Saturday, November 7, 2020

Germany: Uniper stops construction of FSRU Wilhelmshaven

Concerns about a sufficient workload of the planned FSRU confirmed by the paucity of prospective clients willing to book capacities le to the decision to put the project on hold, meanwhile the building works to complete the Nord Stream 2 pipeline have been resumed, writes german newspaper WELT:

Politicians are often sales geniuses, and this is particularly true of the incumbent US President: Donald Trump once advertised American natural gas on the world market as "Freedom Gas". The fuel extracted with the controversial "fracking" method should help to free the countries of the world from the dependence on Russian oil and gas monopolists.

The oil and gas business has always been highly politicized and is still at the center of geostrategic planning by the great powers. It was probably not due to purely economic considerations that Germany started building three liquefied gas ports on the North Sea coast a few years ago.

Frozen liquid gas, also known as LNG, delivered by tanker was intended to limit the market power of the main European supplier, Russia, in natural gas. The EU Commission also considered this to be sensible.

"The expansion of the LNG infrastructure in Germany," confirms a spokeswoman for Federal Economics Minister Peter Altmaier (CDU), "is an important concern of the federal government." The LNG regulation that came into force in 2019, for example, "improves the conditions for the construction of LNG in a very concrete way -Infrastructure. ”Among other things, the federal government obliged the gas network operators to ensure the onshore pipeline connection of the liquefied gas ports.

With its support for the three liquefied gas terminals in the ports of Brunsbüttel, Stade and Wilhelmshaven, the federal government pursued another purpose. In particular, the ports should enable the import of "Liquefied Natural Gas" from the USA and so allay the anger of the US government over the Nord Stream 2 pipeline between Russia and Germany.

The Trump administration and Republican congressmen recently threatened German partners in the pipeline project with sanctions if they did not immediately stop their work on the underwater tube at the bottom of the Baltic Sea. The Americans are annoyed that they take care of the military defense of Germany and Europe, while these European partners pay for the armament there with their natural gas purchases in Russia.

If the federal government had hoped to win the approval of the Americans for the Nord Stream pipeline, if import opportunities for American fracking gas were created at the same time, this was hit hard on Friday: The Düsseldorf energy company Uniper announced that it was planning to take place in Wilhelmshaven Put the LNG project on hold for now.

However, the fact that the most important foreign policy driver of the port project has ceased to exist these days with the freedom gas exporter Trump is probably due to chance.

In truth, Uniper was unable to find enough interested parties among the world's gas exporters who would have been willing to book long-term capacities at the Wilhelmshaven terminal. And without the security of such fixed usage contracts, the complex infrastructure project worth several hundred million euros cannot be financed.

The lack of interest shown by liquefied gas exporters from the USA, Australia, Qatar and Egypt is due to the current uncertainties in the market. After all, the LNG business is growing rapidly, but it is also very fast-moving. When the demand for liquefied gas suddenly increases in Asia and higher prices are offered there, the tankers destined for Europe spontaneously change course while on the high seas.

The price ratios have recently been such that it is already more lucrative to send LNG tankers to Japan or China than to Western Europe, which is well supplied with Russian pipeline gas. After liquid gas terminals had been built in numerous European countries in the past ten years - also with US help - the gas exporters from overseas now apparently see little reason to commit to other LNG ports in Germany.

Uncertainties about the development of demand in the wake of the corona crisis, European climate policy and international trade conflicts also contributed to the fact that gas exporters gave the German port project the cold shoulder.

The company Uniper, which once emerged from the fossil power plant division of the E.on Group and Ruhrgas, does not want to completely discontinue the project in Wilhelmshaven. One will now check whether a smaller variant meets with more interest.

After all, the floating LNG terminal was designed to be very large for a throughput of ten billion cubic meters of liquefied gas. The volume corresponded to around a tenth of the German gas requirement. Possibilities for the import of hydrogen at this location will also be included in the planning now.

"LNG is a growth market and natural gas is making an increasing contribution to security of supply and the decarbonization of the global energy system," said Uniper's CEO, Andreas Schierenbeck: "That is why Uniper will continue to be committed to the secure supply of LNG."

All of this will be “now intensively discussed with those who, like me, consider the development of such an import terminal in Germany to be a fascinating idea and continue to support it,” Schierenbeck continues. A wave of the fence post in the direction of politics.

However, there is little clarity about the willingness of the federal government to launch liquefied gas ports without sufficient demand on the market. On the one hand, Federal Finance Minister Olaf Scholz (SPD) is said to have promised tax money. On the other hand, the Federal Ministry of Economics emphasizes the private-sector nature of the LNG projects.

The plans to build a liquefied gas port under the name "Hanseatic Energy Hub" in Stade near Hamburg are currently ongoing. The project partners include the chemical giant Dow and Niedersachsen Ports GmbH. In Brunsbüttel, too, the project partners around the Dutch companies Gasunie and Royal Vopak are sticking to the plans for a “German LNG Terminal” for the time being.

Nord Stream 2 continues

Meanwhile, Russian work on the Nord Stream 2 pipeline appears to be continuing. The threats of sanctions by the USA against the European project partners, including the BASF subsidiary Wintershall, Uniper and the port company Sassnitz / Mukran, met with unanimous protests from German state and federal politicians and have so far not led to the work being stopped.

At the beginning of the year, a Swiss shipping company had called its laying vessels back from the project. According to reports, however, the Russian energy company Gazprom is currently converting its own pipe-laying ships in order to be able to complete the construction of the almost completed Nord Stream 2 next year, even against the will of the Americans.

The temporary halt to planning for the project in Wilhelmshaven is fueling the hope of being able to do without infrastructure for fossil natural gas altogether among environmentalists. Lower Saxony's Environment and Energy Minister Olaf Lies (SPD), for example, already favors a terminal for hydrogen or synthetically produced gas as a possible replacement.

“We still need a terminal exactly at the same location, we have to continue to transport energy by ship,” said Lies. "But now, I believe, the decision has been made that it can only be renewable and no longer fossil."

With this assessment, however, the Lower Saxony is in a certain conflict with the recommendations of the coal exit commission. It had advised more gas-fired power plants in order to be able to quickly compensate for the politically decided exit from nuclear and coal-fired power plants without risking supply bottlenecks.

Since the gas reserves in the British and Norwegian North Sea are tending to run out and the large natural gas fields in the Netherlands are also reducing their production, Europe is likely to continue to depend on adequate infrastructure for the import of natural gas.

Especially when gas power plants are only used as "backup" to bridge times without wind and solar power, it could be more economical in the future to have the fuel delivered on demand by LNG tankers instead of maintaining a permanent gas supply via pipeline.

According to the concepts of the gas industry, more and more green hydrogen could be added to the methane from the ground in the medium term. In this way, the gas supply can gradually be made climate-neutral without having to give up the multi-billion dollar pipeline system in the ground.

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