The Americans are selling Canadian natural gas to Europe at a profit

Amid growing criticisms that Canada dropped the ball on exporting its natural gas to Europe, the Polish ambassador to Canada said in a recent interview that plenty of Canadian gas is indeed finding its way to Europe — but via the United States at a markup.

“Remember; some of the LNG that’s coming from the United States to Europe, to Poland, is also Canadian … but it’s being sold for a much higher price,” Witold Dzielski told CBC after being asked whether there was Polish demand for Canadian LNG.

Dzielski’s comment was swiftly highlighted by Conservative Leader Pierre Poilievre, who noted Dzielski’s wide smile during the statement, which Poilievre attributed to the ambassador “(stopping) himself from laughing at us.”

The statement also comes at the same time that Canada’s energy minister, Tim Hodgson, publicly criticized former prime minister Justin Trudeau for failing to prioritize the Canadian LNG sector.

“Unlike the previous Canadian government, which closed the door to LNG exports, Prime Minister (Mark) Carney’s government has opened it,” Tim Hodgson said this week in prepared remarks delivered at the Canadian embassy in Berlin, Germany.

Jamie Heard, an executive with the Canadian natural gas producer Tourmaline, told National Post that “nearly all” of their LNG exports to the U.S. have ultimately wound up in Europe.

He said this has been good for them, as it does give Tourmaline a means to get Canadian gas across the Atlantic. But it’s also been good for the U.S.

Cheniere Energy, the U.S. exporter handling Tourmaline’s product, “is making a fair return on our business,” Heard wrote in an email, adding that this is translating into higher tax revenue for the U.S. government.

“The opportunity can grow with the addition of Canadian infrastructure,” he wrote.

Canada currently has only one operational LNG export facility, but it’s on the West Coast and it opened just two months ago.

In late June, LNG Canada’s $18-billion export terminal in Kitimat, B.C., loaded its first tanker, the GasLog Glasgow.

This is in sharp contrast to the world’s other major LNG producers. Australia has 10 LNG export terminals, while the United States has eight — all of them opened since 2016.

Canada remains one of the world’s largest LNG exporters, but aside from the new Kitimat terminal, 99.9 per cent of that is sent into the United States via pipeline.

Since at least 2022, it’s been apparent that a lot of this Canadian gas was being shipped across the Atlantic in order to cover Russian gas supplies blocked by European sanctions.

“It appears that every spare cubic foot of Canadian natural gas that’s not being used for domestic consumption is being exported to the United States for LNG export,” read a Deloitte oil and gas outlook from that year.

“Are LNG exports to Europe being sold at a higher price than Canadian gas is sold to U.S. producers? Absolutely,” said Andrew Leach, an energy economist at the University of Alberta.

But Leach said the current disparity is not necessarily a sign that Canada willingly surrendered LNG profits to American middlemen.

Canadian gas exports into the U.S. are able to plug into a pipeline network that runs along relatively flat and industrialized terrain towards long-established petrochemical ports on the U.S. gulf coast.

A Canadian equivalent, by contrast, would involve thousands of kilometres of new pipeline running through mountainous terrain and servicing brand new export facilities on the Canadian Atlantic Coast.

Notably, even the U.S. Atlantic Coast hasn’t been able to get much of a foothold in the LNG sector with the Gulf Coast able to dominate the trade.

Of 13 U.S. LNG export terminals either operational or under construction, just two are located outside the Gulf Coast. The closest one to Canada is the Cove Point LNG Terminal located just outside Washington, D.C.

“It’s the Canadians that are capitalizing on the fact that the U.S. has built this infrastructure,” said Leach.

Nevertheless, the sheer fact that ships loaded with Canadian LNG are regularly finding their way into Europe has proved a compelling argument for ensuring that at least some of it can start being loaded at Canadian ports.

“We can grow an East Coast LNG business,” Heard told the Post. “It won’t start out cost competitive, but with additional scale, pipeline investment, we can narrow the cost gap over time.”