Ukraine war puts plans for German LNG terminals back on the table

The war against Ukraine has put efforts to diversify Germany’s gas supply away from Russian deliveries at the top of the government agenda. As part of these efforts, chancellor Olaf Scholz announced that Germany will build two domestic liquefied natural gas (LNG) import terminals and the government has said it plans to lease floating terminals. Germany has a well-developed natural gas pipeline grid and is connected to terminals in neighbouring countries, but does not currently have its own port to receive LNG directly. This Q&A looks at the current LNG situation in Germany and Europe, as well as future plans. [UPDATES adds news on four floating terminals, some of which could be in operation as early as winter 2022/2023]

What is LNG?

LNG, or liquefied natural gas, is natural gas that has been super-cooled (−162°C) to a liquid state for easier storage and transportation. Natural gas has 600 times less volume in liquid form than gaseous, and LNG can be transported by ship, truck or rail to places traditional natural gas pipelines cannot reach, or can even be used as a fuel directly. In general, the gas is first liquefied in its country of origin, then transported via ships and re-gasified at the destination, before being fed into existing gas grids and pipelines.

Compared to other fossil fuels, natural gas emits the least amount of carbon dioxide when burned, prompting many countries to see it as a potential “bridge fuel” between dirtier fossil fuels and carbon-free energy sources. However, natural gas is primarily composed of methane, itself a powerful greenhouse gas, and the rate of methane leakage in natural gas production, transport and storage is still hotly debated

The coronavirus pandemic caused a global demand shock in 2020, which impacted gas production. Subsequently, supply could not keep up with rebounding demand during the economic recovery, leading to a gas crisis that hit Europe hardest, with prices reaching record highs.

Global LNG trade expanded by 6 percent in 2021, according to the International Energy Agency (IEA). In 2020, it accounted for about half of the global gas trade (excluding intra-regional pipeline gas trade), according to BP’s Statistical Review of World Energy 2021.

Where does it come from?

Australia and Qatar are the world’s biggest exporters of LNG. The U.S. is also ramping up LNG exports, and could become the world’s largest exporter by 2022. Other major exporters include Malaysia, Nigeria, Indonesia, Algeria, Russia, Trinidad & Tobago, Oman and Papua New Guinea.

Who is buying it?

China was the world’s biggest LNG-importing country in 2021, followed by Japan. Taken together, European countries also import a sizeable share. In 2020, Europe was responsible for a quarter of global inter-regional LNG trade.

Map shows LNG terminals in the EU. Source: European Commission 2022.
LNG terminals in the EU. Source: European Commission 2022.

In 2021, 13 EU countries imported a total of 80 billion cubic metres of LNG, and LNG imports made up 20 percent of total extra-EU gas imports in 2021. The bulk of natural gas is imported via pipeline, mostly from Russia and Norway. Around 10 percent of the EU's gas needs are currently met by domestic production and the share is set to decrease over the coming years.

The biggest LNG importers in the EU were Spain (21.3 bcm), France (18.3 bcm), Italy (9.3 bcm), the Netherlands (8.7 bcm) and Belgium (6.5 bcm).

Graph shows utilisation rate of EU LNG import terminals. Source: European Commission.
Source: European Commission.

While Europe’s LNG terminals have been underutilised on an annual average, Reuters reported that most operated at full capacity in February 2022. Spain has the continent's biggest capacity – which is not yet used to full capacity – but has only limited pipeline connections to the rest of the continent.  

The European Commission says LNG can boost the EU's gas supply diversity and therefore improve energy security. In July 2018, European Commission President Jean-Claude Junker pledged that the bloc would import significant amounts of LNG from the U.S. as a concession to cool a potential trade war. While largely a matter of business rather than politics, exports from the U.S. to Europe have indeed increased every year since then. In 2021 LNG exports to the EU recorded the highest volume, reaching more than 22 billion cubic meters, with an estimated value of 12 billion euros.

In March 2022, the U.S. and the EU said that the U.S. would scale up LNG exports to Europe to 50 bcm per year starting in 2023. However, if the continent aims to replace a sizable chunk of current Russian pipeline gas with LNG from different sources, the import infrastructure is insufficient.

Due to the war in Ukraine, "we’re seeing right now a flurry of new announced projects across EU member states,” Simon Dekeyrel, a climate and energy analyst at the European Policy Centre, told Energy Monitor. “But a big LNG import terminal takes around five years to build and come online” and require "very substantial investments".

Germany’s own LNG import terminal

Germany is one of the world’s biggest gas importers and sources about 95 percent of its consumption from abroad. More than one quarter of Germany’s energy demand was covered by natural gas in 2021, the second most important energy source in the mix after oil. Russia (around 55 percent), Norway and the Netherlands are the most important source countries. Gas is currently imported to Germany only via pipelines.

Germany does not have its own regasification terminals for LNG and imports enter through neighbouring countries’ terminals, especially Belgium and the Netherlands. Germany also receives some LNG via road freight.

For years, it appeared there was no economic case for direct LNG imports to Germany, since the country is so well-connected for receiving gas through pipelines from neighbouring countries and because European LNG import capacities were heavily underutilised. Critics have also argued that LNG imports are more expensive than gas delivered via pipeline.

This had caused the debate about a domestic LNG terminal to largely subside in recent years, and plans were plagued by delays and uncertainty. However, the wish to lessen reliance on Russia in light of President Putin's war against Ukraine, the possibility of Russia stopping deliveries, and high gas prices have revived discussions.

