The Carney government is pitching major new investments in liquefied natural gas (LNG) exports to Germany despite continuing projections that gas demand across the European Union will continue to fall.
On Tuesday and Wednesday in Berlin, Prime Minister Mark Carney and Energy and Natural Resources Minister Tim Hodgson launched a major LNG export push, including new port infrastructure under consideration in Churchill, Manitoba and Montreal, with Hodgson saying the first shipment could go out in “as little as five years. Canada and Germany also signed a ‘joint declaration of intent’ to cooperate on critical mineral supply chains.
The announcement has Canada positioning itself as a key supplier of gas and critical minerals to Europe’s energy transition and resource security, with Carney pledging major investments in infrastructure to allow exports to Germany and beyond, Clean Energy Wire reports. Hodgson said industry proponents are talking about building pipeline and harbour infrastructure in time for a first shipment in “as little as five years,” and developing it “in an environmentally responsible way.”
“I think you’re probably talking about five to seven years,” he told Politico EU in an interview Wednesday, adding that he’d been surprised by long-term interest from German industry in LNG supplies that are typically seen as climate-unfriendly. “They believe that there will be more LNG required and for longer as a transition fuel,” he said.
A “deeply irresponsible” bet on European LNG markets
But independent analysts say there’s been little or no change in projections over the last few years that show a global natural gas glut on the horizon and demand going into permanent decline this decade –meaning limited if any export prospects in Germany by the time Canada could get new LNG projects up and running.
“We currently see no specific projects on the Atlantic coast that are in the start-up or investment phase,” Andreas Schröder, head of gas analytics at Independent Commodity Intelligence Services (ICIS) in Düsseldorf, told Clean Energy Wire.
With projects like Goldboro LNG and Atlantic Coast either abandoned or insufficiently advanced, he added, it’s “difficult to imagine that Canada will be able to meet Germany’s wishes in the short term, but rather only after 2030. LNG export terminals are technically very complex projects with long lead times and high financial volumes.”
But by then, “in the medium and long term, we’re not anticipating an increase in gas demand, certainly not in Western Europe,” Pawel Czyzak, Europe programme director at the Ember energy think tank, told The Energy Mix in an email Wednesday. The continent’s gas demand fell 17% between 2021 and 2024, spurred largely by the energy shock following Vladimir Putin’s invasion of Ukraine, and projections show another 7% drop through 2030 as Europe electrifies its economy.
That means the continent “is already heavily oversupplied towards 2030,” he said, and “that oversupply will get even more severe if the questionable fossil fuel imports from the EU-U.S. trade [and tariff deal] are implemented.”
Czyzak also cast doubt on the widely-held view that artificial intelligence will drive up gas demand. In Europe, he said, there are already signs that data centres may be “moving outside of traditional hubs like Frankfurt towards grids that are less congested and more green,” in places like Scandinavia. “So we don’t anticipate Germany needing gas for AI specifically,” especially since heavier reliance on gas “would just ramp up electricity prices and push these data centres away even more.”
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Michael Sambasivam, Toronto-based senior analyst at Investors for Paris Compliance, said it’s “deeply irresponsible” to prioritize federal resources for an LNG terminal to serve the European market.
“We’ve already seen European LNG demand drop from its peak, with significant resources targeting the decarbonization of its energy supply,” he told The Mix, so “the fundamentals that have driven proposed LNG terminals on Canada’s East Coast to fail in the past remain. LNG is not cost-competitive with renewables, and glut projections suggest that any new eastern Canadian project will have a very hard time remaining viable through its lifespan.”
Against those risks, Sambasivam said, public subsidies for new LNG infrastructure “would mean further entrenching our economy in fossil fuels and placing stranded asset risk on the public books.” Hodgson’s office did not answer questions about this long-standing analysis.
Opening the door to LNG infrastructure
On Tuesday, Carney was focused on LNG as an opportunity, Clean Energy Wire writes. “The number one focus of this government is to build [energy] infrastructure, and particularly infrastructure that helps us deepen our partnership with our European partners and particularly Germany,” the PM said, during a news conference Tuesday with German Chancellor Friedrich Merz.
