Germany poised to use LNG deliveries to replace Russian gas

As German climate negotiators entered the final round of Cop27 climate talks in Turkey, their colleagues in Berlin quietly raised the curtain on a new era of fossil fuels.

As part of Berlin’s race to free itself of Russian gas, the first of five planned liquefied natural gas (LNG) terminals has been completed in Wilhelmshaven on Germany’s North Sea coast.

The terminal has come at warp speed by German standards, where major infrastructure projects are often held back by rigorous bureaucracy.

Nine months after Russia invaded Ukraine and six months after construction began, the floating terminal has an annual capacity of five billion cubic metres of gas and can receive up to 170,000 cubic metres a week – about 8 per cent of Germany’s natural gas consumption.

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For all involved, the LNG terminal is floating proof of necessity as the mother of invention

“The example of Wilhelmshaven shows that Germany can be fast and advance infrastructure projects with great determination,” said Robert Habeck, federal economics minister.

Exploding prices

With a 26km stretch to be finished shortly to connect the terminal to the gas network, the first gas-carrying ship is expected in the new year.

But shifting its energy sources at such short notice has come at a huge price. New figures suggest the cost of purchasing and maintaining Germany’s new LNG terminals has exploded 123 per cent from a forecast €2.94 billion to €6.56 billion.

Russia met more than 50 per cent of the Germany’s total gas needs until February’s invasion of Ukraine. After months of unstable deliveries, September’s explosion of two undersea gas pipelines – combined with maintenance in an older, overland pipeline – has seen Russia gas deliveries ended since September and Germany seeking alternative suppliers, primarily Norway.

But as prices continue to rise, gas electricity production in Germany is down from 14.4 per cent of the total last year to 11.7 per cent at present.

German industry is the biggest consumer of gas, 60 per cent of the total, but energy-saving measures and a drop in production have seen production firms using 30 per cent less gas than this time last year.

The mild autumn – with temperatures only reaching November averages this week – has helped Germany reach its goal of 100 per cent full gas storage ahead of its December target.

This would cover all gas needs until February but, with a campaign under way for 20 per cent energy savings in gas consumption, government officials hope the reserves will see the country through until April.

Nuclear plants

That is when Germany’s three final nuclear power plants will close for good, after a four-month extension. Authorities hope the LNG deliveries in Wilhelmshaven will begin to flow long before then. As well as another facility in Wilhelmshaven, three other LNG terminals are expected to be completed along Germany’s north and Baltic coasts in the coming months.

Despite rapid infrastructure development, and a mild autumn, German energy importer Uniper says that getting through the winter is “all about the weather”.

“When it comes to next winter 2023/2024, storage will be quite empty after this winter, so the question is how do we refill the storages with no gas anticipated from Russia,” said Tiina Tuomela, Uniper’s chief financial officer.

Uniper already imports LNG through long-term contracts in the Netherlands and UK, but is working to secure additional deliveries.

As Germany closes its final nuclear plants for good in April, it has embraced fossil fuels once more to bridge the energy gap until it can boost further production from renewables. Wind and solar currently meet 49 per cent of Germany’s energy needs, up five points in a year.

Turbulence over Russian energy deliveries in 2022 has seen Germany also increase its dependency on coal-burning plants, now providing 31 per cent of the energy mix, up 17 points on last year. Compared to this time last year, German energy production from traditional sources has dropped seven points to 51 per cent.