Germany opens first LNG terminal to turn the page on Russian gas

When boats replace pipelines: Germany inaugurated its first liquefied natural gas terminal on Saturday, aiming to avoid shortages and replace Russian supplies disrupted by the war in Ukraine. But short-term supply remains uncertain.

“It’s a good day for our country,” Chancellor Olaf Scholz said in a fluorescent yellow jacket on board a boat, a few meters from the Wilhelmshaven terminal, by the sea.

The FSRU (floating storage and gasification unit) ship Hoegh Esperanza, which has been burning about 300 meters since Thursday, sounded its siren as it approached the boat carrying the head of state, accompanied by several ministers, local councilors and journalists. in cold and foggy weather.

The 300-meter blue and red piped vessel is loaded with enough Nigerian gas for the annual consumption of “50,000 homes” and will begin deliveries on December 22.

Five floating terminals will open in the coming months after work is done at no cost thanks to billions of euros released by Berlin.

“We are making ourselves independent of Russian pipelines,” Scholz said. These facilities will supply one-third of the country’s gas needs and eliminate the catastrophic scenarios of mass shortages mentioned just a few months ago.

– Contracts –

Floating LNG (liquefied natural gas) terminals allow natural gas to be imported in liquid form by sea. They consist of a mooring platform and an FSRU vessel where LNG is delivered, stored and regasified before being sent to the grid.

Unlike other European countries, Germany did not have a terminal on its own soil, preferring the cheap resource from Russian pipelines, on which 55% of its imports depend.

Everything changed with the war in Ukraine and the suspension of supplies from Russia’s Gazprom. Liquefied gas imports to Germany through Belgian, Dutch and French ports have increased.

To avoid prohibitive transport costs, the country has decided to start several terminal construction sites in its territory.

However, Germany has yet to sign any significant gas contracts to immediately fill these terminals. “The import capacity will be there. But what worries me are the supplies,” AFP Johan Lilliestam, a researcher at the University of Potsdam, told AFP.

An agreement was signed between the American company ConocoPhillips and Qatar for the Wilhelmshaven terminal. But the gas supply will not start until 2026.

German energy companies – led by RWE and Uniper – have been stalling talks between major world suppliers such as Qatar, the US or Canada.

Producers are looking for long contracts to make their investments profitable, while Berlin is looking for short-term contracts to phase out fossil fuels.

Environmental organizations are already concerned that these LNG projects could threaten the government’s climate goals. Dozens of environmental activists demonstrated in Wilhelmshaven on Saturday morning “with signs asking for an end to the gas,” AFP reported.

– Cuts –

Holger Kreetz, chief operating officer of Uniper, which operates the Wilhelmshaven terminal, admitted on Saturday that “if we want to supply liquefied natural gas to Germany for a long time, we will have to make contracts for a long time.” AFP.

Without a substantial deal, Germany is indeed exposed to the volatility of short-term spot markets to become self-sustaining.

Prices have certainly come down since the summer. But the market may tighten from 2023 due to the recovery of demand in China, which is gradually abandoning the “zero Covid” policy.

The current winter in Germany, especially the cold one, may empty the tanks faster than expected.

“We cannot rule out cuts for next winter,” said Andreas Schroeder, an expert at the ICIS Institute in London.

Therefore, the German government urges the population to continue their efforts to save the resource.

“We are far from work,” German Economy Minister Robert Habeck said in Wilhelmshaven on Saturday. Berlin aims to save 20% on gas this winter, compared to 13% currently.