Foreign Affairs Committee on Oct. 17th, 2022

[The Chair, Liberal, Ali Ehsassi]

Welcome to meeting number 31 of the Standing Committee on Foreign Affairs and International Development.

Today's meeting is taking place in a hybrid format, pursuant to the House order of June 23, 2022. Members are attending in person in the room and remotely using the Zoom application.

I would like to make a few comments for the benefit of all witnesses and members.

Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mike, and please mute yourself when you are not speaking.

For interpretation for those on Zoom, you have the choice, at the bottom of your screen, of either floor, English or French audio. Those in the room can use the earpiece and select the desired channel.

As a reminder, all comments should be addressed through the chair.

Pursuant to Standing Order 108(2) and the motions adopted by the committee on Friday, July 15, 2022, and Wednesday, September 21, 2022, the committee has resumed its study of the export of Russian Gazprom turbines.

It is now my pleasure to welcome the witness from Siemens Energy Canada Limited. We have with us Mr. Wohlschlegel, the managing director.

Welcome, sir. You have five minutes for your opening remarks, and then we will go to questions from the members.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Mr. Chair, on a very short point of order, I'd like to express my disappointment with the late cancellation of the Canadian Gas Association to this meeting. My understanding is that they gave notification to you, Mr. Chair, of cancelling their appearance late Friday afternoon. I'm very disappointed that they did so at such a late date after we had spent a lot of time organizing this meeting. I'm hoping, Mr. Chair, that you can convey that disappointment, at least for me and perhaps other members of this committee. I think it's a sign of disrespect for a parliamentary committee and for the 11 members on this committee who were waiting to hear their testimony.

Thank you, Mr. Chair.

[The Chair, Liberal, Ali Ehsassi]

I think all members share in that disappointment. Is that correct?

[Some hon. members]

Agreed.

[The Chair, Liberal, Ali Ehsassi]

Absolutely. We will make it known, Mr. Chong. Thank you.

Mr. Wohlschlegel, the floor is yours. You have five minutes. Approximately a minute before your five minutes are up, I will provide you with a signal so we can ensure that you don't go over time. After your five minutes, we will then open it up to questions from the members.

Please proceed. The floor is yours.

[Arne Wohlschlegel, Managing Director, Siemens Energy Canada Limited]

Thank you, Chair, and thank you to the committee for the opportunity to share the perspective of Siemens Energy Canada on this study.

Our parent company, Siemens Energy, is a global leader in energy technology, with locations in over 90 countries. Here in Canada, we service the entire energy value chain, from power generation and transmission to fully integrated systems for industry. The Canadian portfolio includes conventional and renewable energy technology, such as gas and steam turbines, power generators, transformers and wind power technology. We are also thinking forward to Canada's net-zero commitments, working with our clients on decarbonizing parts of the economy. Our company has a 100-year legacy in Canada and is dedicated to keeping the lights on across the country. We are also active in the emerging Canadian LNG sector.

One of the service lines operated by Siemens Energy Canada is maintenance of specialized critical infrastructure for pipelines, known as aeroderivative gas turbines, or AGTs. Turbine owners typically have long-term programs to maintain the safe operation of the unit. Companies operating pipelines around the world ship these turbines to the state-of-the-art Siemens Energy Canada AGT facility in Montreal. It's the only service shop in the world that works on these specialized parts.

In February 2022, Siemens Energy was in the middle of performing maintenance activities on a turbine owned by Gazprom. When Russia began its illegal war in Ukraine, the Government of Canada announced sanctions in response to these actions, including against Gazprom. Siemens Energy Canada immediately ceased all work on the turbine, froze the movement of the turbine, stored it at our facility, and informed the RCMP, as required.

Siemens Energy opposes Russia's unfounded military aggression in Ukraine. We support the position of the coalition of governments working to end Russia's war, including through sanctions. We abide by all sanctions imposed against Russia and have refused all new business in the Russian Federation.

In May the Government of Germany notified Siemens Energy headquarters that Gazprom was insisting that the continued sanctioning of the return of the AGT would prevent the continued operation of the pipeline this fall. At that time, the Government of Germany advised that non-functionality of the pipeline threatened a failure of energy security in Europe. It was this extraordinary humanitarian circumstance that led us to alert Global Affairs Canada, and this circumstance alone that led us to the filing of an application regarding potential return of the turbine.

We recognized the seriousness of the situation. These were unprecedented global events, but in the end, we are engineers, not diplomats. We are not in a position to balance the geopolitical situation between the Canadian sanctions regime and the energy security of Europe. Siemens Energy Canada is a good corporate citizen. We recognized that we were not the appropriate party to balance the extraordinary geopolitical issues at stake. We were in effect the service shop holding the impounded parts.