“There is a huge range of immediate opportunities with respect to critical metals and minerals, and there are medium-term opportunities with respect to all forms of energy, including LNG and hydrogen.”
Asked whether the federal government would help finance any of the projects, Hodgson told media in Berlin there are tools at Ottawa’s disposal, such as the Canada Infrastructure Bank or the $15-billion Canada Growth Fund. Hodgson’s predecessor Jonathan Wilkinson had ruled out public support for new East Coast LNG infrastructure in 2022.
“I want to make it abundantly clear that the Prime Minister and I are not speaking in the abstract,” Hodgson added Wednesday, in a speech at the Canadian Embassy in Berlin. “This is about delivering real projects that strengthen German industry, create Canadian jobs, and build transatlantic security. This is about selling Canadian resources to our allies, sooner rather than later.”
He placed the recently-adopted Build Canada Act, previously Bill C-5, at the centre of the government’s effort to “make Canada investable at scale, to support our own industries and our closest allies,” by getting projects approved in time, keeping rules and regulations stable after investment decisions are made, and scaling supply chains “fast enough to meet the market window” for exports.
“Unlike the previous Canadian government, which closed the door to LNG exports, Prime Minister Carney’s government has opened it,” Hodgson declared. “If the demand is here, and the infrastructure is built, Canada will deliver.”
On Tuesday, Carney said his government was “in the process of unleashing half a trillion dollars of investment” in energy, port and intelligence infrastructure. The first round of investments will be formally announced in the next two weeks, the PM added. Early deals could include “reinforcing the port of Montreal, Contrecoeur, [and] a new port, effectively, in Churchill, Manitoba, which would open up enormous LNG plus other opportunities, and other East Coast ports for those critical minerals.”
Mixed signals on LNG markets
But this isn’t the first time Canada has considered its options for supplying Europe with LNG. The last round of proposals fell flat, with Spanish oil and gas giant Repsol SA and Calgary-based Pieridae Energy Ltd. abandoning their plans for East Coast export terminals.
Those projects fell apart largely on the need for massive, new port and pipeline infrastructure to transport the fuel to the coast, liquefy it, and ship it to Europe, Clean Energy Wire writes. But as recently as September 2024, the former government of then-chancellor Olaf Scholz was also throwing cold water on the idea that Germany had much need for Canadian gas.
“All studies show that the market is going to shrink,” Jennifer Morgan, the country’s first-ever state secretary and special envoy for international climate action, said at the time, citing projections that showed Europe’s leading economy cutting its gas imports 30% by 2030 and 96% by 2050.
“Germany will be driving forward on renewables, and gas demand will decline,” said Morgan, a former executive director of Greenpeace International and global climate director with the World Resources Institute.
Since then, Canada has opened an LNG export terminal on its west coast to deliver gas to Asia, and Hodgson is expressing strong interest in new LNG deals.
“I know there are buyers,” he told CTV television host Vassy Kapelos last week. “What I can tell you from the conversations that the prime minister has been having, the minister of foreign affairs has been having, the minister of international trade has been having, the conversations I’ve been having, our allies are very interested in Canadian LNG.”
This week, Hodgson and German Economy Minister Katherina Reiche facilitated talks between businesses from both sides of the Atlantic, Clean Energy Wire says.
“We had very good discussions on Germany’s interest in Canadian liquefied natural gas and on continuing the development of ammonia and hydrogen supplies from Canada to Europe,” Hodgson told a media huddle afterwards. “The government is going to use all the tools it has to responsibly develop projects, to do it in a way that’s responsible for Canadian taxpayers and do it in the right environmental way, and in conjunction with First Nations.”
The German Gas and Hydrogen Industry association welcomed Canada’s bid,. “In these times, it is a very important offer, which could help us gain another partner for the diversification of our energy supply,” the group’s chair Timm Kehler told CLEW. “I hope that our stakeholders will also take advantage of this opportunity,” he said, adding that German industry needs affordable gas and long-term contracts are “the right way.”
