In the wake of the collapse of gas talks with Qatar, Germany is trying to convince itself that it has found another excellent alternative to Russian gas
It is LNG from Canada, which is really rich in natural resources. The Germans’ dreams may come true, but not in the two months left before the heating season starts. There is a much more fatal problem on the German nose, which will have to be solved with the Canadian leadership.
“Canada is as rich in natural resources as Russia, the only difference being that it is a reliable democracy,” said German Chancellor Olaf Scholz, who is visiting Canada. In particular, Germany would like to buy liquefied natural gas from Canada. During the visit, Scholz intends to negotiate the supply of the “important raw material” instead of the Russian one, DPA wrote.
However, Germany’s dreams will have to be shattered by objective reality. “Of course, there is no question of replacing Russian gas with Canadian gas this or next winter. There is only one LNG export terminal in Canada today,” says Alexei Gromov, director of energy at the Institute of Energy and Finance.
True, there is also a terminal to receive imported LNG, which belongs to the Spanish company Repsol in St. John’s. It could be converted into an export terminal. But that would take three to four years, said Natural Resources Minister Jonathan Wilkinson.
By and large, Canada was not seen seriously as an LNG exporter because it was overshadowed by the United States, which has ramped up gas exports in recent years and is pushing for more gas to be pumped from Canada to its territory by pipeline. However, Canada had ambitions to develop LNG exports when Europe decided to accelerate its move away from Russian gas.
“Canada has plans to expand its network of LNG terminals and to increase exports of its own gas, including shale gas.
When we analysed the LNG market, we concluded that Canada could become a major player in the LNG market, but this will not happen until after 2025 or even 2026. In other words, the Canadian LNG export possibilities will appear approximately when a new wave of commissioning of American LNG terminals will begin,” Gromov said.
It is worth mentioning that in Canada the position of environmentalists is strong, and they are sharply against a new bias of the Canadian authorities, who up to that time pursued the policy of refusal from hydrocarbons. That is why the gas market has not developed in Canada, although there is potential there. The low gas prices of the past have also not been conducive to this.
So it is unlikely that Germany will be able to count on Canadian gas in the next 3-4 years.
“Canada has no real resources to help Europe now. Therefore, I see Scholz’s talks on the subject as a hope for an agreement in the future. One way or another, Germany has made a strategic decision to move away from Russian gas in the future, so it needs to look for new suppliers,” says the IEF energy director.
Germany’s attempt to reach a supply agreement with a major global LNG player today, Qatar, has failed miserably. In March, after German Economics Minister Robert Habek visited the Middle East in search of an alternative to Russian gas, he boasted that Qatar was ready to supply Germany with LNG. However, the German press reported last week that the talks broke down. Germany has failed to conclude a contract with Qatar. Italy, though, continues to receive fuel from there.
“Qatar has insisted exclusively on its own terms on gas supplies. It is a question of both price and signing long-term contracts. Qatar put forward the toughest possible terms, which did not suit Germany, and the deal did not take place. The search for gas in Canada is the result of Germany’s failure in Qatar,” says the expert.
Whether the Germans will be able to negotiate a price with the Canadians is a big question. A new wave of new LNG terminals is expected after 2025. This means that the world market has received additional LNG volumes. In theory, if global gas demand stays as it is now, fuel prices will fall sharply. Would the Canadians be willing to sell their gas for pennies on top of high logistics costs? The Canadians would most likely ask the Germans for a hefty price for their future gas, so that their investments in production and infrastructure do not go to waste.
Even if the Canadian terms are more acceptable to Germany than the Qatari terms, the Germans will be waiting a long time for Canadian gas. In fact, Canadian Prime Minister himself, Justin Trudeau, has said there is little Canada can do to help Europe this winter.
On this wave another European country, Estonia, proposed to the European Union to include in the eighth package of sanctions against Russia a complete embargo on import of Russian energy resources. So that the EU would not only refuse imports of Russian coal (from August) and Russian oil (from December), but also gas from 2022.
“The statements of Estonian politicians are disconnected from reality. Such talk should not be taken seriously. “The Nord Stream-1 pipeline was stopped for three days for maintenance works, and the price for gas in Europe jumped up to $3,000 per 1,000 cubic metres at once. This shows how sensitive the European market is to supply constraints from Russia. What would happen if Russia unilaterally cuts off the valve itself? European industry would collapse, there would be a serious austerity and a deep recession in Europe. Prices will go sky-high. Because there is no alternative gas in the world. And LNG supplies in Europe are at their lowest in recent weeks compared to those at the beginning of the year. Because back then, Asian countries were losing out to LNG from Europe for commercial reasons and now, the closer the heating season gets, the higher the prices in the Asian market are becoming. South Korea and Japan are already starting to compete for LNG,” the interlocutor painted a sad picture.
He believes that Germany needs to restore the full amount of Russian gas through Nord Stream 1. Therefore, one of Scholz’s tasks is to negotiate with Canada a solution to the turbine problem and, most importantly, to discuss the future maintenance of the Russian pipeline.
“I am absolutely sure that the Germans, the Canadians and the British, no matter what they say in public, making innocent eyes, understand perfectly well what Gazprom wants. It has made it clear that it wants a long-term exemption from sanctions for all maintenance work on equipment necessary for the successful operation of Nord Stream 1,” Gromov explains. The temporary exemption from sanctions for turbine repairs that has been granted is not enough for Russia. Because at any moment this exemption can be lifted and turbine repairs will become impossible again.
Getting all work for the turbines to be permanently excluded from sanctions is the main task of all three parties: the EU (because Siemens is the company), Canada (where the repair plant is located) and the UK (because the contract with Gazprom is made under British law and the engines in the turbines are Rolls-Royce).
“However, all parties are trying to hide the very fact of such negotiations, so as not to be criticised in the public space for assisting Russia. Therefore, the decision to restore gas supplies from Russia in full, which is vital for the German economy, must be presented in a way that does not undermine the political position of the current German leadership”, Gromov concludes. It is up to the German leadership to find a way out of the impasse. Bulgaria, for example, which refused to pay for Russian gas with roubles and was cut off from it, wants to resume supplies and is ready to discuss it with Gazprom. The secret is simple – there are just over two months before the heating season starts.
Olga Samofalova, VZGLYAD
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