LNG projects await approval from new German government in volatile market

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Germany’s new coalition government may revisit proposals to diversify the country’s natural gas supply and reduce its dependence on Russian imports.

However, the new coalition government that took office in December has not publicly supported any plans. Stakeholders of two of the three LNG projects previously proposed for the country told NGI they expect officials to reconsider importing LNG. Germany has set itself the goal of achieving net zero emissions by 2045.

Yet dependence on Russian gas could increase over the next decade as Norwegian North Sea reserves dwindle and the Dutch Groningen gas field closes in the next two years. A continent-wide supply shortage has kept prices volatile since last year and geopolitical tensions between Russia and Ukraine are creating more energy risks in Europe.

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Germany is the largest gas consumer in Europe, but it does not have regasification facilities to receive LNG. The country imports more than 90% of its gas by pipeline to meet demand. Russia, Norway and the Netherlands are the main suppliers, with about 56% of gas imports in 2020 coming from Russia, 31% from Norway and the remaining 13% imported from the Netherlands, according to the statistical study. of BP plc on global energy.

Germany will continue to need more gas, despite phasing out nuclear and coal. New gas-fired power plants will be needed to ensure security of supply throughout the transition to renewables, Germany’s new chancellor Olaf Scholz said last year.

The German LNG Terminal (GLT), an 8 billion cubic meter (Gm3) per year terminal project in Brunsbüttel near Hamburg, is expecting to gain approval. Initially scheduled to be operational at the end of 2022, the project has suffered several setbacks, including delays in obtaining environmental permits, which could delay the start of several years.

“As you know, there is not just a new political framework” in Germany, GLT spokeswoman Katja Freitag told NGI. “It’s also a volatile market with changing supply conditions… But GLT has been, and is in regular dialogue, with all political levels on these issues.”

GLT’s “environmental approval process” began last summer, she said. Last year, GLT also received an exemption from the German regulator, known as the Federal Network Agency, “from the regulation of tariffs and network access”.

GLT was originally created with Dutch gas network operator NV Nederlandse Gasunie, German Oiltanking GmbH and Dutch storage company Royal Vopak NV. Vopak pulled out of GLT last year, citing financial reasons. The previous German government also supported GLT’s plans, but no federal funding had been committed.

Freitag said the project is complex, expensive and a long-term investment. And with the pandemic, “it has been more difficult to make reliable statements about the exact schedule for the project, so German LNG has refrained from doing so for the time being”.

The second proposal is a 12 bcm/year zero-emission onshore LNG terminal, the Hanseatic Energy Hub (HEH), which would be located in Stade, in northern Germany. HEH would also have approved infrastructures for LNG biomethane and synthetic methane. HEH’s partners include Belgian infrastructure company Fluxys, Swiss private equity firm Partners Group AG and German logistics services Buss Group GmbH & Co. KG.

“HEH completed the non-binding phase of the open season in February 2021 and there has been a great deal of confirmed interest from global players supporting the planned full capacity of the terminal,” said Danielle Stoves, Chief Commercial and Regulatory Officer. from HEH, to NGI.

HEH expected to begin its binding opening season and potentially sanction draft early next year, Stoves said. However, the sponsors must review the binding dates of the open season. “The start date will follow. It was originally scheduled to start in 2026,” Stoves said.

“The binding phase won’t happen until the summer as we wait for market turmoil to subside and for there to be more clarity on some of the policy frameworks,” she said. “Obviously in Germany things are changing with the new coalition government agreements saying that natural gas is indispensable in the transition period.”

A third project, the proposed 10bcm/yr floating terminal near the German port of Wilhelmshaven, was canceled last year after German utility Uniper SE opted for an ammonia import terminal instead.

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