On the heels of a deal to build one of the largest EV battery manufacturing facilities on the planet, a German delegation is back in Canada meeting with business leaders across the country.
The delegation is being led by German President, Frank-Walter Steinmeier and one of the agenda items on his list is energy.
During last summer’s visit, Chancellor Olaf Scholz made clear Germany is looking at Canada to be a preferred supplier of energy. This time, the President will visit the West Coast, the heart of Canada’s emerging LNG export industry where two projects are under construction and more are being considered for rapid development.
Energy development is one of Canada’s biggest strengths, but our export strategy is a weakness. Having one of the biggest consumers of oil and natural gas right next door in the United States has made it convenient and economical to simply move our resources south.
Oil and natural gas combined make up our largest export product, contributing $168 billion to national GDP. But virtually all of our oil and natural gas sales are to the U.S. Anyone in business knows that having just one customer, even if they’re a great one, is not a recipe for success.
Now is the time to diversify our energy trading partners and Germany is a potential decades-long customer. Canada is on the cusp of becoming a global supplier of LNG. Due to our interconnected North American pipeline network, natural gas has been land locked. As technology has advanced, not only can we extract greater amounts of natural gas from our land base, we can also super cool it and turn it into a liquid. Once it’s a liquid, natural gas can be put on a boat and shipped anywhere in the world.
About one quarter of Germany’s energy demand was met by natural gas in 2022, the second most important energy source in the country’s mix after oil. Up until the war in Ukraine, Russia supplied more than half of Germany’s natural gas supply.
In order to replace Russian supply, Germany is turning to LNG.
With the LNG Acceleration Act passed in 2021, the country has fast-tracked its import capacity, going from zero at the beginning of 2022 to 14.5 billion cubic metres (Bcm) annually today – and the country expects to reach 37 Bcm per year by 2028.
There are other places to buy LNG. The U.S. is the world leader in LNG exports with Qatar a close second. But Germany is coming to Canada.
This could be because Canada is expected to produce some of the lowest emission LNG on the planet. By virtue of the northern location of our LNG export facilities, less energy is needed to cool the natural gas to liquid form resulting in fewer emissions. In addition, plans are in place for some export facilities to be electrified with hydropower, making them near-zero emission. Upstream, we extract natural gas with some of the highest environmental and emission standards in the world. A recent report from the Alberta Government shows oil and natural gas producers in that province are on track to achieve a 45 per cent reduction in methane emissions by 2025 from 2014 levels. Canada’s emerging LNG export industry is also being built in partnership with Indigenous communities through benefit agreements, employment opportunities and Indigenous ownership in facilities.
Establishing an LNG trading relationship with Germany would offer massive economic benefits to Canadians for years. LNG contracts are measured in decades, often being 15-to-20-year agreements to ensure security of supply. And as energy sources and markets evolve, the relationships established through LNG export agreements can be the trading links for future energy sources – with developed infrastructure and agreements from which to build.
We have a customer knocking on our door asking us for a product they need for decades to come. It’s time for Canada to put the “open for business” sign in the window and invite that customer in.
