Trudeau douses excitement over East Coast gas exports, calling business case weak

CANADA-GERMANY-DIPLOMACY-ENERGY-POLITICS

Prime Minister Justin Trudeau said there has “never been a strong business case” for liquified natural gas exports from Canada’s East Coast to Europe, dealing a blow to those in the energy industry who thought Russia’s invasion of Ukraine presented an opportunity to revive dormant gas projects.

Trudeau made the comments Monday during a joint press conference with his German counterpart, Olaf Scholz, who is visiting Canada for the first time as chancellor. The pair were grilled on the likelihood of Canadian LNG being directly exported to Europe over the next few years as countries such as Germany seek to reduce their reliance on Russian gas, now that the European Union appears determined to isolate President Vladimir Putin’s regime in retaliation for its unprovoked attack on a democratic country.

Geopolitics appear to have created new opportunities for Canadian energy, as importers could be willing to accept higher costs in return for stable supply. However, economics remains a powerful force. Trudeau suggested the long distances between Canada’s most prolific gas fields in Alberta and British Columbia to proposed liquefaction projects in places such as Saint John, N.B., have previously made direct export to Europe uneconomic.

“We are looking right now and companies are looking at whether or not the new context makes it a worthwhile business case to make those investments,” Trudeau said, adding the federal government would be willing to ease regulatory hurdles to assist its allies.

“But there needs to be a business case. It needs to make sense for Germany to be receiving LNG directly from the East Coast. Those are discussions that are ongoing right now between our ministers, between various companies to see if indeed it makes sense,” Trudeau said.

The two leaders spoke at length about the challenge of safeguarding the energy security of Western democracies during the news conference in Montreal Monday. The leaders, along with numerous federal cabinet ministers, will gather this week for meetings on investment and partnership opportunities in the areas such as critical minerals and the automotive sector.

Story continues

Trudeau said Canada’s best chance of helping its allies may be to continue supplying natural gas to global markets via existing pipelines to the United States, and then eventually through LNG exports on Canada’s West Coast, where the country’s only export terminal is under construction.

“We are looking at every possible different way to help out the German people and Europeans in the short term as they face a real challenge this coming winter and the next as Russia continues to squeeze off gas supply,” Trudeau said.

The German chancellor is facing an energy crisis at home where European natural gas prices have hit record levels on fears that Russian supply cuts could tip the German economy into recession.

Russia’s invasion of Ukraine last February disrupted global energy flows, including the main route through which Russian gas flows to Germany: the Nord Stream 1 pipeline. Gas flows on the key pipeline were temporarily halted last month for maintenance work and a second temporary shut down is anticipated on Aug. 31 — disruptions which have jeopardized the region’s plans to store additional gas for the winter.

Germany has been on the hunt for alternative sources of gas to end its dependence on Russia — but despite Canada’s abundant supply, the lack of an operational LNG export terminal has made it an unlikely near-term solution.

Instead, discussions leading up to Scholz’s visit have centred around hydrogen.

Germany has expressed an interest in “green” hydrogen from Canada, made using renewable power sources like wind. However, Natural Resources Minister Jonathan Wilkinson said Friday that Canada’s ally has not ruled out hydrogen made using natural gas and carbon capture — the method most common in Alberta where the bulk of Canada’s hydrogen is produced.

Scholz is expected to sign an energy development agreement with Trudeau for the exploration and production of renewable hydrogen for export to Germany during his visit. The agreement will be signed when the pair visit Stephenville, N.L. on Tuesday.

Despite the cool language from the prime minister on East Coast LNG, proponents of the sector say they’re encouraged that Ottawa is looking closely at the opportunities available.

“I think the case is stronger than he’s giving it credit for,” said Timothy Egan, chief executive of the Canadian Gas Association. “The thing I draw from his comments is that he speaks about a willingness to revisit the regulatory framework. And if you revisit the regulatory framework, those business cases become stronger fast.”

During Monday’s press conference Scholz also thanked the Trudeau government for its decision to exempt Siemens Canada from federal sanctions that would have prevented the company from performing maintenance on a gas turbine bound for the Nord Stream 1 pipeline.

The exemption, which was opposed by Ukraine, allows the return of a repaired turbine for use in the pipeline owned by Russia’s state-controlled Gazprom. Both Trudeau and Scholz defended the move Monday, arguing that Moscow has sought to weaponize energy, reducing gas supplies to Europe while attempting to pit western governments against each other.

Scholz’s visit began late Sunday and will end in Newfoundland on Tuesday with the signing of the hydrogen accord. The chancellor and Trudeau last met in June on the sidelines of the G7 Summit in Germany where the pair reportedly discussed energy security and accelerating the global transition to clean energy.

With additional reporting from the Canadian Press.

• Email: mpotkins@postmedia.com | Twitter: