Canada could be alternative to Russian gas — but not any time soon

CALGARY — With western sanctions threatening to tighten the taps on Russian energy exports to Europe, Canada could become an alternative supply source — but not any time soon.

CALGARY — With western sanctions threatening to tighten the taps on Russian energy exports to Europe, Canada could become an alternative supply source — but not any time soon.

The Conservative government has been pushing for Canada to expand its energy export reach by building new oil pipelines to coastal waters, as well as multibillion-dollar plants that would enable natural gas to be transported by tanker overseas in an ultra-chilled liquid form.

The crisis in Ukraine is adding urgency to those efforts, Foreign Affairs Minister John Baird said Thursday in Ottawa.

“I think, if anything, it underlines the importance of moving ahead responsibly on the export of not just our oil but natural gas,” he said.

“And it’s an important reminder that opportunities are not all exclusively south of the border or to the Asia-Pacific region but also to our traditional allies in Europe.”

German chancellor Angela Merkel was asked about the possibility at a news conference in Berlin on Thursday, alongside Prime Minister Stephen Harper.

Her enthusiasm for Canada as a potential energy provider was tempered by its current lack of export infrastructure.

Germany gets 35 per cent of its gas from Russia, she said, with the rest coming from Norway, the U.K. and elsewhere.

Baird noted that some countries, like the Baltic states, are fully reliant on Russian energy.

The continent as a whole now gets about a third of its natural gas from Russia. By the end of the decade, about half of its gas demand will need to be met by outside sources — whether that’s Russia or LNG from abroad, said Barry Munro, head of Ernst & Young’s Canadian energy practice.

“There are probably a bunch of North American LNG guys who see these developments as creating a market opportunity for them to move gas to Europe,” he said.

But it’s not going to happen quickly. Exports of liquefied natural gas from Canadian shores are several years off.

“Good or bad, one of the realities is that these are big, complex, very expensive projects which take a lot of time,” said Munro.

And, in any event, the vast majority of Canadian projects in the works would be pointed in the opposite direction — on the West Coast and aimed at growing Asian markets ravenous for energy.

But Ed Kallio, director of gas consulting at Ziff Energy in Calgary, said he expects Canada’s natural gas industry to benefit from a domino effect of sorts.

There are a host of liquefied natural gas export terminals planned for the U.S. Gulf Coast — a handful of which have been approved by the U.S. government — that could send cargoes to Europe instead of Asia via the Panama Canal. Canadian West Coast LNG projects could then backfill the Asian demand.

“Of course the Europeans would have to pay a higher price for that gas,” said Kallio, noting gas currently fetches US$18 per 1,000 cubic feet in Asia versus US$10 in Europe.

“But what price do you put on your energy security? It’s one thing to pay a bit more for your gas, but it’s quite another for Granny to freeze in the dark,” he said.

“I think even if there aren’t energy sanctions on the Russians, that Europe is going to begin to wean itself off that Russian gas and look more and more to LNG in the Atlantic Basin to serve their needs.”

In Canada, the East Coast has been quieter on the LNG front than the West — but there is some action.

For instance, the Goldboro LNG project in Nova Scotia, planned by Pieridae Energy (Canada) Ltd., last year signed a major German utility as a long-term customer. If all goes according to plan, it would start up toward the end of the decade.

Geoff Hill, oil and gas sector leader at Deloitte in Calgary, said it will take more than current geopolitical events to convince the Europeans to sign 30- or 40-year contracts for Canadian LNG. The same goes LNG developers contemplating multibillion-dollar investments in East Coast infrastructure.

“I don’t think any rash, short-term decisions are going to be made,” he said.

“Do I expect to see more interest in the East Coast? I would say it’s possible. But I wouldn’t see any short-term major announcements. These things take a lot of time to materialize.”

Munro said one potential outcome of the crisis could be a larger role for coal in the European energy mix in a bid to reduce reliance on natural gas to generate electricity — essentially displacing one form of energy with another that emits more carbon.

On the oil front, Munro sees TransCanada’s Corp.’s (TSX:TRP) proposed $12-billion Alberta-to-New Brunswick Energy East pipeline as a boost to Europe’s energy security.

That doesn’t necessarily mean Canadian oil will arrive at European ports in any significant amount. Refineries in Eastern Canada currently import a lot of crude from overseas. But with Energy East enabling those refineries to tap into domestic supplies, those foreign cargoes would have to head elsewhere.

“So maybe that means that there’d be crude available into Europe that would have otherwise been destined into Canada,” Munro said.

