Security Concerns Pushing Germany Towards LNG Use?

799

  • Pushed by security concerns and the United States has pushed Germany to weigh LNG as a new fuel source.
  • An L.N.G. terminal would provide an alternative to its dependence on fuel piped from Russia.
  • Germany ready for constructing an L.N.G. terminal in return for the United States toning down its opposition to the new pipeline with Russia.

According to an article published in the New York Times, the country’s first liquefied natural gas terminal could bring imports from shale fields in the United States and elsewhere.

Germany to open its gates for LNG

Wilhelmshaven, a port city of about 80,000 people founded as a naval base, is celebrating its 150th anniversary. Now it is among a handful of candidates for a project, supported by the German government, that would open Europe’s largest economy to liquefied natural gas, known as L.N.G.

The fuel, which is created by chilling natural gas to a liquid form, is increasingly traded globally like oil. It is loaded onto enormous specialized ships, some more than 1,000 feet long. These vessels can go anywhere there is a terminal and deliver a substantial transfusion of fuel into a country’s gas network to keep the lights on and factories humming.

Lessen fuel dependence on LNG

For Germany, Europe’s largest consumer of natural gas, an L.N.G. terminal would provide an alternative to its dependence on fuel piped from Russia, its largest supplier, and give the country away to receive supplies from Qatar or the United States or elsewhere if an alternative were needed.

Uniper, a German energy provider, and other companies have considered building an L.N.G. facility in Wilhelmshaven for decades, holding on to the site since the 1970s. Earlier plans, including an effort to import the fuel from Algeria, have failed to come to fruition. Now, executives at Uniper say, the right moment may have arrived.

The timing in the market is a very good one to develop such a facility, Niels Fenzl, the company’s vice president for transportation and terminals, said in an interview.

Uniper holds opens season

Uniper recently held an open season to gauge the interest of potential suppliers, with encouraging results. Exxon Mobil, the American energy giant, has already reached a preliminary deal to use the terminal.

Germany has long relied on natural gas from Russia, Norway, and other countries. Pipeline gas tends to be cheaper than L.N.G., which has higher processing and transportation costs.

In 2018, more than half of Germany’s gas imports came from Russia, according to the BP Statistical Review of World Energy. But although the German establishment appears to be comfortable with Russia and its main gas provider, Gazprom, there are increasing reasons for the country to explore L.N.G. as an alternative.

Price dispute disrupts shipments

In 2009, a price dispute led to a nearly two-week disruption in Russian gas shipments through Ukraine, raising concerns about European reliance on Russian supplies. And the Netherlands, another large supplier to Germany, faces the prospect of declining output from the Groningen field, not far from the German border. Its production is expected to decline and eventually cease because of earthquakes triggered by gas production. An L.N.G. facility could help compensate for those losses.

President Trump has also leaned on Europe, including Germany, to import more natural gas from shale deposits in the United States, which have produced a bounty of fuel that is now flowing into exports in the form of L.N.G. The administration has criticized a new pipeline, Nord Stream 2, being built from Russia to Germany, while promoting fuel from new export facilities in Louisiana and Texas.

Germany ready to construct an LNG terminal

Earlier this year, Peter Altmaier, the German economics and energy minister, announced support for constructing an L.N.G. terminal in return for the United States toning down its opposition to the new pipeline with Russia.

For years, German politicians and industry leaders have shrugged off warnings about relying on Russia. Northwest Europe has other terminals, which until recently were little used. L.N.G. supplies instead went to destinations like Asia, where buyers were willing to pay higher prices.

Security arrangements make a headway

Now the energy security arguments appear to be making headway, and the market for L.N.G. looks stronger. Utilization rates of terminals in northwest Europe have risen sharply. Uniper, which has an agreement to take L.N.G. from a facility in Freeport, Tex., said that the shiploads of fuel traded by the company more than tripled from 2017 to 2018, from 40 to 135.

At a visitor’s center for the Wilhelmshaven port, Mr. Fenzl said that to keep costs down, the company is leaning toward using a floating vessel, rather than an onshore facility, as its terminal. The vessel, which would be provided by Mitsui O.S.K. Lines, would be tied to an extension of the existing jetty. L.N.G. vessels would tie up alongside and discharge their frigid cargo through flexible hoses.

Mr. Fenzl said the company has not made a final decision to move ahead and was weighing commitments from other suppliers to use the facility, as well as potential government support. He estimated the cost of the project at 500 to 650 million euros. For us, as Uniper, this is a lot of money, he said. It is not an easy task to get it off the ground.”

Building an L.N.G. terminal would not guarantee that Germany would import fuel from the United States. The German stance is that they are going to take the most competitive L.N.G. supply that they can. If that happens to be the U.S., that is a bonus, said Murray Douglas, an analyst at Wood Mackenzie, a market research firm.

The United States to compete with Qatar

Mr. Douglas said the United States would need to compete with Qatar, a major exporter, as well as planned projects in East Africa. Russia is also increasingly competing in the L.N.G. market.

Other German ports, including Stade, have also joined the competition for a terminal. In Brunsbuettel, the state-owned Dutch gas distributor and partners are considering a terminal in part to make up for lost supplies from the quake-rattled Groningen field. All three of these cities are near Hamburg, the thriving commercial and maritime hub in northern Germany.

Of course, local and environmental opposition to liquefied natural gas could grow, as it has in other ports. The Wadden Sea is considered a unique area of mudflats and shallows, and environmentalists say that putting a terminal there might cause pollution, while the big ships could damage the sea bottom.

Environmental concerns due to fracking

In addition, some activists question whether Germany, which has halted the drilling process known as fracking, in which water is injected into gas wells to break up rock and increase their production, should be building a terminal to import gas from the United States produced by this process.

It is extremely hypocritical that Germany forbids the use of this technology but allows the import of the same type of gas, said Antoine Simon, a campaigner against fossil fuels at Friends of the Earth Europe in Brussels.

Andy Gheorghiu, a campaigner in Germany for Food and Water Watch, a group that opposes fracking, said opposition to the L.N.G. terminals had been relatively small but was growing. I am pretty confident we can kill these projects, he said. In Wilhelmshaven, some civic leaders see an L.N.G. terminal as a boost to the city’s efforts to build up local port activities. Now it looks like we come to the end of a long, long story, joked John H. Niemann, president of the Wilhelmshaven Port Association, noting that various versions of the project had been under discussion for 40 years.

Did you subscribe to our daily newsletter?

It’s Free! Click here to Subscribe!

Source: NewYorkTimes

LEAVE A REPLY

This site uses Akismet to reduce spam. Learn how your comment data is processed.