Why Supplying Europe With LNG Has a Best-Before Date

Canada’s proposed associate membership with the European Union is a first-of-its-kind political and economic partnership announced by Prime Minister Mark Carney and EU leaders during the October 2026 Canada-EU Summit in Montreal.The arrangement creates a multi-layered tie that goes well beyond a standard free-trade agreement (like CETA), while stopping short of full EU membership.The push is driven largely by a need to reduce economic and strategic reliance on the United States amid ongoing trade tensions, tariff disputes, and political rhetoric by the US President.Canada has been actively courting the EU for more trade afterUS President Trump clashed with the trading bloc over several issues. For example, Trump criticized the EU for trade deficits and restrictions on US exports such as farm products and cars, threatening 25% tariffs on European goods and auto imports while accusing the bloc of being designed to disadvantage the US economy.He vowed to launch a trade investigation and slap fresh tariffs on the EU after European regulators fined major American technology companies like Google, Apple, Meta and Amazon, stating the US is not a "piggybank" for Europe.And he threatened tariffs on European countries (including the UK, Denmark and others) over disputes surrounding the potential acquisition of Greenland, drawing strong pushback from European leaders who labeled the move as blackmail.After the European Commission invited Canada to become the bloc's first associate member, Trump calling the idea “laughable” and a potentially hostile move that could result in more US tariffs on Europe or even a halt to trade.But Prime Minister Carney wasn’t laughing when he agreed during the EU-Canada summit in Montreal to carry out a joint long-term feasibility study to assess market conditions, infrastructure needs, and potential long-term supplies of Canadian LNG to the European market. Earlier this year, Canada secured its first-ever European LNG supply deal when British Columbia's Ksi Lisims LNG project signed an agreement with Germany's SEFE (Securing Energy for Europe). Under this 20-year contract, SEFE will purchase 1 million tonnes per annum of Canadian LNG, with deliveries expected to begin in the early 2030s.Canadian LNG exports seem like an ideal economic tool to help forge a new trans-Atlantic alliance, given that Canada is rich in energy resources and the EU is not. For decades the bloc relied on Russian gas to keep the lights on, homes warm and industries humming. The Kremlin was all too happy to have a captive market in Europe.That all changed when Russia invaded Ukraine in February 2022. After the Nord Stream pipelines built across the Baltic Sea to deliver Russian natural gas to Europe were blown up, gas prices in Germany and the rest of Europe soared.The EU pledged a complete phase-out of Russian pipeline and LNG imports, prompting the US to step in as an alternative supplier, having rapidly expanded its domestic liquefaction and export infrastructure.In 2022 and subsequent years, high natural gas prices at European trading hubs made shipping LNG to Europe far more lucrative for US suppliers than sending it to other markets.In August 2025 the EU committed to a multi-year target of roughly $750 billion in US energy purchases — including liquefied natural gas, crude oil and refined products.The broader framework agreement averted higher 30% punitive tariffs by setting a 15% baseline tariff on many European exports to the US.Back to the Canada-EU LNG deal, the idea, in the words of Globe and Mail columnist Eric Reguly, seems to have a certain geo-economic elegance to it. It would spur the development of Canadian LNG, which has been out-classed entirely by the immense LNG projects in the United States, Norway, Australia, Qatar and Russia; and it would protect the EU by diversifying its energy supply. The EU wants to downgrade its outsized reliance on American LNG, which the Brussels mandarins know could vanish if Donald Trump wakes up in a bad mood.But the idea also clashes with the EU’s energy reality. Reguly continues:The EU’s gas demands are falling fast. If the trend remains intact, its appetite for imported LNG will fall with it. LNG projects – financing and building the pipelines, the gas liquefaction sites, the export terminals, the insulated “Thermos” ships – can take a decade or longer. By then, the EU’s gas consumption could be half or less of what it is now. “What is clear is that the EU is reducing its gas consumption drastically,” says Adrian Hiel, director of the Electrification Alliance, a Brussels lobby group whose members generate and sell electricity. “The long-term trend is clear and by the middle of the next decade, Europe should be out of the LNG game.”Think about what this means. At the end of May, the Canadian government brokered a deal between the Ksi Lisims LNG facility planned for north of Prince Rupert, on the British Columbia coast, and German company SEFE, which is agreeing to buy 1 million tonnes of LNG per year for up to 20 years.Another project to ship Canadian liquefied natural gas through the Port of Churchill to Europe is currently in the feasibility and early planning/memorandum stage.Manitoba Premier Wab Kinew has noted that building out the necessary expansion — including an offshore LNG loading terminal and related infrastructure — would require significant dredging and carry an estimated price tag of $70-$80 billion. The expensive project would rely on icebreakers to escort the LNG cargoes out of Hudson’s Bay, which is covered by ice about half of the year.Beyond Canada and the United States, several countries are actively pursuing or expanding natural gas and liquefied natural gas exports to Europe as the continent diversifies its energy supplies. They include Norway, Azerbaijan, Algeria and Qatar.Reguly points out that the EU’s gas reversal is an economic, political and environmental necessity. After the United States and Israel attacked Iran, Iran retaliated by closing the Strait of Hormuz, through which 20% of the world’s LNG and crude oil passes. Last week, European gas prices soared past 100 euros per megawatt hour for the first time in four years. Benchmark prices were up about 40% in October.Reuters reported that European gas prices are entering winter at levels far above recent years.As the war continues, gas shortages are keeping prices high, which is leading the EU to pursue renewable energy with gusto.In the second quarter of 2026, just over half (54.1%) of the electricity generated in the European Union came from renewable energy sources, according to data from Eurostat.“Going green” makes both environmental and economic sense. The EU has a binding target to cut greenhouse gases by 55% by 2030 over 1990 levels. Even coming close to reaching it would mean substantial reductions in the burning of fossil fuels.A European think tank in Brussels estimates that EU gas consumption in 2025 was down 17% over 2020. “Gas,” writes Reguly, “is too costly for industrial and consumer comfort and the EU wants to break its reliance on the U.S., which supplies close to 60 per cent of its LNG.”The Canadian government led by Prime Minister Carney, a former central banker who wants to turn Canada into an “energy superpower” through oil pipelines and LNG terminals, may see itself as the more reliable source of LNG to Europe than the United States — especially with a leader as unpredictable as Donald Trump.The question is whether it makes sense to plan major energy infrastructure projects for an export market that could well be substantially diminished by the time such projects come online.By Andrew Topf for Oilprice.comMore Top Reads From Oilprice.comADNOC Gas to Supply LNG to TotalEnergies Under Five-Year DealIndian Refiner BPCL Buys U.S. WTI Crude Oil CargoDubai Benchmark Slips Into Contango for the First Time Since July