German Chancellor Olaf Scholz used a meeting with Canadian Prime Minister Justin Trudeau to push for closer energy ties as his ruling coalition in Berlin rushes to find alternatives to Russian fossil fuels.
Germany expects to import liquefied natural gas from Canada to help replace Russian gas on which it still depends for more than a third of its imports, down from about half before the Ukrainian invasion. Germany and Canada have been discussing options for an LNG terminal on Canada’s east coast to export to Europe, German officials said.
Meeting Monday on the sidelines of the Group of Seven summit in Bavaria, Scholz and Trudeau discussed how to keep up pressure on President Vladimir Putin and reduce Russia’s dependence on energy. “The two countries will cooperate even better than they already do,” Scholz said, alongside Trudeau before his talks with Schloss Elmau.
Scholz plans to visit Trudeau in Canada in late August, and German officials hope the two countries can announce an LNG deal by then.
An agreement cannot be reached fast enough for Europe’s largest economy. The Scholz government warned last week that recent Russian moves to reduce gas supplies to Europe were at risk of causing a collapse in energy markets.
Economy Minister Robert Habeck raised the country’s gas risk level to the second highest phase of “alarm” and invoked the role of Lehman Brothers in activating the financial crisis.
“Russia’s lowest gas flows are leaving Germany in a dangerous situation,” Maeva Cousin, a eurozone economist at Bloomberg Economics, said in a note released Monday. “Whether this becomes a full-fledged energy crisis may depend on the willingness of European partners to spread the pain.”
Canada is among the largest producers of natural gas in the world, but has no export infrastructure on its east coast. The construction of a new LNG terminal could take a decade to overcome the regulatory process and would likely face strong opposition from environmental groups.
However, there is an import terminal owned by the Spanish company Repsol SA that could become an export terminal relatively quickly. If the company decides to continue, Canada’s Minister of Natural Resources Jonathan Wilkinson has said the terminal could start shipping gas in three to four years.
“We’re interested in trying to help our friends in Germany, and the Germans have been pressuring us to try to do what we can,” Wilkinson told Bloomberg in an interview last week.
But he added that “the Canadian government will never announce a decision on this project. It must be the private sector that will invest the billions of dollars to really do it.”
Another concern for both countries is that signing a long-term agreement on natural gas could jeopardize their commitments to abandon fossil fuels. Canada has said it would require any new LNG terminal to be low-emission and capable of exporting hydrogen in the future.