Marwa Rashad & Christoph Steitz

LONDON/FRANKFURT – Even if Germany is able to meet its goal of building two liquefied LNG terminals within two years, Europe’s most important economy will still be far behind Russia in the race for replacing Russian gas.

Although the terminals might be able to regasify sufficient LNG to supply Germany with about one-third of its current Russian supply, Berlin must also secure LNG supply from a tight LNG market.

Robert Habeck, Economy Minister, stated last month that the terminals must be constructed at Tesla (NASDAQ) speed. This refers to the two-year construction time of the first electric car pioneer’s gigafactory in Berlin.

Germany has two LNG terminals projects to help this process: one at Wilhelmshaven in North Sea and one at Brunsbuettel, near Hamburg.

    Yet the challenges are plain, including Germany’s bureaucratic red tape and strict environmental rules, prompting doubts about the timeline among economists, advisers and even policymakers.

Greg Owen (Vice President, Business Development), energy consultancy GLJ said that it would be hard to achieve project development timelines.

Owen explained that these projects require massive streamlining and acceptance of regulations and the social acceptance. Due to legislative uncertainty, investors may be looking for incentives and guarantees.

After a final investment decision (FID), it takes about two years to construct a regasification station. Owen added that adding an LNG export terminal capable of loading, offloading transfer, liquefaction and processing takes around five.

PROJECT FIDs

First, the FIDs for Brunsbuettel’s planned terminal must be obtained. This is supported by RWE, state lender KfW and top Dutch utility Gasunie.

The spokesperson for German LNG Terminal declined to give a date when the FID will be issued.

The plans for Stade’s third LNG terminal are underway, although they do not have government support.

Deutsche Bank Eric Heymann (ETR) Senior economist said the construction of two terminals would require at least three more years. Additionally, Germany’s efforts to diversify away form Russian gas will “face many limits”.

A partner in the Merkel Energy consulting was Christoph Merkel. He noted that Poland had taken almost a decade for a plan to get rid of Russian gas by 2023.

The company had to double its capacity in the LNG terminal, construct a pipeline for gas transfer from Norway, and establish gas connections with Slovakia, Lithuania, and Lithuania to do this.

Germany’s temporary move to encourage smaller LNG imports includes procuring floating storage and regasification unit (FSRU) use. The country has allocated around 2.94 Billion Euros ($3.17 B).

Uniper and Utilities RWE secured three FSRUs. Discussions are ongoing over a fourth.

“TUG OF WAR”

Germany is now without an LNG terminal. It’s a sign that plans were not realized for years because of a lack in political and economic support. Russian gas was cheaper and much more easily available.

However, in Europe there are over two dozen terminals. These buyers can often get supply via long-term agreements, much like their Asian peers.

Victor Tenev from ROITI Ltd, a LNG business consultant said that it is currently a tug-of war. “It is an ongoing tug-ofwar, everybody is pulling the string to his side. Europe and Asia are both on the same page, but Europe this time isn’t very resilient.”

“(Germany), didn’t look beyond Russian gas. They would already have at least 15 billion cubic meters of LNG if they had.

Many market participants believe that Berlin should sign long-term, 15-20 year contracts with large producers in order to be able attract sufficient volumes.

Germany is seeking to make 1.5 billion euro in short-term LNG supplies. It also has talks with Qatar, which is the biggest LNG producer.

Habeck’s trip to Qatar in recent weeks showed how difficult it can be to obtain additional volumes, as there was no agreement after the initial announcement that one had been made.

There is a good chance that additional volumes will be taken by Asian buyers who are already Qatar’s largest clients. China imported about 110 billion cubic metres of LNG (bcm) in 2021, which absorbed 25 percent of the new market capacity.

Germany uses around 100 billion cubic meters of natural gas per year. Around 55% comes from Russia, while smaller quantities are piped from the Netherlands and Norway.

Frank Mastiaux is the CEO of EnBW Germany, a German utility. He estimates Europe’s terminals for LNG could supply 2,000 TWh, or about 40% of Europe’s gas needs. Germany has 1,000 TWh.

Capra Energy’s managing director Tamir Druz said that “LNG isn’t the only answer” and would need to be replaced by about 10 LNG production trains.

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