Since the practical question was whether Siemens Energy Canada should ship out the AGT, we filed an application to the government pursuant to the sanctions rules, so that the officials could take that decision.

On July 9, 2022, Global Affairs issued a permit pursuant to the Special Economic Measures (Russia) Permit Authorization Order made under the Special Economic Measures Act. Shortly after the permit was issued, we began the authorized process for the return of the AGT to Germany. The turbine was returned to Germany in July 2022, and it remains there today.

Our role throughout was to provide information to the Government of Canada. We were not involved in the Government of Canada's discussion with the Government of Germany, the assessment of Russian strategic intentions, or any decision-making process. These were not our decisions to make. Strict adherence to our regulatory obligations is a cornerstone of our company. At all times, we operated in accordance with the sanctions regime.

Thank you for this opportunity. Siemens Energy Canada remains eager to work with Canadian industry on energy projects from coast to coast to coast.

I'm available for your questions. Thank you.

[The Chair, Liberal, Ali Ehsassi]

Thank you very much, Mr. Wohlschlegel.

We will now open it to the members for questions.

I understand that, Mr. Chong, you are first.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Mr. Wohlschlegel, for coming to our meeting today.

The turbine that had been under maintenance in Montreal was delivered to Germany in July of this past summer, but Gazprom has refused to take possession of it. Furthermore, last month, Nord Stream 1 was shut down.

My question is, considering these events, does your company take any position about whether the permit to export these turbines should be maintained?

[Arne Wohlschlegel]

Feel free to address me by my first name, Arne. I know that my last name is a little complicated.

To answer your question, I do not think this was our decision to make. We informed the government about this new political situation at stake that we couldn't balance, and we really filed the permit only to get guidance from Global Affairs.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

You filed the permit at the direction of the German government? Is that what you're telling us? Or you filed the permit...?

[Arne Wohlschlegel]

We filed the permit at the direction of the German....

Let me go back.

When sanctions were put in place in March, we immediately stopped all the work on the turbine. It was only months later, about May, when the German government instructed Siemens Energy headquarters and the Canadian government that an energy crisis was unfolding—that was public news—that we started filing for a permit to export the AGT to the customer.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Is it your view that the permit is still required, seeing as Nord Stream 1 is shut down and seeing as Gazprom has refused to take possession of the turbine?

[Arne Wohlschlegel]

This is not for me to decide.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay.

With what entity does Siemens Canada have a contractual relationship for the turbine? Which entity of Gazprom is it? Can you tell us that?

[Arne Wohlschlegel]

The contract with the customer is through our affiliate in the U.K., Siemens Energy U.K. We are in the situation that we subsupply to Siemens in the U.K., to the—

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay.

Who is Siemens U.K. under contract with?

[Arne Wohlschlegel]

It's with a subsidiary of Gazprom.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Okay. Thank you.

Are there any penalties in the maintenance contract, either between Gazprom and the Siemens subsidiary in the U.K. or in the contract with the Canadian subsidiary?

[Arne Wohlschlegel]

I can't comment on the penalties that are laid out in the long-term program maintenance contract.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Some people have suggested that while this was going on last summer, the turbines didn't really need to be maintained and there was enough capacity and enough life left in the existing turbines in the Nord Stream pipeline to continue operations.

What is your company's view of those suggestions?

[Arne Wohlschlegel]

We built these turbines, these energy technology products. I'm not sure if you're familiar with the technicalities of the turbine. It's basically rotating equipment that is similar to an aircraft engine. These turbines have to undergo scheduled maintenance in order to continue operation. We differentiate between scheduled and unscheduled maintenance. Scheduled maintenance can occur, let's say, every 25,000 hours of operation. That means about three to four years if you consider that a pipeline compressor would operate 8,000 hours a year, let's say every hour of the day.

Again, the maintenance can occur only at our Siemens AGT Montreal facility.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Were the turbines on the existing Nord Stream pipeline beyond those hours?

[Arne Wohlschlegel]

They were scheduled to be around those hours, every—

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

This is the last question that I have for you: What's your understanding of the relationship between Gazprom and the Kremlin? In other words, what is the relationship between Gazprom and the Russian government? Obviously, the relationship that Siemens has with the German government isn't the same kind of relationship as Gazprom has with the Russian government, with the Kremlin. What is your company's understanding of that relationship?

[Arne Wohlschlegel]

Well, I don't want to comment on the relationship the government has with Gazprom, but for us, it's a sanctioned party. It means we had to stop all the work we were doing with the asset we had in our shop at the time, and then we actually started filing for the permits so we could get the proper guidance from Global Affairs Canada.