Political Window Dressing: Germany’s Drive to Replace Russian Gas Can’t Rely on Canada

Regulatory and environmental hurdles to building a new LNG terminal on Canada’s eastern shore for exporting the fuel to Germany are partly to blame for the lack of progress, according to one official.

The most promising Canadian project would add an export facility to an existing LNG import terminal in Saint John, New Brunswick. But even if approved and implemented quickly, LNG shipments would not reach Germany within the next two years, said the official, who asked not to be identified discussing confidential information.

Talks with gas suppliers in Europe and the Middle East have proven similarly complex, underlining the uphill struggle Scholz and his government face in sealing short-term delivery contracts for gas which could help Europe’s biggest economy avoid rationing this fall and winter.

With Russia squeezing supplies to Europe through the Nord Stream pipeline, companies and households have been hit hard by soaring energy prices, and the government has said gas consumption needs to fall by a fifth to avert a supply crisis. Some officials have voiced concern about social unrest if the energy shortage spins out of control.

Germany relied on Russia for more than half of its gas imports before Kremlin forces invaded Ukraine. It has since cut that share to around 30%, partly through increased supplies from Norway and the Netherlands, and wants to broadly end Russian purchases by mid 2024.

Negotiations with Qatar, one of the world’s biggest LNG exporters, have been especially difficult, one of the German government officials said, describing Qatar’s strategy as playing hard ball over the price and duration of potential agreements with German companies.

Scholz and his deputy, Economy Minister Robert Habeck, have accused Russia of using energy as a weapon to retaliate against European Union sanctions. Habeck, who will travel to Canada with Scholz and a corporate delegation, blames President Vladimir Putin for creating an “artificial shortage” that has helped drive up prices.

Ironically, soaring gas prices are helping Germany and other European countries secure some LNG shipments on the world market as they’re willing to pay more than Asian rivals.

To help cut dependence on Russia, Germany is fast-tracking new LNG import terminals, and the first of four floating facilities is due to come online around the turn of the year.

The government wants its first two terminals to operate at full capacity from the start, and energy companies have said that should be feasible. They plan to tap LNG from their global portfolios, and expect that most of the supplies will come from the US.

Utility RWE AG will be responsible for about a third of the total LNG received by the terminals, and is targeting three cargoes per month, according to a spokeswoman. The company quadrupled LNG supplies to Europe in the first half of 2022, trading more than 40 cargoes, the company said this month.

Scholz also wants to use his Canada trip to facilitate Germany’s access to rare minerals and metals, in a push to reduce its dependency on China.

He and Trudeau will sign a deal on green hydrogen — which can be turned into climate-neutral synthetic liquid fuel or fuel gas using sustainably generated electricity — in Stephenville, Newfoundland on Tuesday.

Scholz will also meet with representatives of Canadian pension funds to lobby for more green investments to support Germany’s shift toward a carbon neutral economy.