Canada Says Hydrogen Better Than LNG for German Needs

(Reuters) — Providing clean hydrogen to Germany and the rest of Europe is a better opportunity for Canada than trying to build LNG terminals as the world moves away from fossil fuels, said Canada's natural resources minister late on Thursday.

Canada and Germany are discussing building LNG terminals on the Canadian Atlantic coast within the next five years ahead of German Chancellor Olaf Scholz's Canadian visit next week. Germany has been trying to wean itself from its dependence on Russian gas since Russia's invasion of Ukraine in February.

But the costs of transporting gas from Alberta in the Canadian west to the East Coast would be high. A new pipeline would be needed, and the global shift away from fossil fuels means the terminal's lifetime would be too short to be profitable unless converted into a hydrogen terminal when gas demand declines.

"We're working through those issues. But what I would say is... on the East Coast, the big opportunity is hydrogen," Natural Resources Minister Jonathan Wilkinson told Reuters.

Wilkinson's comments reflect a shift away from supporting possible new East Coast LNG projects to underscoring the difficulties. On Thursday, a German official said Canadian LNG would be only "a medium-term solution".

Scholz will sign a deal to establish hydrogen supply chains with Canada during a two-day visit next week. His delegation, which will include German corporate executives, will be in Montreal, Toronto and Stephenville, Newfoundland.

The agreement will accelerate a partnership to develop hydrogen exports from the East Coast by as early as 2025, Wilkinson said.

Hydrogen is a zero-carbon fuel best suited for powering large industrial machines, heavy vehicles and for heating.

On Friday, Canadian Prime Minister Justin Trudeau told reporters his talks with Scholz will be "much more about where we need to be on the path to net zero, and the fact that Canada can and will position itself as a significant energy supplier in a net-zero world" rather than on Germany's current energy needs.

In recent months, Canada and Germany had indicated they were discussing options for LNG terminals on the East Coast, and Canada's Environment Minister Steven Guilbeault told Reuters in June that Repsol's REP.MC facility in New Brunswick was the most feasible project.

"The economics of west coast LNG are almost certainly likely to be better than east coast LNG, just given how far the transmission requirements are," Wilkinson said.

Canada has two LNG projects planned on its Pacific coast: Shell-led LNG Canada is due to begin operating in 2025, and Woodfibre LNG, a subsidiary of Pacific Energy Ltd, is expected to be completed in 2027.

Given the global shift towards renewable energy, new Canadian LNG projects should have a plan to move LNG to hydrogen to avoid stranded assets, Wilkinson said.

Critical minerals used in electric-vehicle batteries will also be on the agenda during the German visit amid "an active interest" by firms to secure supply via partnerships or investments, he said.

Volkswagen CEO Herbert Diess will be among those traveling, people familiar with the matter told Reuters. Wilkinson said Mercedes-Benz Group AG, and BMW will also send representatives.

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