Page 12 - GLNG Week 46

GLNG COMMENTARY GLNG

The Nord Stream 2
pipeline has still not
been completed owing
to US sanctions.

proposed facility to import hydrogen. The lack of transit countries. Russia has three main
move comes after Uniper’s call for binding bids options for ramping up supplies to Europe – in
for the project’s capacity ended in disappointing the form of LNG, via Ukraine and via the Turk-
interest. Stream to Turkey. But Moscow is eager to stop
Australian investment bank Macquarie and using the Ukrainian route once its five-year con-
ChinaHarbour Engineering, want to build a 5-8 tract expires in 2025. Meanwhile, the smaller
bcm per year plant in Stade, but this project is at Yamal-Europe pipeline through Poland and
an even less advanced stage. Belarus will require upgrades, further strength-
ening the case for Nord Stream 2.
Nord Stream 2 The best scenario for Germany may be to pur-
The problem is that importing LNG, while sensi- sue both Nord Stream 2 and its own regasifica-
ble in terms of supply diversification, may not be tion capacity.
competitive against Russian piped gas. Germany “We see Gazprom benefiting from the Nord
receives most of its Russian gas directly from Stream 2 pipeline as it gets access to low-cost
Russia via the Nord Stream 1 pipeline, subject gas and reduces supply risk in bypassing third-
to no transit fees. party countries,” Rystad concluded. “Having
Gazprom has shifted away from its traditional access to LNG through their own regasification
oil-indexed long-term contracts in recent years terminals will additionally allow Germany to
and now offers buyers more hub-based pricing. reduce dependency on a dominant source of
This means that its prices more closely follow supply and gas buyers in the country can better
trends in the LNG market, limiting opportu- optimise their portfolios by taking advantage of Importing LNG,
nities for the super-chilled gas to outcompete low-price periods in the LNG market.”
piped supplies. The problem is Nord Stream 2 and Germany’s while sensible in
Rystad estimates that German buyers would LNG projects both face an uphill struggle. There terms of supply
need to pay somewhere between $4 and $7 per is growing antipathy to all gas import schemes
mmBtu for LNG spot supplies, whereas the cost from environmentalists. The US could impose diversification,
of Russian gas in Western Europe fluctuates even tougher sanctions on Nord Stream 2 and
between only $2.6 and $4. lean on Germany to withdraw its support. While may not be
“Germany’s dependency on gas imports his policies are starkly different from those of
will increase and it is therefore key to ensure President Donald Trump in many ways, Pres- competitive
access to reliable sources of gas and diversify ident-elect Joe Biden shares the incumbent’s against Russian
the risk by adding new infrastructure that will opposition to Nord Stream 2.
allow direct supplies either as piped gas or Meanwhile, Germany will struggle to get the piped gas.
LNG,” commented Rystad’s head of power and necessary financing for LNG projects amid cur-
gas markets, Carlos Torres Diaz. “If Germany rent subdued gas demand, low global levels of
decides price is the most important factor, investment and their likely cost disadvantage
Nord Stream 2 will go ahead, as it diversifies versus Russian gas. One source of funding could
supply to the market, reducing the risk of high be the US, but is likely only if Germany agreed
energy prices.” to block Nord Stream 2. And a Biden adminis-
Nord Stream 2 will indeed diversify Ger- tration would be less likely to offer such funds
many’s gas supply, at least in terms of import than its predecessor, owing to its tougher stance
routes, while also lowering costs due to the on fossil fuels.™

P12 www. NEWSBASE .com Week 46 20•November•2020