Follow (at)LaurenKrugel on Twitter

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Asymptomatic testing will now be available for "priority groups" who are most likely to spread the COVID-19 virus to vulnerable or at-risk populations. File photo by THE CANADIAN PRESS
Marcus Golczyk, with Taco Monster, hands food to a customer during Food Truck Drive and Dash in the Westerner Park parking lot in Red Deer Friday afternoon. The drive-thru event will run every Thursday from 4-7 p.m. and Friday from 11 a.m. to 2 p.m. through June. Photo by SEAN MCINTOSH/Advocate staff
Food Truck Fridays, Food Truck Drive and Dash return in Red Deer

Red Deerians are able to take in a drive-thru food truck experience… Continue reading

Don and Gloria Moore, of Red Deer, are set to celebrate their 70th anniversary later this month. (Contributed photo)
Red Deer couple to celebrate 70th anniversary

Red Deer couple Don and Gloria Moore are set to celebrate their… Continue reading

Chris Scott, owner of The Whistle Stop Cafe, was put in handcuffs after an anti-restriction protest Saturday in the parking lot of the business. (Screenshot via The Whistle Stop Facebook page)
UPDATE: Central Alberta cafe owner arrested after anti-restriction protest

The owner of a central Alberta cafe, which was the site of… Continue reading

Alberta has 1,910 active cases of COVID-19 as of Wednesday. Red Deer is reporting five active cases, with 108 recovered. (File photo)
Red Deer now has 911 active COVID-19 cases

Central zone has 2,917 active cases

FILE - A firefighter wears a mask as he drives his truck. THE CANADIAN PRESS/Jonathan Hayward, File
VIDEO: Flames rip through Edmonton-area seniors complex, but no fatalities

ST. ALBERT, Alta. — Fire has destroyed part of a retirement complex… Continue reading

Quebec Premier Francois Legault chairs a premiers virtual news conference as premiers John Horgan, B.C., Jason Kenney, Alberta, and Scott Moe, Saskatchewan, are seen onscreen, Thursday, March 4, 2021 in Montreal. THE CANADIAN PRESS/Ryan Remiorz
Several provinces bring in new restrictions as high COVID-19 case numbers persist

Several provinces are gearing up to tighten public health measures once again… Continue reading

Members of the RCAF take part in a Royal Canadian Air Force change of command ceremony in Ottawa on Friday, May 4, 2018. The Royal Canadian Air Force is hoping Canada will open its doors to military pilots from other countries as it seeks to address a longstanding shortage of experienced aviators. THE CANADIAN PRESS/ Patrick Doyle
RCAF turns to foreign pilots to help with shortage as commercial aviators stay away

OTTAWA — The Royal Canadian Air Force is hoping Canada will open… Continue reading

An arrivals and departures information screen is seen at the Halifax Stanfield International Airport in Halifax on Thursday, Jan. 4, 2018. The chief executive of Atlantic Canada's largest airport is hoping for COVID-19 testing for arriving passengers "sooner rather than later," as an added measure to combat the province's third wave of the virus. THE CANADIAN PRESS/Andrew Vaughan
Halifax airport CEO hopes for more on-site COVID testing ‘sooner rather than later’

HALIFAX — The chief executive of Atlantic Canada’s largest airport is hoping… Continue reading

Shoppers wear mask as they shop at a nursery & garden shop on Mother's Day weekend during COVID-19 pandemic in Wilmette, Ill., Saturday, May 8, 2021. (AP Photo/Nam Y. Huh)
Tearful reunions mark second Mother’s Day under pandemic

Last Mother’s Day, they celebrated with bacon and eggs over FaceTime. This… Continue reading

Arizona Coyotes head coach Rick Tocchet, standing, watches the game during the second period of an NHL hockey game Wednesday, April 14, 2021, in St. Paul, Minn. The Wild won 5-2. (AP Photo/Craig Lassig)
Tocchet won’t return as coach of Coyotes after 4 seasons

GLENDALE, Ariz. — The Arizona Coyotes and coach Rick Tocchet have mutually… Continue reading

Columbus Blue Jackets head coach John Tortorella shouts at an official after a fight between Columbus Blue Jackets' s Gavin Bayreuther and Florida Panthers' Sam Bennett during the second period of an NHL hockey game, Monday, April 19, 2021, in Sunrise, Fla. (AP Photo/Lynne Sladky)
Tortorella out after 6 years as Columbus Blue Jackets coach

COLUMBUS, Ohio — John Tortorella is out as coach of the Columbus… Continue reading

A caribou grazes on Baffin Island in a 2008 file photo. A last-ditch attempt to save some of Canada's vanishing caribou herds is a step closer after a scientific review panel's approval of a plan to permanently pen some animals and breed them to repopulate other herds. THE CANADIAN PRESS/AP-Kike Calvo via AP Images
Parks Canada captive caribou breeding proposal gets OK from scientific review panel

JASPER, Alta. — A last-ditch attempt to save some of Canada’s vanishing… Continue reading

The smouldering remains of houses in Slave Lake, Alta., are seen in a May 16, 2011, file photo. The wildfire that is devastating large swaths of the northern Alberta city of Fort McMurray comes just five years after another blaze destroyed 400 buildings and left 2,000 people homeless in Slave Lake, Alberta. THE CANADIAN PRESS/Ian Jackson
Ten years later: Five things to know about the Slave Lake wildfire

A wildfire burned about one-third of Slave Lake in northern Alberta in… Continue reading

Most Read