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May 29, 2022

Ottawa is open to plans by two companies to export liquefied natural gas from the East Coast to Europe to help address energy-security concerns stemming from the war in Ukraine, as long as the projects comply with Canada’s climate goals.

Global and regional energy issues are now intertwined with Russia’s invasion, and the supply picture is undergoing a fundamental shift as European countries move to sever ties to Russian oil and gas.

Natural Resources Minister Jonathan Wilkinson said the federal government believes that LNG projects envisaged for the East Coast could fit into the energy transition toward a cleaner economy. “They would have to minimize domestic emissions so that it’s consistent with our climate plan,” he said during a news conference on Friday.

Mr. Wilkinson made the comments after he and Environment Minister Steven Guilbeault wrapped up meetings with their counterparts at a Group of Seven meeting in Berlin. Canada and its allies have been emphasizing energy security since Russia’s invasion of Ukraine in February, with Europe scrambling to reduce its dependence on Russian energy.

Regulatory, geographic and logistical hurdles could still threaten the viability of the East Coast LNG projects.

Mr. Wilkinson mentioned two proposals as being best positioned to export LNG to Europe: Repsol SA’s Saint John LNG in New Brunswick and Pieridae Energy Ltd.’s Goldboro LNG in Nova Scotia. Those two projects could begin shipping the fuel to Europe within five years.

“We’re obviously listening to the proponents that have put those projects forward, one of which is the project that’s been proposed by Repsol in New Brunswick,” he said. “Because it’s an LNG import facility at this point, a lot of the existing infrastructure that you would need is already there.”

Ottawa in talks with Repsol, Pieridae Energy about speeding up proposed East Coast LNG export terminals

Still, the Canadian government’s commitment to tackling climate change means that any East Coast LNG proposals will need to incorporate electric-drive technology for supercooling natural gas into liquid form. Traditionally, companies have used turbines powered by natural gas in the liquefaction process. East Coast LNG proposals would also need to eventually shift to hydrogen production as the world moves away from fossil fuels.

Yet another challenge is Canada’s lack of infrastructure to any future East Coast terminals. Upgrades and expansions would be needed on TC Energy Corp.’s pipeline system through Ontario and Quebec, in order to connect to a snaking route that leads to the Maritimes & Northeast Pipeline from New England to New Brunswick and Nova Scotia.

Mr. Wilkinson pointed out that GNL Québec Inc.’s Énergie Saguenay proposal already has been rejected by both the Quebec and federal governments. Proposals in Quebec, New Brunswick and Nova Scotia rely on transporting natural gas long distances from Western Canada.

He named LNG Newfoundland and Labrador Ltd. as a possibility, though he noted that is a longer-term prospect. LNG Newfoundland and Labrador is studying the feasibility of securing offshore natural gas from the Grand Banks, aiming to start LNG exports to Europe in 2030.

The Canadian Association of Petroleum Producers welcomed Ottawa’s general support for potential LNG exports.

“Canadian LNG can provide our allies with a source of safe, secure and responsibly developed energy for decades to come while helping to lower global emissions by offsetting the dependence on coal around the world,” CAPP president Lisa Baiton said in a statement. “CAPP believes there is vast untapped potential to build an LNG industry on both the West and East Coasts of the country.”

LNG Canada’s $18-billion terminal is being built in Kitimat in northern British Columbia, targeting customers in Asia. The Shell PLC-led joint venture is the only LNG export project under construction in Canada. Slated to open in 2025, it would become the first LNG export terminal in Canada to ship the fuel overseas.

Russia supplied nearly 40 per cent of the European Union’s total consumption of natural gas last year, according to the International Energy Agency.

Timothy Egan, president of the Canadian Gas Association, said recent energy discussions should also prompt a review of Canada’s transition plans, including issues such as supply security and affordability.

“The security one has been pretty dormant as an issue until this year, until Russia invaded Ukraine, and suddenly it’s top of mind,” he said in an interview on Friday.

The association represents a range of industry members, from distribution and transmission companies to equipment manufacturers and others in the natural gas sector.

Mr. Egan has already met with a half-dozen ambassadors from EU member states rushing to cut their energy ties with Russia, and has more meetings in the coming weeks.

“This is about a seismic shift in the supply picture, and that’s a dramatic change in a very short period of time,” he said.

Mr. Egan has written three letters to Prime Minister Justin Trudeau this spring, the most recent on Friday, in the hopes of sparking a national conversation about Canada’s opportunities to export LNG.

While he said there have been some developments from Ottawa – including the creation of a Canada-EU working group on green transition and LNG – he said more positive signals are key to bolster investor confidence in the kinds of projects that Canada needs to increase its exports.

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