Trudeau, Germany's Scholz cool to the idea of exporting Canadian natural gas to Europe

Prime Minister Justin Trudeau and his German counterpart, Chancellor Olaf Scholz, appeared to pour cold water on the idea ofshipping Canadian natural gas to Europe when asked about the proposal Monday.

At a news conference in Montreal, the two leaders instead suggested that their priority is developing cleaner energy sources, like green hydrogen, in Canada for export to Europe to help solve the continent's energy crunch.

While not ruling out a role for Canadian natural gas in alleviatingEurope's energy shortage, Trudeau said there isn't a clear business case yet for building a liquefied natural gas (LNG) export terminal in Saint Johnor elsewhere.

Trudeau said natural gas would have to be shipped by pipeline from the gas fields of Western Canada to a still-unbuilt liquefaction terminal on the Atlantic coast.

It would bea costly undertaking andmight not be a prudent investment, given Europe's commitment to a rapidtransition to a cleaner economy, Trudeau said.

WATCH |Trudeau talks clean energy with German chancellor:

Trudeau talks clean energy with German chancellor

2 years ago

Duration 1:47

During a bilateral meeting in Montreal with German Chancellor Olaf Sholz, Prime Minister Justin Trudeau addressed how Canada can lead the world in producing clean energy.

"One of the challenges around LNG is the amount of investment required to build infrastructure for that," he said.

"There has never been a strong business case because of the distance from the gas fields, because of the need to transport that gas over long distances before liquefaction."

Trudeau said private companies are investigatingwhether such multibillion-dollar investments would beworthwhile inthis"new context."

The war in Ukraine has upended the global energy market.

Russia, a major supplier of natural gas to Europe, has been accused of holding back some of its supply to retaliate against crippling sanctions imposed by Western countries, including Germany, over itsunprovoked attack on Ukraine.

To reduceEurope's reliance on Russian gas, observers have floated the idea of shipping some of Canada's abundant natural gas across the Atlantic to terminals in Germany.

Butbecause Canada has been slow to develop proposed LNG sites in the Atlantic provinces, it's unlikely this scenario will materialize any time soon.

Trudeau said Canada will push ahead with LNG projects that are already under construction on the country's West Coast, terminals that will supply gas to another energy-starved region: Asia.

With more gas coming from Canada, other major suppliers, like Qatar, would have a freer hand to send their product to Germany and other European countries, he said.

"Right now, our best [solution] is to continue to contribute to the global market, to displace gas and energy that then Germany and Europe can locate from other sources," Trudeau said.

Trudeau said the conflict in Ukraineand the energy supply shocks it triggeredshow"the world needs to accelerate its ending of dependency on oil and gas in general" and transition to clean sources. Trudeau said that, in the coming years, Canada will position itself asa "key supplier to the world in a net-zero economy."

Scholz said Germany is interested in helping Canada develop its hydrogen production capacity it's still a nascent industry with very little production underway so that it can eventually tap into that resource.

Trudeau and Scholz will travel to Newfoundland and Labrador on Tuesdayto meet with companies there that are pitching new hydrogen projects that eventually could feed energy to Europe.

Germany is interested in "green" hydrogen a form of fuel that is produced through electrolysis with no resulting emissions.

In a recent report, Canada's environment commissioner, Jerry DeMarco, found that the actual annual production of hydrogen in Canada is only about 3 megatonnes almost all of it being "grey" hydrogen, a dirtier form that produces roughly double the emissions of natural gas.

The commissioner said there are doubts about whether hydrogen can play any sort of meaningful role in Canada in the short term because very little of the necessary infrastructure like hydrogen pipelines and liquefaction plants is in place.

Green hydrogen is also prohibitively expensive. A gigajoule of natural gas costs about $3.79 to produce, while a gigajoule of green hydrogen costs over $60 if it's produced using electricity from renewable sources such as wind and solar, the commissioner found.

But Scholz said rapid technological innovation is possible and hydrogen could soon be a crucial source of energy for major industrial economies.

"What we're doing at this time is scaling them up, which would really change the world of industry and production globally," he said.

"This is like all other industrial processes from the past. It starts slowly but then there is a moment where, from one day to the other, there is a big scaling up because so many different industries have decided they need to change."