DIW against the construction of fixed LNG terminals

Berlin (energate) - Scientists from the German Institute for Economic Research (DIW - Deutsche Institut für Wirtschaftsforschung) have spoken out against the construction of fixed LNG terminals in Germany. They argued that no gas shortage is expected for the coming winter either. Even with lower savings than in 2022, sufficient gas could be imported via the LNG import terminals in Belgium and the Netherlands and the floating terminals in Germany in addition to stable imports from Norway in all possible supply scenarios. In a position paper, the authors do note that Germany will have to secure sufficient LNG volumes on the world market in the future, in order to be able to compete with other importing countries. This would be possible due to the greater willingness to pay compared to other world regions.
 

Imports of Norwegian gas less harmful to the environment

In principle, efforts to save natural gas remain important. But in view of the declining importance of fossil gas on Germany's path to climate neutrality, the planned construction of the fixed terminals in Wilhelmshaven, Stade and Brunsbüttel is superfluous. It is quite possible that the remaining demand in the future could be met more cheaply and in a less environmentally damaging way by imports from Norway, since no gas is extracted there with the help of fracking technology. The planned use of the terminal in Wilhelmshaven for the import of green LNG by the operator TES is not mentioned in the paper. TES wants to produce green LNG (eNG) from CO2-free hydrogen and CO2. The CO2 is to be captured in Wilhelmshaven or at the customer's site, then transported back to the production facilities and reused in a cycle to produce eNG.
 

European perspective of Bruegel not quite so optimistic

In the short term, the scenarios of the Brussels-based think tank Bruegel do not seem so optimistic. In a recent article, the think tank stressed that further savings are necessary to reach a storage fill level of 90 per cent in Europe at the beginning of next winter. Policymakers should therefore support a further structural shift away from gas. The level of savings needed in the EU depends on weather conditions and whether the still current Russian gas flows through Ukraine to Central Europe and through Turkey to Southeast Europe remain available. Cold weather and the complete stop of Russian gas flows require, according to the Bruegel analyses, a reduction in natural gas use of 26 per cent compared to the average of the last five years.
 

Analysts expect high prices on the LNG market

The competitive situation on the LNG market also depends on the level of European demand. If demand is low, the expected LNG supply is comfortable. If additional EU demand is high, the Bruegel analysts expect intense competition and high prices in 2023. The market could also remain tight in 2024. Therefore, the FSRUs planned in Europe should come on stream as scheduled. To a limited extent, new long-term contracts for gas procurement are also necessary despite the European climate protection goals. In principle, the authors of the paper, like their DIW colleagues, expect demand to decline faster than awaited. Therefore, the loss of Russian long-term contracts would not have to be replaced one-to-one. The Bruegel paper did not say anything about the question of whether new fixed LNG terminals are necessary. /hl