German Chancellor Olaf Scholz is using a meeting with Canadian Prime Minister Justin Trudeau to push for closer energy ties as his ruling coalition in Berlin vies to find alternatives to Russian fossil fuels.
Germany hopes to import liquefied natural gas from Canada to help replace Russian gas, which it still relies on for more than a third of its imports, less than about half before the invasion of Ukraine. Germany and Canada are discussing options for a liquefied natural gas terminal on Canada’s east coast for export to Europe, German officials said.
Meeting Monday on the sidelines of the Bavarian Group of Seven summit, Scholz and Trudeau discussed how to maintain pressure on President Vladimir Putin and reduce Russia’s dependence on energy. “The two sides will cooperate even better than they already do,” said Scholz, standing next to Trudeau before their talks at Schloss Elmau.
Scholz plans to visit Trudeau in Canada in late August, and German authorities hope the two countries will be able to announce a liquefied natural gas deal by then.
An agreement cannot be reached quickly enough for Europe’s largest economy. The Scholz government warned last week that recent Russian actions to cut gas supplies to Europe risk collapsing energy markets.
Economy Minister Robert Habeck raised the country’s gas risk level to the second highest phase of the “alarm” and cited the role of Lehman Brothers in provoking the financial crisis.
“Reduced Russian gas flows leave Germany in a dangerous situation,” said Maeva Kuzin, a eurozone economist at Bloomberg Economics, in a note released Monday. “Whether this will turn into a complete energy crisis may depend on how willing European partners are to spread the pain.
Canada is one of the world’s largest producers of natural gas, but has no export infrastructure on its east coast. The construction of a new liquefied natural gas terminal could take a decade to go through the regulatory process and is likely to face fierce resistance from environmental groups.
However, there is an import terminal owned by the Spanish company Repsol SA, which can be turned into an export terminal relatively quickly. If the company decides to continue, Canadian Natural Resources Minister Jonathan Wilkinson said the terminal could start delivering gas in three to four years.
“We are interested in trying to help our friends in Germany, and the Germans have been pressuring us to try to do what we can,” Wilkinson told Bloomberg in an interview last week.
But he added that “the Canadian government will never announce a decision on this project. It must be the private sector that will invest billions of dollars to do that. ”
Another concern for both parties is that signing a long-term natural gas agreement could compromise their fossil fuel transition commitments. Canada has said it will require each new liquefied natural gas terminal to be low-emission and able to export hydrogen in the future.
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