A small orchard on the banks of the Elbe River in northern Germany, overgrown and surrounded by seagulls, holds the key to the country’s energy future without Russia.
The orchard near the city of Stade will soon be cleared to make way for a 1 billion-euro liquefied natural gas terminal, one of three planned to help Germany reduce its dependence on Russian gas.
“The location is perfect,” said Jörg Schmitz, senior director of the liquefied natural gas project at Dow Germany, citing the wide range of the Elbe, the North Sea to the west and the port of Hamburg, Germany’s largest east.
If Schmitz’s vision comes true, Stade will become the center of global trade in LNG, a gas that has cooled to minus 160C so that it can be transported around the world by tanker. “If all goes according to plan, we will see about 100 landings a year, up to the size of the Q-Max,” he said, referring to the world’s largest liquefied natural gas carriers, each longer than three football fields.
Stade is at the forefront of a revolution in German energy. Just days after Russian troops invaded Ukraine, Chancellor Olaf Scholz announced plans to radically reduce Germany’s dependence on Russian energy. LNG will be vital to the plan to reduce Russian natural gas imports from 55% of the total to 10% by summer 2024.
But the change will be a challenge. Germany’s new gas demand may clash with its commitment to achieve net zero carbon emissions by 2045. It may also struggle to get all the LNG it needs.
“The question of millions of dollars is whether they will be able to find enough LNG,” said Frank Harris, a fuel expert at energy consulting firm Wood Mackenzie. “There are relatively few new deliveries in the next two or three years.”
The policy change is taking place at an unusual pace for Germany. In the weeks following Scholz’s speech in late February, the government rushed to hire four specialized ships, known as floating storage and regasification units, or FSRU, tankers with heat exchangers that use seawater to turn LNG back into gas.
The first FSRU is coming online in Wilhelmshaven on the North Sea this year. They will operate as an interruption until the permanent terminals are put into operation. So far, three potential sites have been identified for them – in Stade, near Brunsbüttel, also on the Elbe, and Wilhelmshaven.
For the past five years, Dow has been working to build a gas terminal in the area. “The idea was to diversify your gas supplies and not allow yourself to become too dependent on one source,” Schmitz said.
Hiring the four FSRUs so quickly was a coup for Germany – there are very few suitable vessels available. But finding the ships was only half the battle. “The big challenge is to fill this capacity with LNG, and that will be difficult because the market’s resources are so scarce,” said Andreas Gembala, director of LNG at Uniper, the German energy company.
Ironically, the biggest source of new supplies expected over the next two to three years is from Russia – the Arctic LNG-2 project on the Gidan Peninsula in northern Siberia. But this seems “very challenging now,” Harris said, in large part because sanctions have limited Russia’s access to finance and technology, while some Western buyers may not buy gas from the project.
Qatar could be a major source of liquefied natural gas for Germany, and its fuel production should increase by 60 percent by the middle of the decade. But 90-95% of its current output has already been sold under long-term contracts.
This reflects another problem for Berlin – liquefied natural gas contracts are usually long-term. But after promising to make Germany carbon neutral by 2045, the government may be reluctant to engage in fossil fuel imports for 20 years or more.
“Germany says we want all this LNG, but we also want to speed up the transition from fossil fuels, including gas,” Harris said. “It’s a mixed message.”
In addition, much of LNG Berlin, which is the focus of attention, is indexed to the price of oil or, if it comes from the US, to Henry Hub, the US gas index, which can sometimes be higher than the Dutch TTF, the European marker. This exposes buyers to the risk of financial loss. Such agreements “do not correspond to the way gas prices in Europe”, Gembala said.
For that reason, large liquefied natural gas producers such as Qatar may prefer to make deals with Asian countries that have fewer worries about signing 20-year contracts and are more comfortable with indexed oil prices, Harris said.
Robert Habeck, the Minister of the Green Economy, embodies Germany’s dilemma. He traveled to Qatar and the UAE to discuss energy co-operation and observe the start of construction of the first floating liquefied natural gas terminal in Wilhelmshaven in early May.
But he also warned of the dangers of clogging Germany with expensive infrastructure that could end its dependence on fossil fuels.
Olaf Lis, Minister of the Environment of Lower Saxony, third from the left, and Bernd Altusmann, Minister of Transport of Lower Saxony, second from the right, hold the approval documents for the LNG Stade terminal
“In the short term, we have been quite successful in replacing Russian gas, but we must be sure that we are not very successful,” he said late last month. “We don’t want to spend the next 30-40 years building a global natural gas industry that we don’t really want anymore.
The trick, he said, is to build “three or four times more kilowatt-hours of renewable energy” from the natural gas resources that are now being developed to quench Germany’s short-term thirst for fuel.
Tim Keller, managing director of Zukunft Gas, does not see the inevitable wave of gas infrastructure construction as a problem: the new terminals will also be designed to handle green hydrogen, a low- or zero-carbon fuel. “[They] it will be a bridge to a future in which we do not import gas in the form of LNG, but hydrogen in the form of ammonia, “he said.
For Dow’s Schmitz, Berlin’s sudden enthusiasm for LNG is an excuse. “The plan [for a terminal] “It has always made commercial sense,” he said. “But now it also has geopolitical significance.
Add Comment