The "milestone" purchase agreement announced May 27 for the Ksi Lisims liquefied natural gas (LNG) project in British Columbia is still a good deal more tentative than a federal media release made it sound, according to the German state utility that signed the deal.

"Canada secures first European LNG deal," Ottawa headlined in a media release Wednesday, after Energy and Natural Resources Minister Tim Hodgson travelled to Vancouver to announce the signing. "Today's agreement between Ksi Lisims LNG and SEFE is about much more than energy," Hodgson said. "It is about delivering on our promise to build a stronger, more sovereign economy that generates opportunities and prosperity for Canadians."

Hodgson was accompanied for the announcement by Nisga'a Lisims Government President Eva Clayton, German Deputy Consul General Dirk Jakobi, and B.C. Energy and Climate Minister Adrian Dix, "representing federal, provincial, international, and Indigenous alignment on Canada's role as a reliable energy supplier of choice, with Indigenous leadership at the heart of energy resource development," the federal release said.

But the concurrent announcement from Securing Energy for Europe (SEFE), the buyer in Germany, described negotiations that are still at a more preliminary stage.

"Under the agreement, SEFE will purchase one million tonnes per annum (mtpa) of LNG on a free-on-board basis, with deliveries expected to begin by the early 2030s, for up to 20 years," SEFE stated.

However, "the agreement is contingent on the finalization of a definitive Sales and Purchase Agreement between the two parties. Once concluded, this would be SEFE's first partnership with a Canadian LNG supplier."

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Unlike the federal announcement, the SEFE release headlined the deal as a Heads of Agreement, a contractual term more similar to a memorandum of understanding than a firm, final contract.

"A Heads of Agreement is an agreement in principle on the key commercial terms of a transaction, serving as a basis for negotiating the definitive contract," SEFE Strategy Communication Manager Adrianne Montgobert told The Energy Mix in an email Monday morning.  "We are currently negotiating a Supply and Purchase Agreement and are working to finalize the agreement as soon as possible."

"A 'head of' agreement is an initial, non-binding document that establishes the basic framework for a partnership or transaction," Investopedia explains. "The agreement is the first step toward creating a formal deal, and due to its tentative nature can often be renegotiated or reneged."

But even before analysts/campaigners Richard Brooks and Seth Klein unearthed the SEFE announcement, major limitations in the "milestone" agreement had already come to light.

Ksi Lisims "has not yet attracted the many billions in private investment needed," wrote Simon Fraser University political economist Andy Hira, director of the Clean Energy Research Group, in a Globe and Mail opinion piece. "This deep shortfall, along with numerous other hurdles along the way, raises the likelihood the federal government becomes the investor of last resort, putting Canadians on the hook."

And an eventual firm agreement for a million tonnes of LNG per year for up to 20 years would only cover a small share of the exports Ksi Lisims would need to justify investment in a 40-year plan to export 12 million tonnes per year.

"LNG terminals typically aim for 80 to 90% contracted capacity before proceeding," Mark Kalegha, energy finance analyst at the Institute for Energy Economics and Financial Analysis (IEEFA), told The Energy Mix in an email last week. "This puts the project at about 40%, so still ways off from target, thus a final investment decision is yet to be announced by project sponsors."

The federal government release confirmed that the tentative deal with SEFE was one of the "exploratory discussions" on the agenda when Hodgson and Prime Minister Mark Carney travelled to Berlin on an August, 2025 trade mission. At the time, Hodgson said Canadian LNG exports to the European Union could begin in "as little as five years", despite projections that the continent's gas demand was set to fall.

But a joint reporting project by The Energy Mix and Berlin-based Clean Energy Wire last summer reported little or no change in analysts' projections showing 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 Schrder, head of gas analytics at Independent Commodity Intelligence Services (ICIS) in Dsseldorf, told Clean Energy Wire. So 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."

The Canadian Press, citing Hodgson, has since reported that Ksi Lisims and SEFE would likely enter into a "swap" deal for B.C. gas, in which the buyer "could essentially trade cargoes with another company with a ship headed in the right direction."

But even so, "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 Mix in an email last August. 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 at the time showed another 7% drop through 2030 as Europe electrifies its economy.

While the American/Israeli war in Iran has roiled global energy markets over the short term, the resulting disruption in the Strait of Hormuz has energy-importing countries focused on speeding up their shift from imported fossil fuels to more reliable, clean alternatives. "If you look at the economics, for every million dollars you have to spend on energy, build the asset. Don't burn the commodity," BNEF founder Michael Liebreich told The Mix earlier this year.

CP adds that both Ksi Lisims LNG and the Prince Rupert Gas Transmission (PRGT) pipeline that would feed it have been facing stiff opposition from environmental advocates and legal challenges from some First Nations.

"First Nations are already experiencing the devastating impacts of climate change first hand, and we cannot continue gambling future generations' prosperity, health, and well-being on an industry that places increasing pressure on our lands, waters, salmon, and ecosystems," said Grand Chief Stewart Phillip of the Union of British Columbia Indian Chiefs. 

Jesse Stoeppler, co-executive director of the Skeena Watershed Conservation Coalition, said Canadians deserve "honest conversations" about the risks the project entails.

"A government announcement does not create Indigenous consent, resolve active litigation, or guarantee economic viability," he said.

Source: The Energy Mix