Canada would need ‘business case’ for LNG exports to Europe: PM | Oil and Gas News

Canada would need 'business case' for LNG exports to Europe: PM |  Oil and Gas News

Canada is exploring whether a “business case” can be made to export liquified natural gas (LNG) to Europe, Prime Minister Justin Trudeau has said, as European nations look for alternative energy sources to wean themselves off Russian supplies.

Speaking alongside German Chancellor Olaf Scholz during a news conference in Montreal, Trudeau said on Monday that such exports pose logistical and financial challenges, but that his government would do what it can to boost global energy supplies amid the war in Ukraine.

Economic conversations on potential LNG exports are taking place between Canadian and German businesses, Trudeau told reporters.

“We will do what we can to contribute to the global supply of energy by increasing our capacities in the short term, and explore ways to see if it makes sense … and if there’s a business case for it, to export LNG directly to Europe, Trudeau said.

But he added that one of the challenges is the investment needed to build LNG export infrastructure, stressing that Canada’s “best capacity” right now is to add to global energy supplies more generally.

“LNG conversion plants are usually placed close to the sources of LNG, and as we look at the possibility of LNG plants on the east coast able to ship to Germany, we find ourselves a long way from the gas fields in Western Canada,” Trudeau said.

“It’s doable, we have infrastructure around that, but we’re looking very much at how we can best help, and right now our best capacity is to continue to contribute to the global market, to displace gas and energy that then Germany and Europe can locate from other sources.”

Russian President Vladimir Putin has repeatedly warned that his country’s supply of natural gas to Europe could see dramatic cuts amid international sanctions over the war in Ukraine.

“Russia is no longer a reliable business partner,” Scholz said on Monday. “It has reduced gas deliveries everywhere in Europe, always referring to technical reasons that never existed. And that’s why it’s important not to walk into Putin’s trap.”

Russia’s state-owned gas company Gazprom reduced gas deliveries through the Nord Stream 1 pipeline to Germany by 60 percent in June, citing alleged technical problems involving the turbine that partner Siemens Energy sent to Canada for overhaul and that couldn’t be returned because of sanctions imposed over the war.

The pipeline will also shut down for three days of maintenance at the end of this month, Gazprom announced last week, raising economic pressure on Germany and other European countries that depend on the fuel to power industry, generate electricity and heat homes.

Canada, home to the tar sands of Alberta, is the fifth largest oil producer in the world, according to the government, and earlier this year it announced plans to increase oil and gas production to help its allies in Europe distance themselves from Russia.

The European Union is heavily reliant on Russia for its energy needs, with Moscow supplying approximately 40 percent of the bloc’s natural gas last year.

“Our European friends and allies need Canada and others to step up,” Jonathan Wilkinson, Canada’s natural resources minister, said in March. “They’re telling us they need our help in getting off Russian oil and gas in the short term, while speeding up the energy transition across the continent. Canada is uniquely positioned to help with both.”

Pro-oil lobby groups and conservative politicians in Canada have urged the government to crank up energy production, but environmentalists have slammed that push, saying any increases – even in the short term – will prevent Canada from meeting its pledge to tackle the climate crisis.

Experts also have pointed out that Canada will be unable to scale up LNG exports in time to meet Europe’s needs.

“Due to climate commitments and energy security concerns, Europe is accelerating its plans to reduce gas use by ramping up energy efficiency and the use of renewable energy sources. While there may be demand for some fossil fuels, markets like Norway are more logical to fill immediate needs,” the International Institute for Sustainable Development, an international think-tank, recently said.

“This results in a fundamental mismatch with Canadian supply opportunities. Canada cannot ramp up supply before 2025, while Europe’s energy needs will largely be resolved by that time.”

Germany fears a further reduction of natural gas supplies from Russia this winter in retaliation for Western sanctions following the invasion of Ukraine, Economy Minister Robert Habeck told German broadcaster ARD on Monday.

In an interview with the Reuters news agency last week, Wilkinson, Canada’s natural resources minister, underscored the country’s potential to provide clean hydrogen to Germany and the rest of Europe instead of trying to build LNG terminals as the world pivots away from fossil fuels.

On Tuesday, Canada and Germany will sign an agreement in Newfoundland to develop clean hydrogen for export to Germany by as early as 2025, Wilkinson said.

“Canada plays a really, really central role for the development of green hydrogen,” Scholz, the German chancellor, said during Monday’s news conference with Trudeau. “That’s why we are very glad to be able to expand our cooperation in this area on this occasion, too.”

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