It was not long.
Posted at 5:00 a.m.
Russia had barely launched its attack on Ukraine when Canada’s oil and gas lobby took over the crisis. His message: This is proof that oil and gas pipelines are needed to export our resources, reduce Russian market share in Germany and elsewhere in Europe, and ultimately weaken Putin.
By digging into the file, however, we see that it is not so simple.
It is true that the idea did not come from nowhere. A year ago, Canada signed an energy protocol with Germany1. It focused on the objective of carbon neutrality in 2050.
Although natural gas was not explicitly mentioned, the industry hopes to take advantage of the agreement to advance two projects.
The first, in Saint John, would convert an existing import terminal. It would now be used to liquefy Canadian gas and then ship it abroad.
The second, a new infrastructure in Goldboro, Nova Scotia, would fulfill the same function. The terminal project was authorized in 2012, without a scope assessment2. It would probably also require the construction of a gas pipeline that would pass through southern Quebec. Its promoters are calling for more than $920 million in federal aid – the Liberals, however, recently promised to abolish fossil fuel subsidies. These promoters are not in seduction mode – they are suing Quebec and have also threatened to sue Environnement Vert Plus.
It would take several years for one of these terminals to be built. The case of Énergie Saguenay shows that this is far from certain. Before being blocked by the Legault government, this project was in difficulty for strictly economic reasons. Investors are looking to enter into long-term contracts. However, the projected price is not always enough to make them profitable, as evidenced by the abandonment of gas projects in Alberta and British Columbia before the pandemic.
What will be the impact of the war on the price of gas in the medium and long term? On demand? Beware of those who predict the future…
Germany imports almost half of its gas from Russia. For the European Union, it is one third.
Russian aggression forces Germany to reconsider this strategy. She does not want to depend on Putin or finance him – 36% of the Russian budget comes from its fossil fuels. Moreover, it is probably no coincidence that the attack occurs in winter, when the barrel exceeds US$100 for the first time since 2014. Moscow is taking full advantage of this balance of power.
To reduce this dependence on Russian gas, everything is on the table. Germany announced a few days ago that it does not rule out postponing the end of coal, scheduled for 2030, or extending the life of its nuclear power plants (it would be very complicated). It will also bail out its reserves and build two terminals on the shores of the North Sea to receive liquefied natural gas or, in the longer term, hydrogen.
Two obstacles stand in the way of Canada.
First, competing countries are already ready to supply Germany. It already sources its supplies in Norway and Qatar, in particular. Their proximity could make their prices more competitive.
Then time plays against Canada. It would take a few years for a liquefaction terminal to be operational. However, the war encouraged the German Chancellor to accelerate his energy transition. “The faster we move towards the development of renewable energy, the better,” he told the Bundestag last week.
The decarbonization of its electricity is accelerated. The new target is set for 2035, with an intermediate target of 80% in 2030. His Minister of Finance has an expression for renewable energies: “freedom energies”.
Without disqualifying Canadian projects, it complicates them.
Such investments depend on projections of the volatile energy market. What is easier to anticipate, however, is global warming. It hits even faster and harder than expected, shows new IPCC punch report released on Monday3.
Climate is not linear. A small change in temperature leads to large impacts on ecosystems. To refugees and dead.
Arguably, of course, European demand for gas will not disappear so quickly and it is better that Canada meet it. However, this does not exempt the country from meeting its targets for reducing greenhouse gas emissions. To be compensated, these projects would require that we drastically reduce our consumption of fossil fuels. However, the Conservatives are not proposing it.
The other argument in favor of Canadian gas is its “ethical” aspect. Again, this is not wrong. Unlike Russia, Canada is an allied democracy. However, things get a bit more complicated in our globalized economy…
Projects in the West are financed by people close to Putin. Roman Abramovich controls 28% of Evraz, which is supplying the majority of the steel to build the expansion of the Trans Mountain oil pipeline and the Coastal GasLink pipeline. Igor Makarov, another Russian oligarch, is the main shareholder of the Alberta gas company Spartan Delta. Even though these two individuals are on the American list of Putin’s allies, Canada excludes them for the moment from the oligarchs whose assets are confiscated.
Here is a brief overview of this complex file.
Despite what the industry claims, therefore, it would not be so easy to quickly replace the Russian market. And even if that were the case, the question of the impact on the environment would still remain.
There would be another way to recover from the crisis. Seeing it as an argument to accelerate the energy transition.