After Russia invaded Ukraine, chancellor Scholz announced Germany will build two domestic import terminals. Economy and climate minister Robert Habeck said this is necessary to “govern energy supply on our own state territory and guarantee sovereignty.” The German government quickly announced it will co-fund with a 50 percent stake the terminal project in Brunsbüttel, but details on state involvement in a second project in Wilhelmshaven remained unclear by early April 2022.

To speed up the permit and construction process, the government said it would introduce an 'LNG Acceleration Act'. It would temporarily allow the licensing authorities, under certain conditions, to temporarily waive some procedural requirements, especially in the area of environmental impact assessment.

In addition to fixed onshore terminals, the German government plans to lease so-called Floating Storage and Regasification Units (FSRU) in the short term, one of which could be installed as early as this winter (2022/2023). In April 2022, the economy ministry said that it was in discussions over the details and that it was examining possible locations. The ports of Wilhelmshaven and Brunsbüttel are already decided, and Stade, Rostock and Hamburg are further options. Due to the fallout of Russia’s war against Ukraine there is international competition for FSRUs, of which there are currently just under 50 worldwide, according to German news service Tagesspiegel Background. The government plans to lease a total of four FSRUs.

The chancellor emphasised that the fixed onshore terminals could eventually be converted to handle climate-friendly gases. “An LNG terminal that receives gas today can also receive green hydrogen tomorrow,” said Scholz. This is in line with plans by the economy ministry. In a document on strengthening crisis preparedness, seen by Clean Energy Wire, the ministry says that any new LNG terminal has to be built “hydrogen-ready” and that it is now necessary to assess how much state support is required to build the terminals.

There are other reasons that could make more autonomy in the gas sector attractive for Germany. Shipping companies will likely need LNG as an alternative to the CO2-intensive fuel they use at the moment and LNG could play a growing role in their efforts to reduce emissions in the freight industry. If Germany’s harbours want to remain internationally competitive, they will need to supply ships with LNG in the future, German business publication Handelsblatt wrote in 2018.

Criticism of plans for German import terminal

There is considerable opposition to a German LNG terminal from environmental organisations. Environmental Action Germany (DUH) called Scholz’s decision “premature” and said such installations create more dependence on fossil energy.

In April, DUH criticised plans for an import terminal in Stade, arguing that it will not help with the current energy crisis and will harm the climate. “Despite all the claims to the contrary by the developer and politicians, the terminal can only be used for the import of fossil natural gas,” said managing director Sascha Müller-Kraenner. This means that it will not contribute to the energy transition, but will cement our dependence on climate-damaging fuels for decades to come.

A recent report by the German Institute for Economic Research (DIW) concluded that Germany does not need its own import terminals. The researchers warned the projects do not “make sense due to the long construction times and the sharp decline in natural gas demand in the medium term,” and warned of stranded assets.

The German LNG terminal projects

There have been three major German LNG terminal projects currently going through the planning process for several years: Scholz in his speech mentioned Brunsbüttel (German LNG Terminal) at the Elbe river near the North Sea, and a competing location in the city of Wilhelmshaven (LNG Terminal Wilhelmshaven GmbH). The third project for a fixed onshore terminal is located in Stade (Hanseatic Energy Hub), near Hamburg.

In Brunsbüttel, in the northernmost state of Schleswig-Holstein, a consortium named German LNG Terminal plans to build a regasification facility with a capacity of 8 billion cubic metres. The project had been delayed, but the government in March 2022 said it will co-fund it with a 50 percent stake. The regional government aims to change regulation to speed up the construction process. It could be operational by 2026 if plans can be sped up. "Schleswig-Holstein will do everything in its power to ensure that the chancellor's clear commitment to the construction of an LNG terminal in Brunsbüttel is taken forward swiftly," state premier Daniel Günther (CDU) has said. The Brunsbüttel project is a joint venture between Gasunie LNG Holding B.V., Oiltanking GmbH and Vopak LNG Holding B.V. It has in the past been a target of environmental protests.

German energy company Uniper had planned a floating LNG terminal in Wilhelmshaven at the North Sea, but re-evaluated this in 2020 “because of market players' reluctance to make binding bookings for import capacities at the planned terminal in the current circumstances.” It officially dropped the plans several months later and said it was instead aiming to build a green hydrogen hub at the site. However, in February 2022, after Scholz’s pledge, business daily Handelsblatt reported that the government has asked Uniper to revive the LNG port plans.

While chancellor Scholz mentioned only Brunsbüttel and Wilhelmshaven in his parliament speech, Stade continues to try and realise a terminal. The project has been “less visible” than the other two, said Johann Killinger during an online briefing in early March 2022 organised by gas industry lobby group Zukunft Gas. U.S. chemicals company Dow announced on 11 April it is taking a minority stake in the Hanseatic Energy Hub (HEH) project in Stade. The HEH consortium plans to build, own, and operate an import terminal for liquified gases on Dow’s industrial park there. The LNG terminal could be operational by 2026, HEH managing director Johann Killinger told Handelsblatt.

In terms of the floating terminals, the ports of Wilhelmshaven, Brunsbüttel, Stade, Rostock and Hamburg have all shown interest in hosting such a vessel. The decisions for Wilhelmshaven and Brunsbüttel as locations had been made, said the government. Lower Saxony's government has said that it plans to begin importing LNG with a floating terminal by the beginning of 2023 at the latest - this concerns Wilhelmshaven. The federal government said this terminal could start operation at the end of 2022 already. As for Brunsbüttel, Schleswig-Holstein's state premier Daniel Günther told Welt that the state also aims to start operation of a floating terminal by early 2023.

Uniper and RWE are supporting the government to lease four such floating import terminals, the government has said. Both companies told Handelsblatt at the end of April they were in final negotiations for the terminals. 

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