Germany completes building its first LNG import facility

The completion of the project in just 200 days alleviates fears of a gas shortage caused by a reduction in Russian supplies.

Germany has completed building of its first import terminal for liquefied natural gas, a significant step in its ambitions to lessen its energy reliance on Russia.

The completion of the terminal at Wilhelmshaven on the North Sea will alleviate concerns that Europe's greatest economy may be subject to gas restrictions this coming winter.

Since Moscow's full-scale invasion of Ukraine on February 24, which precipitated a steep drop in Russian gas supplies to Europe, Germany has endeavoured to construct a new gas import infrastructure.

It leased five floating storage and regasification units (FSRUs) earlier this year, of which one will be deployed in Wilhelmshaven and the other in nearby Brunsbüttel before the end of the year. The first LNG ships are expected to dock at the two sites in the beginning of 2019.

Robert Habeck, the German minister of the economy, noted that the Wilhelmshaven terminal was constructed in just 200 days, a remarkable feat in a nation where building projects sometimes 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, stated that the completion of Wilhelmshaven marked a "major" step in Europe's efforts to "wean itself off Russian gas this winter, something that was thought to be unachievable at the beginning of Russia's invasion of Ukraine."

Earlier this year, Germany was plagued by fears of an impending winter gas shortage, particularly when Russia substantially curtailed gas deliveries through the Nord Stream 1 pipeline.

These concerns have diminished in recent weeks. Germany's gas storage is 100 percent filled, in part as a result of the abnormally mild temperatures experienced this month and previous.

In October, industrial gas use decreased by 27%, although German gas imports from the Netherlands, Belgium, and Norway have grown marginally over the past few weeks and France has begun delivering gas to Germany.

This has had a significant influence on European gas prices, which are around one-third lower than they were in August. In that month, a price increase exceeding €300 per kilowatt hour—equivalent to approximately $500 per barrel of oil—instilled dread in European cities.

"Overall, the picture for gas supply has improved dramatically over the past few weeks," Deutsche Bank wrote in a research note, adding that there is a "increased possibility" that Germany would avoid rationing this winter.

Prices, however, remain about three times the long-term average and have begun to rise again this week, with temperatures in Berlin expected to fall below freezing by Friday.

The German government had to spend tens of billions of dollars to subsidise gas purchases from alternative sources and nationalise Uniper, the country's largest purchaser of Russian gas. Uniper will operate the port infrastructure at Wilhelmshaven and has already begun connecting the FSRU to shore-based facilities.

The economy ministry announced that three further FSRUs would be deployed in the next months, one in Stade on the Elbe River near Hamburg and two in Lubmin on the Baltic Sea, and one in Wilhelmshaven in the fourth quarter of 2023. This will provide Germany with an LNG import capability of at least 29.5 billion cubic metres per year, roughly one-third of its total gas demand of 90.5 billion cubic metres per year in 2021.

Deutsche noted that the supply of LNG on international markets and the global demand for the fuel "remain significant unknowns."

Hydrogen, which is viewed as a viable low-carbon option for energy-intensive industry, is being considered as a long-term replacement for natural gas in Germany. Berlin said on Tuesday, on the fringes of the COP27 climate meeting, that it will invest €550 million via two new funds to launch a "green hydrogen sector" – fuel created from renewable energy.

One would focus on funding hydrogen projects in underdeveloped and emerging economies, while the other would focus on expediting the global hydrogen market, including infrastructure development. The money would be divided equally between the two funds that will be established this year.

By fLEXI tEAM