If Russia remains a pariah, Europeans will need Canadian natural gas
Russia’s invasion of Ukraine has raised important questions in the Canadian energy sector, including considering the pros and cons of exporting more natural gas directly to Europe. Canada already effectively supplies the continent, though not directly, as existing American LNG (liquefied natural gas) terminals send gas to Europe. With North American pipeline systems so well integrated, Canadian natural gas is either indirectly sent through U.S. terminals or it backstops U.S. volumes that are directly shipped there.
One question for Canada becomes: should we build Canadian East Coast LNG terminals (and related east-west pipeline capacity) to increase direct European sales? It’s no longer simply an economic or environmental question, there are now moral and strategic implications.
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Canada is the largest exporter of energy to the United States, but our energy sales to Europe are limited. Recently, Natural Resources Minister Jonathan Wilkinson spoke of Canada exporting natural gas as LNG to Europe. European countries have expressed an urgent need to move away from Russian sources and Canada is a desirable trading partner. Our energy exports to the U.S., for example, are centred on a rules-based, customer service-oriented relationship. We do not use our natural resources as an imperial cudgel.
When projects in Canada are questioned by opponents or regulators, proponents often revise their offerings to better suit customers and stakeholders. Simply put, Canada’s energy is responsible because it is responsive. We are better at energy than Russia. Just ask our customers.
Lately, market signals have not been reliable in the European natural gas market. Until recently, Germany discounted Russian natural gas supply risks and authorized the Nord Stream 2 pipeline. But the world is now a different place, Germany has indefinitely shelved Nord Stream 2 and they are in need of alternative sources.
If Russia remains a pariah, Europeans will not only want Canadian natural gas, but they will need it. The question might become: should Canada deprive its European allies of its natural gas? We must now consider how we can best support our allies and fellow democracies.
The argument against sending more Canadian natural gas to Europe is not a trivial one. Natural gas is a greenhouse gas-emitting hydrocarbon. Increased Canadian production could grow emissions and potentially scuttle our reduction commitments. In fact, competing for our attention earlier this month was the release of another sobering report from the Intergovernmental Panel on Climate Change. Canada must deal with both the Ukrainian invasion and the global climate crisis at the same time.
Helpfully, the Canadian natural gas distribution system has a track record of rising to the challenge. It has reduced natural gas emissions by 20 per cent since 2000, according to the Canadian Gas Association, while Canadian demand and consumption steadily rose.
Moreover, 81 per cent of Canadian electricity is from non-emitting sources. LNG production requires massive amounts of power and Canadian LNG is best in class because of our electricity advantage. If Europe requires low-emission LNG, Canada’s would be the lowest.
Most, if not all, Canadian oil and natural gas infrastructure could be converted to transport hydrogen. Any new natural gas infrastructure built to supply our European allies could effectively be a pre-build for an emerging hydrogen industry. Hydrogen, as a fuel, emits no greenhouse gases. At present, we can’t use hydrogen at a large enough scale to replace oil and natural gas. But in the future, we could. Just as we could be positioned to supply Europe with the lowest-emission LNG in the world, Canada might also later provide the lowest-emission hydrogen in the world – if we build the infrastructure now.
There is no shortage of variables that could complicate or even undo expanded Canada – Europe natural gas (and future) hydrogen trade. There are two questions to focus on now: does Canada want a customer like Europe and does Europe want a supplier like Canada? Can Canadian LNG supply Europe without de-railing progress toward eliminating emissions? Wilkinson suggested this is possible, especially when economics, the environment, freedom, and democracy, are fully factored into the equation. As now they must be.
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