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A day late and a dollar short: Exporting Canadian natural gas to the EU
First, the potential imposition of Trump’s tariffs on Canadian energy and other exports will impact both U.S. consumers and Canadian energy suppliers exporting to the U.S. (Pexels photo)
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Canada is the world’s fifth largest producer and seventh largest exporter of natural gas. However, unlike most other natural gas exporters, Canada’s market is limited to a single customer – the United States.
President Donald Trump’s on-again off-again tariffs on Canadian exports have many implications but a key one is that Canada must expand its natural gas markets to other countries, not only in Asia, but also to those in the European Union.
Supplying the EU with natural gas is in Canada’s best interest because the EU is trying to reduce its reliance on natural gas imports from Russia in the wake of Moscow’s three-year-old invasion of Ukraine.
To achieve the goal of diversifying Canada’s export markets, the next federal government must do two things: reverse the Trudeau government’s ineffective preference for green hydrogen over natural gas and find ways to ease the construction of pipelines from Western Canada to new liquefied natural gas (LNG) export facilities with potential routes to Europe.
Attempts at constructing LNG export facilities in the Maritime provinces and Quebec were abandoned earlier this decade. By reconsidering some of these projects or developing new ones, Canada can help the EU reduce its more than 75-year dependence on Russian natural gas.
Europe long dependent on Soviet/Russian natural gas
Between 1970 and 1991, despite Cold War tensions, the flow of natural gas from the Soviet Union to Western Europe rose almost 30-fold. This relationship was built on the Soviet need for hard currency (and access to Western technology) and Western Europe’s need for natural gas (and belief in détente.)
Natural gas continued to flow to Europe after the collapse of the Soviet Union, although now primarily from Russia. Disputes between Russia and Ukraine, U.S. fears of European dependence on Russia and the invasion of Ukraine complicated the situation before the sabotage of Russian pipelines to Germany finally ceased most of the flow in 2022.
However, this did not stop the European Union from importing Russian natural gas as figure 1 shows.
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Imports from Russia declined by more than 34 billion cubic metres (bcm) from 67.4 bcm in 2021 to 33 bcm in 2024. But the loss of Russian natural gas was offset by an increase in LNG imports.
As figure 2 shows, the volume of natural gas entering the European Union as LNG has increased since Russia’s invasion of Ukraine. Although demand declined from 2023 to 2024, the volume imported in 2024 exceeded the 2019-21 average by 37 per cent.
Despite the war and EU support for Ukraine, Russia has been gradually increasing its export of LNG to the EU, rising from a low of 14.1 bcm in 2021 to 21.5 bcm in 2024.
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In March 2022, shortly after the Russian invasion of Ukraine, then-federal Natural Resources Minister Jonathan Wilkinson raised the possibility of Canadian natural gas helping Europe reduce its reliance on Russia.
However, five months later, the minister was saying that hydrogen, rather than natural gas, was a better option. Olaf Shultz, who was then German chancellor, was visiting Canada at the time with the intent of securing an agreement to import LNG from Canada. However, then-prime minister Justin Trudeau argued there had never been “a strong business case” for LNG terminals on the East Coast.
In August 2022, two German energy companies – E.ON and Uniper – signed memorandums of understanding with two East Coast green-hydrogen startups that agreed to supply them with one million tonnes of green ammonia annually.
Shultz and Trudeau did sign a “hydrogen alliance” for the export of green hydrogen to Germany. However, despite millions of tax dollars being spent on these projects, no off-take agreements for green hydrogen have been signed with any company in Europe.
At the time of the alliance signing in 2022, there were three proposals for LNG facilities in the region.
Repsol, the owner of an LNG facility in Saint John, N.B., had considered a six-megatonne liquefaction facility in 2014 using natural gas from the United States or Canada supplied through the Maritimes and Northeast Pipeline, but the proposal was shelved in 2016. The company reconsidered the proposal after Russia’s 2022 invasion of Ukraine but abandoned it again in 2023, citing costs.
In 2013, Pieridae Energy announced it planned an LNG facility in Goldboro, N.S., costing $10 billion, that would have produced 10 million tonnes per year. The natural gas would have been supplied from Pieridae’s Alberta holdings and shipped across Canada and the United States. But, in the summer of 2021, the project was shelved because Pieridae Energy was unable to secure the funding required.
Russia’s invasion of Ukraine rekindled Pieridae’s interest in a smaller, less costly version, which would have produced about 2.5 million tonnes of LNG a year starting in 2025 using an offshore floating LNG liquefaction facility (FLNG) rather than the original onshore facility. The project was finally abandoned in 2023.
Canada failed to heed the warning signs of key U.S. policy shift
Supporting Canadian LNG projects is good for the economy and the planet
In 2014, Énergie Saguenay proposed building a $9-billion LNG liquefaction facility in Port Saguenay on the Saguenay River to produce 11 million tonnes of LNG a year starting in 2026. The project was to have used Western Canadian natural gas moved through a new 750-kilometre pipeline connecting the TC Canadian Mainline pipeline in northeastern Ontario to Port Saguenay.
The project was rejected by the Quebec government in 2021 and by the federal government in 2022, primarily over concerns regarding beluga whales and the emissions caused by the end users.
Had these projects gone ahead, Canada would have been able to supply about 27 bcm of natural gas a year to the European Union by mid-decade, almost equalling the 33 bcm of natural gas Russia supplied to the EU by pipeline in 2024.
Canada needs to reconsider its position on shipping LNG to Europe for at least two reasons.
First, the potential imposition of Trump’s tariffs on Canadian energy and other exports will impact both U.S. consumers and Canadian energy suppliers exporting to the U.S..
The largest exporter of electricity in Canada is Hydro Québec, meeting about 10 per cent of New England’s electrical load. Any decline in its revenue would, in turn, affect Hydro Québec’s single shareholder – the provincial government.
For these reasons and perhaps others, the government of Quebec is reconsidering the Énergie Saguenay project. Whether developers or the people of Quebec have an appetite for the construction of a pipeline from northeastern Ontario to Port Saguenay is an issue that will need to be addressed.
Another alternative for shipping natural gas to Europe would be to move it through Hudson Bay from Churchill or Port Nelson in northern Manitoba.
The Indigenous NeeStaNan project envisages developing Port Nelson as an alternative to Churchill for shipping products to Europe. The threat of U.S. energy tariffs has the government of Manitoba backing the NeeStaNan project as a way of shipping Western Canadian crude oil or natural gas overseas.
The Hudson Bay projects also face challenges, such as building pipelines to contend with thawing permafrost and the need for ice-class LNG carriers to sail through the Labrador Sea, Hudson Strait and Hudson Bay.
Second, over the past several months, an increasing number of EU member states have been calling for a ban on LNG imports from Russia. However, the EU’s latest sanctions package did not include LNG imports and will not do so until alternative supplies are secured.
There is an opportunity here for Canada. In a world in which the United States can no longer be considered a trusted partner, Canada needs to support its allies in Europe. It can begin by helping the European Union reduce its reliance on Russian LNG.
This article first appeared on Policy Options and is republished here under a Creative Commons license.
