Germany finishes construction of its first LNG import terminal

Germany has finished construction of its first import terminal for liquefied natural gas, a crucial milestone in its efforts to end its energy dependency on Russia.

The completion of the terminal, at Wilhelmshaven on the North Sea, will ease fears that Europe’s largest economy might face gas rationing this winter.

Germany has been striving to build new import infrastructure for gas since Moscow’s full-scale invasion of Ukraine on February 24, which led to a sharp decline in Russian gas supplies to Europe.

Earlier this year, it chartered five floating storage and regasification units (FSRUs), one of which will be installed at Wilhelmshaven and the other at nearby Brunsbüttel by the end of the year. The first LNG tankers are due to dock at the two sites early next year.

German economy minister Robert Habeck pointed out that the Wilhelmshaven terminal had taken just 200 days to build — a major achievement for a country where construction projects can drag on for years.

“Germany can be fast and advance infrastructure projects with great determination when the federal and regional governments, together with the project participants, all pull together,” he said.

Henning Gloystein, a consultant at Eurasia Group, said Wilhelmshaven’s completion marked a “significant” step in Europe’s attempts to “wean itself off Russian gas this winter, something that was deemed impossible at the start of Russia’s invasion of Ukraine”.

Earlier this year, Germany was haunted by fears of a looming winter gas shortage, especially after Russia drastically reduced flows through the Nord Stream 1 pipeline across the Baltic Sea.

Those fears have eased in recent weeks. Germany’s gas storage is 100 percent full, partly because unusually mild temperatures this month and last meant private households consumed less gas.

Industrial use of gas also dropped 27 percent in October, while German gas imports from the Netherlands, Belgium and Norway have increased slightly over the past few weeks and France started to deliver gas to Germany in mid-October.

That has had a big impact on gas prices in Europe, which are approximately one-third the level seen in August. In that month a surge above €300 per megawatt hour — the equivalent of almost $500 a barrel in oil terms — spread fear through European capitals.

“All in all, the outlook for gas supply has brightened significantly over the past few weeks,” Deutsche Bank said in a research note, adding that there was an “increased likelihood” of Germany getting through this winter without rationing.

Prices, however, remain almost three times the level of the long-term average and have started to climb again this week, with Berlin forecast to see temperatures drop below freezing by Friday.

The German government has had to spend tens of billions of euros to backstop gas purchases from alternative sources and to nationalize Uniper, the country’s biggest buyer of Russian gas. Uniper will operate the port infrastructure in Wilhelmshaven and has already started work on a connection between the FSRU and shore-based installations.

The economy ministry said three further FSRUs would be deployed in the coming months — one in Stade on the Elbe river near Hamburg and two in Lubmin on the Baltic Sea — and an additional one in Wilhelmshaven in the fourth quarter of 2023. That will give Germany LNG import capacity of at least 29.5bn cubic meters a year, roughly a third of its total gas demand of 90.5 bcm a year in 2021.

Deutsche cautioned that the availability of LNG on world markets and global demand for the fuel “remain important factors of uncertainty”.

Germany is looking for long-term alternatives to natural gas such as hydrogen, which is seen as a potentially low-carbon alternative for energy-intensive industries. Berlin announced on the sidelines of the COP27 climate summit on Tuesday that it would provide €550mn to kick-start a “green hydrogen sector” — fuel made from renewable energy — via two new funds.

One would focus on providing grant money for hydrogen projects in developing and emerging economies, while the other would be centered on accelerating the global hydrogen market, including infrastructure development. The money would be split evenly between the two funds, which are to be set up this year.

Leave a Comment