Ukrainian Naftogaz backs Scholz bid for Canadian LNG ahead of trip

Shortly before his two-day trip to Canada, German Chancellor Olaf Scholz received support for his interest in Canadian liquid natural gas to help replace Russian gas imports from an unexpected ally: Ukraine’s state-owned gas company Naftogaz.

Kyiv is at odds with Berlin over its gas import policy: first over its deal with Moscow to build the Nord Stream 2 gas pipeline and more recently over its deal with Canada to deliver a repaired Nord Stream turbine 1 in Germany.

But the prospect of LNG deliveries to Europe from Canada, one of the world’s leading gas producers, is something Naftogaz not only supports, it is also something it is quietly working on.

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Naftogaz signed a low-profile memorandum of understanding earlier this year with Canadian energy developer Symbio Infrastructure to buy LNG in Canada. Meanwhile, Canada and Germany are discussing the construction of LNG terminals on Canada’s Atlantic coast.

Naftogaz CEO Yuriy Vitrenko told Reuters in an emailed statement that Canadian gas has many advantages.

“Canadian suppliers do not have a dominant position in the German market, do not abuse it, like Gazprom, which artificially reduces supplies, ‘corners the market’ and rips off its customers,” he said.

Still, the challenges to these proposals are considerable, German and Canadian officials point out.

Costs to transport gas from Alberta in Western Canada to the East Coast would be high. New pipelines would be needed, and the global shift away from fossil fuels means the terminal’s lifespan would be too short to be profitable unless it is converted to a hydrogen terminal when gas demand declines.

German officials this week acknowledged that Canadian LNG deliveries are, at best, a mid-term prospect and instead highlighted a hydrogen deal that Scholz is set to sign with Canadian Prime Minister Justine Trudeau. .

Pipes from the Nord Stream 1 gas pipeline landing facilities are pictured in Lubmin, Germany, March 8, 2022. (Reuters)

Sensitive political subject

German government officials are keen not to cause more headaches for ally Trudeau after the backlash over his decision to allow delivery of a turbine for Germany’s Nord Stream gas pipeline after repairs in Canada.

Scholz and Economy Minister Robert Habeck will also meet with Quebec Premier François Legault – from a different political camp than Trudeau – due to considerable resistance to the construction of an LNG terminal and other necessary infrastructure.

Michael Link, the German government’s transatlantic coordinator, said it would make much more sense to import LNG from Canada than from autocratic governments, noting it was important for Scholz to visit provinces in the federal country.

“Canada is reliable, democratic and has the highest environmental and social standards,” he said in an interview.

Still, ultimately, even Canadian LNG deliveries to Asia from the west coast would help, he said.

“Gas exported there goes to the world market, it increases supply and puts downward pressure on prices,” he told Reuters.

Read more:

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