Canada ready to fuel Europe’s gas, hydrogen and mineral needs

Analysts doubt Canada could deliver any time soon. “We currently see no specific projects on the Atlantic coast that are in the start-up or investment phase,” said Andreas Schröder, head of gas analytics at ICIS. Projects like Goldboro LNG and Atlantic Coast had either already been abandoned or were not sufficiently advanced. “It is therefore difficult to imagine that Canada will be able to meet Germany’s wishes in the short term, but rather only after 2030. LNG export terminals are technically very complex projects with long lead times and high financial volumes,” he said. 

The German Gas and Hydrogen Industry association still welcomed Canada’s bid. “In these times, it is a very important offer, which could help us gain another partner for the diversification of our energy supply,” said the group’s chairman Timm Kehler. “I hope that our stakeholders will also take advantage of this opportunity,” he told Clean Energy Wire. German industry needed affordable gas, and long-term contracts were “the right way.”

How much demand there will be for Canadian gas from Germany and the EU remains uncertain. Europe sought to find new suppliers following the halt of gas supplies from Russia in the aftermath of the war against Ukraine. Russia was the main supplier of oil and gas to Europe, and Germany only received it through pipelines. The war and the energy crisis pushed Germany to build domestic LNG import terminals to help diversify supply. The first temporary import terminal was inaugurated at the end of 2022. The US has filled some of the gap left open by lacking Russian supply through LNG deliveries from its Gulf Coast, and it continues to expand its export infrastructure.

However, Europe is also aiming to become climate neutral by 2050 – Germany already by 2045 – and will have to largely phase out the fossil fuel by then. Even German government officials have warned that Europe’s appetite for natural gas is set to shrink. Overall demand is projected to decline over the coming years and especially decades, increasing the risk of stranded assets in case of new gas infrastructure.

“In the medium and long term we’re not anticipating an increase in gas demand, certainly not in Western Europe,” Pawel Czyzak, Europe Programme Director at think tank Ember told The Energy Mix. “In fact, even typically conservative gas and electricity grid operators are not anticipating a rise in gas demand, which means Europe is already heavily oversupplied towards 2030. That oversupply will get even more severe if the questionable fossil fuel imports from the EU-US trade are implemented,” he said. 

Gas use in Germany in particular is also projected to decline, although this could happen at a slower rate than projected until now. Lagging electrification of sectors like buildings mean that households are set to use gas heaters for longer. In addition, the country’s industry also struggles to decarbonise and will require gas as feedstock and to generate heat in production for some time.

Only 15 to 20 percent of the gas Germany consumes is used for electricity production. While the country is currently planning to expand its gas-fired power plant capacity, the new plants would mainly run at times of low wind and solar power feed-in. Overall gas use in the sector is also projected to decline as Germany continues to build out renewables.

Still, Canada’s Hodgson said German businesses had signalled interest. “There seems to be a desire on the part of Germany to buy our natural gas, and we have a desire from proponents, a province, and First Nations to develop that for German customers,” he said.

The minister explained that until a few years ago, there was a view that the need for natural gas would be relatively minor and there only for a relative short term. “What we all realise post the Ukraine, post what is happening with AI, is that natural gas is going to be a transition fuel that is in greater demand in Germany and for a longer period of time,” he told journalists. Canada had the opportunity to be a “great partner” to Germany in that regard.

Hodgson said Canada is currently producing “the lowest-carbon-footprint natural gas of any country in the world,” because it used clean energy for liquefaction.