Long-term trends diverge from short-term demand
But the uncertainty around how much Canadian gas Germany and the EU will need, and for how long, is old news. Europe sought to find new suppliers following the halt of gas supplies from Russia in the aftermath of the war against Ukraine. Russia was the main supplier of oil and gas to Europe, and Germany only received it through pipelines.
The war and the resulting energy crisis pushed the EU into a scramble for energy independence that saw Germany build domestic LNG import terminals to help diversify its supply – even after the independent E3G climate think tank warned the move could double the country’s energy costs and waste €200 billion.
Germany’s first temporary import terminal was inaugurated at the end of 2022, with the United States filling some of the gap through LNG deliveries from its Gulf Coast. Now, countries on both sides of the Atlantic are moving to reduce their reliance on the U.S., with Carney committing to cultivate more “reliable” trading partners to secure Canada’s economy and sovereignty.
In his CTV interview last week, Hodsgon touted Canadian gas as “much cleaner than the American in terms of carbon footprint,” a frequent industry claim that rests on the electrification of Canadian LNG terminals but often leaves out or underestimates emissions of climate-busting methane from gas extraction and transport.
Lower-carbon or not, Europe is also aiming to become climate neutral by 2050 – Germany by 2045 – and will have to largely phase out the fossil fuel by then. Overall demand has long been projected to decline over the coming years and especially decades, increasing the risk that new gas pipelines and terminals will ultimately become stranded assets.
Hodgson said German businesses have still signalled interest in new export/import deals. “There seems to be a desire on the part of Germany to buy our natural gas and we have a desire from proponents, a province, and First Nations to develop that for German customers,” he said.
“What we all realize post-Ukraine, post what is happening with AI, is that natural gas is going to be a transition fuel that is in greater demand in Germany and for a longer period of time,” he told media, creating an opportunity for Canada to be a “great partner” to Germany.
But beyond the projected decline in European demand, multiple analyses show the wider world heading for a glut of supply, producing risks for new gas projects in Canada. Over the five- to seven-year frame that Hodgson is suggesting, analysts say the gas glut brought on by a recent wave of new LNG construction could be in full swing. Modelling by the International Energy Agency shows a dawning “Age of Electricity”, with global demand for all fossil fuels peaking this decade before going into permanent decline.
Cooperation on critical minerals, but little relief from tariffs
Canada and Germany also signed a joint declaration of intent on cooperation on critical minerals. The two countries aim to push for the diversification of supplies of critical minerals, which are increasingly important in products needed for defence, the energy transition, and clean technologies. A major objective would be to promote and strengthen cooperation and trade in the critical minerals value chain, with a focus on midstream technologies, including mineral processing, refining, and recycling, said the declaration.
“On rare earths, Canada is in a position to develop the only mine-to-magnets, complete supply chain outside of China in the world,” Hodgson said.
“It gives us a really great card with our allies, our like-minded allies, and it takes a card out of the hands of people who might have a different perspective in the world,” he added.
Stable and reliable supply chains are of central importance to companies in both countries, said German economy minister Reiche. “The supply of critical raw materials in particular is key to the competitiveness of our economy.”
Jamie Kneen, national program co-lead at Mining Watch Canada, said the joint declaration “would be laudable if it were diversifying Canadian trade and diminishing dependence on U.S. markets. But it’s not. The only specific agreements are for early-stage projects, several years from production if they even get there, so any tariff relief is pretty distant.”
Even as a way of building longer-term trade relationships and value chains, he told The Mix in an email, “it’d make more sense to link to less complex and/or problematic projects.”
There’s also “a very real risk that projects that should never see the light of day are pushed forward and even into production without Indigenous consent and without adequate scrutiny of their impacts, leading to short- and longer-term conflict and potentially grievous environmental and social consequences,” he added.
While the Canadian delegation was in Berlin, companies from the two countries signed three memoranda of understanding to cooperate on raw material extraction and processing, Clean Energy Wire reports—between Montreal-based Torngat Metals and Vaccuumschmelze, Toronto-based Rock Tech Lithium and Enetrag, and Toronto-based Troilus Gold and Aurubis.
The original version of this story first appeared on Clean Energy Wire as part of a joint reporting project byThe Energy Mix. Republished by permission.
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