Page 4 - GLNG Week 17 2022

GLNG COMMENTARY GLNG

Exploring Germany’s drastic shift in

energy policy

German energy policy is unrecognisable to what it was
before Moscow began its invasion of Ukraine

EUROPE WHEN he took office in December, German and offshore. Last week, the government gave
Chancellor Olaf Scholz was expected to follow Dutch firm One-Dyas the green light to drill at a
WHAT: closely in the footsteps of his predecessor Angela new site in the German North Sea.
Germany has embraced Merkel when it came to the country’s energy However, German gas supply has been in
LNG as the main means policy. But in the wake of Moscow’s invasion of decline for years, falling from 7.2bn cubic metres
of cutting energy ties with Ukraine, that policy is unrecognisable. in 2015 to 4.5 bcm in 2020. And while more pol-
Russia. Like Merkel, Scholz was supportive of the icy support might help slow down the rate of
Nord Stream 2 pipeline, even though the project this decline, it is unlikely to reverse it. Accord-
WHY: was set to increase Germany’s already-significant ing to BP data, Germany has less than 20 bcm
This marks a sharp reliance on Russian energy. But within 24 hours of proven gas reserves left, which means there is
departure to previous of Russian troops entering the Donbas region, only enough to maintain the current output for
policy. Scholz announced that the pipeline’s certifica- less than four and a half years.
tion would be halted. It now looks increasingly The president of Germany’s gas-rich south-
WHAT NEXT: likely that Nord Stream 2 will remain nothing ern state of Bavaria, Markus Soder, on April 10
Germany could replace more than a hunk of metal at the bottom of the called for the federal government to lift its ban
as much as 30 bcm per Baltic Sea, barring regime change in Moscow. on hydraulic fracturing, in order to unlock the
year of Russian gas if it In its place, the government in Berlin has development of the country’s shale gas resources.
develops all three of its lent its support to the construction of several But such a call is unlikely to be heeded, given the
main LNG projects by the LNG terminals. On April 15, it committed €3bn extent of public opposition to fracking.
late 2020s. ($3.3bn) of financing for these projects, bypass- With limited prospects for domestic supply,
ing the usual step of consulting the budget com- and with gas consumption continually rising,
mittee of Germany’s parliament. Germany needs from 74.6 bcm in 2015 to 86.5 bcm in 2020, it is
to embrace LNG, the government argues, and it no surprise then that Germany was open to the
needs to do so quickly. idea of Russia funding the construction of a new
Germany is not the most gas-intensive econ- pipeline all the way to its shore.
omy in Europe, although its reliance on the fuel Before the war Nord Stream 2 had been antic-
has grown in recent years as nuclear and coal- ipated online later this year, once Germany’s
fired power plants have been phased out. And energy regulator had finished the certification
its reliance is only set to increase further as process necessary for the pipeline to start pump-
more of these stations are retired over the next ing gas. But it now looks increasingly likely that
few years, especially at times when the coun- the pipeline will never be operational, or at least
try’s vast but intermittent renewables capacity not in the foreseeable future. And if Germany’s
underperforms. three planned LNG projects are realised, Nord
Germany has installed more wind and solar Stream 2 would no longer have any economic or
power generation than any other European commercial logic.
nation. By the end of 2022, it boasted 53.8 GW The proposed 8 bcm per year Brunsbuettel
of solar and 62 GW of wind capacity. As such, LNG project is situated at the mouth of the river
the share of renewables in its primary energy mix Elbe, which is the entry point to the industrial
has expanded from 12.5% in 2015 to 18.2% in port of Hamburg. At a cost of $450mn, the facil-
2020. This rate of growth, though quite a feat, is ity will be equipped with a jetty and two berths
not fast enough to make up for the loss of nuclear to enable it to receive large LNG tankers up to
and coal-fired generation, however. Germany Q-max size. It will also be able to load tankers,
has therefore relied on gas to fill the gap, with trains and smaller vessels, and it will have two
the share of that fuel rising from 21% to 25.8%. 165,000 cubic metre storage tanks.
The problem is that the vast majority of this gas The planning approval process for the project
is imported. began last year, and a consortium has already
With its renewed focus on energy security, been selected for engineering, procurement
Scholz’s administration plans to look at ways to and construction (EPC). The companies behind
bolster domestic gas production, both onshore the German LNG Terminal partnership were

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