Germany won’t discuss rapid expansion of LNG exports during Canada visit

German Chancellor Olaf Scholz, left, and Canadian Prime Minister Justin Trudeau, right, take a walk during their bilateral meeting on the sidelines of the G7 summit at Castle Elmau in Kruen, Germany, on June 27. .Kerstin Joensson/AFP/Getty Images

When German Chancellor Olaf Scholz visits Canada next week to discuss the energy crisis plaguing his country, the prospects for a rapid expansion of Canada’s liquefied natural gas exports will not be a topic of discussion, according to Canadian and German officials. .

Instead, Scholz and his entourage are expected to focus on longer-term energy goals. And they will try to bolster Canadian efforts to develop renewable energy markets, with a special focus on hydrogen fuel.

The two countries will sign an agreement to promote the expansion of Canadian hydrogen exports. Mr. Scholz and Prime Minister Justin Trudeau sign the agreement in Stephenville, NLwhere there are plans to build a plant that will use wind power to produce the fuel.

The German Federal Economics Ministry confirmed that LNG will not be discussed at next week’s visit. But spokeswoman Susanne Ungrad noted that the German government is still interested in Canadian LNG. “Companies that trade would have to decide if there could be deliveries,” she said.

The visit is not a commercial mission, but it will look like one. Mr. Scholz will be joined by executives from Germany’s energy, environment, chemical, automotive, maritime and mining sectors. Volkswagen CEO Herbert Diess will be among the delegation. And so will Siemens Energy CEO Christian Bruch.

The trip and deal are part of the German government’s efforts to become less dependent on Russian gas and mineral supplies by deepening energy and raw material partnerships with other countries. Acquiring those essential supplies from Russia has become politically tense in recent months, as Moscow’s invasion of Ukraine has drawn international condemnation and sanctions. Recent sharp cuts in Russian natural gas flows to Europe have forced Germany to prepare for gas rationing.

Trudeau and Scholz must face hard truths about energy security

Although Germany is interested in Canadian LNG, its leadership in Berlin has little confidence that Canadian companies are capable of delivering in the country’s time of need. And Germany’s desire for natural gas could wane over time, because the country has committed to phasing out fossil fuels by 2035.

Canada currently has no operational LNG export terminals. And it only has one of them under construction: the Shell PLC-led LNG Canada project, which will ship natural gas in liquid form to Asia from Kitimat, BC.

To ship the fuel to Europe, Canada would need to build terminals on its east coast, but the likelihood of them joining quickly is low. Environment Minister Steven Guilbeault told All Nova Scotia, an Atlantic Canadian news outlet, that the federal government will not support expanding pipeline capacity from Alberta to help export LNG from Atlantic provinces. . He added that new Canadian LNG facilities cannot be built in time to address Europe’s short-term energy needs.

Charlie Grueneberg, a spokesman for Future Gas, a German association, said Canadian investor interest in building LNG export terminals on the East Coast is limited, because the German government’s energy and climate policies make it seem unlikely that the country will be a long-term buyer of gas.

Ottawa recently rejected the idea of ​​federal funding for two private-sector proposals to export LNG from the East Coast to European countries: one from Pieridae Energy Ltd.’s Goldboro LNG and another from Repsol SA’s Saint John LNG, which operates an LNG import terminal. Neither company has made concrete construction plans.

Natural Resources Minister Jonathan Wilkinson told The Globe in June that the two proposals would have to stand on their own and go through Canadian regulatory reviews to ensure they meet Canadian climate goals.

In a statement to the Globe on Thursday, Mr. Wilkinson’s office reiterated that “any potential new project must incorporate energy transition considerations into the project design, such as plans to transition to hydrogen production and export.”

In an email, Repsol spokesman Mike Blackier said the company is constantly exploring options to maximize the value of its import terminal, with a particular focus on new low-carbon ways to meet market demand and support the transition to renewable energy.

Pieridae Energy spokeswoman Sophie Schneider said the company is considering reviving its East Coast terminal plans and that its chief executive, Alfred Sorensen, recently met with Deputy Prime Minister Chrystia Freeland and other energy leaders in Halifax to discuss. advancing energy security and ways Canada can collaborate with business to meet the energy needs of the country’s allies.

To realize their terminal dreams, Calgary-based Pieridae and Madrid-based Repsol would have to organize the transportation of natural gas from Alberta through a tortuous route to the East Coast.

According to Future Gas, building an LNG export terminal takes at least five years, and it may take 10 to 20 years before investors recoup the cost, which typically amounts to around $13 billion. Building an export terminal is about 10 times more expensive than building an LNG import terminal. This is because the gas liquefaction process is complex and requires a large amount of energy.

Despite the economic challenges, Volker Treier, head of foreign trade at from Germany Chambers of Commerce and Industry said the construction of LNG export terminals on Canada’s east coast could be supported by the high prices Germany would be willing to pay for a non-Russian fuel supply.

Gas importers in Germany currently do not plan to receive gas from Canada. Energy company EnBW, which has already booked LNG capacity at a German import terminal currently being built in the city of Stade, said in a statement that additional LNG volumes will come from the US and the Middle East.

An analysis by the Institute for Energy Economics at the University of Cologne shows that direct exports of LNG from Canada to Europe will be limited. “It is more profitable for Canada to export LNG gas to Asia,” said Eren Çam, head of the institute’s energy raw materials department. This is mainly due to the export terminal already under construction in British Columbia and the fact that a pipeline will bring LNG directly to the area from Alberta, where it is produced.

The most realistic way for Canada to help meet Germany’s energy needs could be some kind of energy swap, experts say. “LNG exports from western Canada could have an indirect impact on Europe and lower prices,” Çam said. Canadian gas exports could replace US LNG exports to Asia, allowing the US to increase the volumes of fuel it sends to Europe.

Some policymakers in Canada and Germany, including Prime Minister Trudeau, have expressed hope that the LNG export infrastructure could later be reused to export hydrogen fuel. But hydrogen-capable LNG infrastructure doesn’t exist today, and building it would be a technical challenge.

Unlike natural gas, hydrogen in its pure form is not suitable for shipment by ship. This is because it must be cooled to -253 degrees to turn it into a liquid state. (LNG only needs to be cooled to -161 degrees.) And the energy density of hydrogen is significantly lower than that of LNG, which means that a ship filled with hydrogen fuel does not provide as much energy as a ship filled with gas.

Because of this, the most likely way to transport hydrogen on a commercial scale is in the form of ammonia, a derivative of hydrogen that only needs to be cooled to -33 degrees and has a much higher energy density than liquid hydrogen.

The ammonia production process is considered simpler than liquefying natural gas, so the cost of building ammonia export terminals should be lower than that of building LNG export terminals, according to Future Gas. But ammonia synthesis is a chemical process, while natural gas liquefaction is physical, so different facilities are needed.

The Association of German Engineers points out that it is easier to build terminals that can export both LNG and liquid hydrogen, rather than trying to retrofit an LNG terminal to use hydrogen. “Modernization at a later date is possible, but not economically feasible, as too many major components would have to be replaced,” the association says on its website.

Gas experts say the situation is different for LNG import terminals, which can easily be adapted for ammonia if their tanks have been prepared for the switch, because the switch would only require changing a few components, such as internal pumps and compressors. The designs of the German import terminals in Wilhelmshaven and Stade already provide for this.

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