German Chancellor Scholz’s visit failed to address the elephant in the room

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German Chancellor Olaf Scholz’s three-day visit to Canada played out more like a run-of-the-mill trade mission instead of addressing the elephant in the room: the energy crisis unfolding across the Atlantic that could shake Europe’s alliance against Russian aggression.

The European manufacturing powerhouse desperately needs all the natural gas it can get, and Canada is one of the world’s largest producers. But you wouldn’t know from the itinerary for the German Chancellor and Vice-Chancellor Robert Habeck, who is in charge of the country’s energy file.

There were no formal meetings with Canadian natural gas firms. There was no travel to Alberta, where the country’s energy production is headquartered. And in the end, there was no concrete agreement with Canada on liquefied natural gas (LNG) projects – which allow for natural gas volumes to be exported vast distances across the ocean.

To be sure, LNG came up. Prime Minister Justin Trudeau told reporters easing regulatory processes to get projects built to help Europe is something Canada is willing to do.

But he also questioned the “business case” for LNG facilities on the East Coast. “LNG conversion plants are usually placed close to the sources of [natural gas]. And as we look at the possibility of LNG plants on the East Coast, able to ship directly to Germany, we find ourselves a long way from the gas fields in Western Canada,” Mr. Trudeau said.

A day later into the trip, Mr. Scholz made a more declarative statement. “Germany is moving away from Russian energy at warp speed. Canada is our partner of choice,” he said.

“For now, this means increasing our LNG imports. We hope that Canadian LNG will play a major role in this.”

But it all seems rather vague, given the current crisis. Germany and other European countries are highly reliant on Russian natural gas, and Russia has asserted its control by slashing shipments of gas on its Nord Stream 1 pipeline just 20 per cent the regular flow. Europe lives under the threat of being totally cut off by Russia.

Power prices are skyrocketing to never-seen-before levels. Germany is restarting at least one mothballed coal-fired plant to keep the lights on. European leaders are looking for voluntary cuts in energy use this winter, but rationing is a possibility. Countries are casting far and wide in the hunt for natural gas. The United Kingdom took an LNG shipment from Australia this week as the head of one of the country’s major energy suppliers warned of a “dramatic and catastrophic winter for customers.”

Top-ranking European officials have warned about the civil unrest that could result, and climate hawks are advocating for short-term return to fossil fuels.

Once again, it comes down to how long the energy crisis in Europe will last. Many Western policy makers think the crunch will last a couple of winters – not long enough for Canada to go to the trouble of building any LNG export facilities on the East Coast. The abrupt end to Europe’s energy dependence on Russia could spur a faster push on renewables.

To that important end, Mr. Scholz’s visit to Canada was almost entirely focused on accelerating access to Canadian raw materials for batteries in electric vehicles, and a small, ambitious start to hydrogen exports from Newfoundland by 2025 – where a single hydrogen production plant has yet to be built.

But if there’s one thing the Russian invasion of Ukraine has shown, it’s the need for reliable energy sources of all types, into at least the medium term. This week Belgian Prime Minister Alexander De Croo warned the next five to 10 winters “will be difficult.” Norway, which has become the No. 1 supplier of pipelined natural gas to Europe now that Russian imports are restrained, plans to keep its record level of gas production up until at least 2030.

Even in the longer term, LNG is likely to be a part of the solution to displace higher-emission coal-fired power in Asian and European countries.

Currently, Canada has no LNG export terminals. The LNG projects most likely to come to fruition are on the West Coast, especially the LNG Canada project in Kitimat, B.C. – set to begin exporting in 2025. These West Coast projects are seen as being too far away to help Europe. However, supplying Asian markets with gas still eases global demand. And Canada could benefit by realizing the highest international prices.

And Canada could, if it really wanted to, build LNG export facilities in five years, or less. In 2015, neither Canada nor the United States had any LNG export terminals. Today, there are seven LNG export facilities operating south of the border, and at least another five – including expansions at three existing sites – are likely to opened by 2028.

It is, as political leaders like to say, possible to walk and chew gum at the same time. In May, for instance, Mr. Scholz’s green-energy-focused government signed a deal with Qatar on hydrogen as well as LNG.

But of course, Canada is different. It’s not yet an LNG powerhouse such as Australia, Qatar or now the U.S. The Prime Minister is correct when he says it’s a long distance from Western Canada to the East Coast. The existing pipelines on that route need upgrades, which will take time and money, and community approvals and buy in.

Even if the federal government were inclined to make LNG projects a national priority, it might not be able to deliver quickly because of the country’s provincial infighting, and opposition from Indigenous communities and environmental groups.

There are other political considerations. The Liberal government doesn’t win votes from much of its base for talking about expanding any of Canada’s fossil fuel exports, no matter how strong the geopolitical rationale. For the sake of a progressive ally, German officials perhaps made the decision not to dwell too much on the subject of LNG exports while visiting here.

But it leaves us then with the strange display of the Germany delegation flying across the Atlantic, and not coming back home with any agreement, even a MOU, on getting more Canadian natural gas to Europe.

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