Énergie Saguenay: what has changed

Officially announced in 2018, Énergie Saguenay’s project to export liquid natural gas to Europe via Quebec sparked a lot of debate, before being buried. The project reappears today in a different context, that of the war in Ukraine and an unprecedented energy crisis on the European continent. Is it more likely to happen?

Encouraged by the forecasts of the International Energy Agency, which anticipates a sharp increase in global demand for natural gas, several liquefied natural gas (LNG) export projects have emerged to transport the resource from the countries who have it in quantity towards those who need it.

Énergie Saguenay proposed to transport natural gas from Western Canada through a 780 kilometer pipeline from the Ontario border to the city of Saguenay, where the gas would be liquefied and transported to European markets. Estimated cost of the project: 14 billion, which would make it the largest private investment in the history of Quebec.

Controversial since its announcement, the Énergie Saguenay project was examined by the Bureau d’audiences publiques sur l’environnement (BAPE). The exercise attracted record participation and in its March 2021 report, the BAPE issued three major reservations about the economic viability of the project.

An uncertain demand

The fact that the promoters of the project had not entered into contracts with potential buyers to justify such a large investment weighed in the balance.

In the current context, when Europe is desperately trying to get rid of Russian gas, long-term contracts would probably be easier to conclude. “We assume that there would be some,” says Claude Villeneuve, professor and director of the Chair in eco-advice at the Université du Québec à Chicoutimi.

However, it is unthinkable to solve the short-term problem of Europe with Énergie Saguenay which, at best, “could take 7, 8 or 10 years to be realized”, estimates the professor.

In the short term, according to him, the Europeans have an interest in turning to other LNG projects that are more advanced than Énergie Saguenay.

In the medium term, Europe, and especially Germany, will have found a solution, believes for his part Patrick Bonin, of Greenpeace Canada. “The reality is that Germany has carbon neutrality objectives and wants to abandon fossil fuels in 2045,” he recalls.

These commitments, in Germany or elsewhere, are completely unrealistic, believes Gaëtan Lafrance, professor emeritus at the National Institute for Scientific Research and author of the book The carbon neutral illusion: what will the weather really be like after 2050?.

According to him, it is unthinkable that economies like Germany’s could do without carbon to fuel heavy industry.

The other element of the equation that has changed is the price of natural gas, which has increased tenfold and makes the profitability of LNG projects more attractive. “It’s true,” says Philippe Tanguy, energy specialist and professor at Polytechnique Montréal. But will it last? »

A brake on the energy transition

The other reservation expressed by the BAPE is that the construction of new gas infrastructures, which should be profitable over a period of at least 20 years, would have the effect of prolonging the consumption of fossil fuels in Europe and delaying its transition to renewable energy sources.

Today, many specialists see things differently. Gas pipelines can transport other kinds of energy, such as renewable natural gas, and promote the energy transition.

German Chancellor Olaf Scholz has even raised the possibility that liquefaction and regasification infrastructure will one day be used to import green hydrogen.

Claude Villeneuve does not believe it. “It’s a joke,” he says of the possibility of massively importing hydrogen, given the energy needed to produce it and the energy losses in the process.

On the other hand, he believes that gas pipelines could very well transport renewable natural gas, which would be gradually mixed with fossil natural gas as the sector develops.

It would still be necessary to be able to produce renewable natural gas in sufficient quantity, notes Patrick Bonin, of Greenpeace, which is practically unthinkable.

Increase in emissions

Compared to the use of coal which could replace Russian gas in several European countries, the liquefied natural gas imported from Canada has environmental advantages. It was less obvious during the BAPE review than it is today.

Since then, the European Union has also accepted that natural gas be used as a transition energy to replace coal and facilitate the achievement of its climate objectives.

Énergie Saguenay had undertaken to ensure that its natural gas liquefaction facilities in Saguenay would be carbon neutral, thanks in part to the use of electricity from Quebec, which is possible according to a study carried out by the Chair in eco-advice directed by Claude Villeneuve, and which would have given an advantage over other LNG projects.

Similarly, the lobby of Canadian oil and gas producers points out that Quebec is closer to European markets than any other LNG export terminal in North America, which is both an economic and environmental advantage.¹.

As Europe will continue to consume natural gas, it would be preferable, both for the planet and for the stability of supplies, for this gas to be supplied by Énergie Saguenay rather than by Qatar, observes Gaëtan Lafrance.

“The problem with Énergie Saguenay is that they chose Saguenay for their liquefaction plant, rather than the North Shore”, where the project would have been better accepted and where there are also industrial customers who want natural gas.

There are other options

If the conflict in Ukraine continues, Germany could be forced to continue burning coal for a long time so as not to suffocate its economy, but this will be to the detriment of the planet, agrees Philippe Tanguy, energy specialist and professor at Polytechnique Montreal.

Germany has plenty of coal and might not meet its environmental commitments, but that won’t happen, he says. “Given the presence of environmentalists in government, it’s hard to imagine,” he said.

“The crisis will accelerate the transformation of Germany”, rather believes the professor. The Germans have the technology, the resources and the money to eliminate their dependence on Russian gas and continue to prosper, he said.

But even with all the renewable energy possible (solar and wind), the country will need a firm source of energy, which militates in favor of LNG export projects like that of Énergie Saguenay.

“It’s an argument, agrees Philippe Tanguy, but Qatar and other possible suppliers such as the Emirates and Saudi Arabia are increasingly concerned about the environment to meet these needs. Europe has other options, he believes.

According to him, the economic conditions are more favorable than they have ever been for Énergie Saguenay, “but the project was rejected because people didn’t want it and that, I don’t think that has changed” .