose of it.

Secure claims 13 percent of the Western Canadian Sedimentary Basin treatment and disposal business and sees that as a primary growth market. We initiate coverage of Secure Energy with a hold rating.

CE Portfolio Aggressive Holding Newalta Corp (TSX: NAL, OTC: NWLTF), one of this month’s Best Buys, reported a 15 percent increase in second-quarter revenue, driven by processing mature fine tailings (MFT) from projects such as the Syncrude oil sands joint venture in Alberta.

Both Secure and Newalta will see solid growth driven by a steadily increasing well count in Western Canada, combined with the proliferation of horizontal drilling; by the fact that older wells are generating increasing amounts of waste; and by the shift to an oil-focused from a gas-focused basin that therefore creates greater waste volumes.

For more on Newalta, see this month’s Best Buys feature. Newalta is a buy under USD17.50.

Although drilling activity has fluctuated and evolved over the past few years, service intensity has picked up. Drillers are on site longer, they need more rental products and they’re engaging services firms to a greater extent. Utilization rates for a number of services have therefore risen.

And new endeavors such as a build-out of LNG export capacity will keep them even busier: Peters & Co estimates that the four major sources for natural gas feedstock for LNG export projets–Montney, Horn River, Duvernay and Wilrich–will see aggregate rig count surge from 95 in 2012 to 160 by 2014.