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Canada could help fill the gap in European energy market

Mar 29, 2022 | Featured

But politics and lack of LNG terminals and pipelines hinder the prospects.

Yuri Bilinsky, New Pathway – Ukrainian News.

In response to Russia’s invasion of Ukraine, the global oil and gas markets are quickly changing.

Canada and the U.S. have banned all Russian oil and gas imports while the UK will phase out Russian oil imports by the end of 2022.

The European Union has set a plan to make Europe independent from Russian fossil fuels well before 2030, starting with natural gas.

These changes are particularly drastic for Germany, which has set a goal of halving its imports of Russian oil and coal this year and freeing itself from its dependence on Russian natural gas by the middle of 2024. Germany’s timelines look remarkable given that, just a few months ago, the country planned to increase its natural gas imports from Russia through a new Nord Stream 2 pipeline. The German vice-chancellor, Robert Habeck, said that his country was shifting away from Russian energy at an “insane pace”.

As the EU gets 40% of its natural gas from Russia, the bloc will need to quickly make substantial changes to its energy balance. Along with a swift transition to renewables and hydrogen, combined with more energy efficiency, the EU is now scooping all Liquified Natural Gas (LNG) stocks available on the global markets.

Last week, the U.S. and the EU announced a major deal that will see the U.S. provide the EU with an extra 15 billion cubic metres of gas, equivalent to around 10% of the gas it currently gets from Russia, by the end of the year. The eventual aim is for the U.S. and international partners, including Canada, to provide about 50 billion cubic metres per year to the EU.

Being the fourth biggest natural gas producer and sixth biggest oil producer globally, Canada is well-positioned to help fill the gaps in the energy supply to the EU. Last Thursday, at a press conference in Paris, Canada’s Natural Resources Minister Jonathan Wilkinson said that Canada will increase its oil and gas exports by the equivalent of 300,000 barrels a day (bpd) to help nations that are trying to shift away from Russian supplies. Energy producers can raise shipments of crude oil by 200,000 bpd and natural gas by the equivalent of 100,000 bpd by year-end by accelerating planned projects to expand output. Canada and the U.S. already have the pipeline capacity to handle the extra volumes, with some of the extra oil expected to be shipped to Europe via the U.S.’s Gulf Coast, he said.

The Canadian government is also in discussions with European countries about eventually supplying them with liquefied natural gas, but any export facility would need to be eventually convertible to exporting hydrogen as part of a planned pivot away from hydrocarbons, Wilkinson said.

However, the lack of exporting LNG terminals hinders Canada’s natural gas exporting potential. Canada has had five LNG projects on the East coast that were trying to get approval. At least three of them were backed by European utilities that wanted to diversify their energy sources. All the projects have now been cancelled with the Saguenay LNG facility in Quebec being the most recent cancellation that happened on February 7 of this year.

In his interview for NP-UN, Tim McMillan, Canadian Association of Petroleum Producers President and CEO, called on the federal government to resurrect the Saguenay project and enable the Goldboro LNG project in Nova Scotia: “We are encouraging the federal government to announce that this is a national imperative to get these major LNG facilities under construction so that we can get them in operation as soon as possible and that the federal government would enable them to be going”.

An LNG project off Newfoundland’s coast, initiated by LNG Newfoundland and Labrador Ltd., has said that it could push forward its schedule on the background of the war in Ukraine. The company said that the project at Grassy Point could be pushed forward from 2030 to start as early as 2028. The company also indicated that the project would be advantaged in that Newfoundland is almost half the distance to Europe than LNG terminals in the Gulf of Mexico, and the plant would be powered by hydropower, keeping emissions minimal.

The lack of oil pipelines to Canada’s Eastern seaboard limits the country’s oil-exporting potential. The Energy East oil pipeline project, which was cancelled five years ago, would have connected Western Canadian oil and gas producing area with the East Coast. Now, Canada sends almost all of its oil exports to the U.S.

Another strong advocate of developing Canada’s energy-exporting capacity is Alberta Premier Jason Kenney, who has been calling to “get some pipelines built” to help “defang” Russian President Vladimir Putin. Since the Russian invasion began, Kenney has tweeted repeatedly about how Canadian oil should replace “dictator oil” in global energy markets and how dead pipeline projects have helped Russia build wealth to carry out this invasion.

Canada’s environment minister Steven Guilbeault rebuked the calls to help solve Europe’s energy crisis with Canada’s fossil fuels. “There is clearly a crisis in Ukraine, just like we’re slowly emerging from the COVID crisis, and there will be other crises in the coming months and years,” Guilbeault told Canada’s National Observer. “But climate change will not go away, and if we’re thinking we can solve the crisis by exacerbating another one, those people who think that are clearly mistaken.”

“The solution to global energy problems is not to increase our dependency on fossil fuels,” said Guilbeault. The best way to improve the energy security of European countries is to simply reduce dependence on oil and gas “regardless of where it’s coming from,” he said. Even if Canada could build more pipelines to increase oil and gas capacity, this would take “a number of years” and wouldn’t address the crisis people in Ukraine and Europe are now facing, he added. The real solution, he said, is to “quickly deploy renewables and cleantech” to reduce dependence on Russian oil and gas.

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