The Federal Ministry for Economic Affairs and Climate Action has drafted a report on the plans for floating and fixed LNG terminals and their capacities. The planning and development of German LNG infrastructure are the direct result of Russia’s war of aggression against Ukraine and the resulting energy crisis. The aim is to overcome one-sided dependencies, step up precautionary measures, and strengthen resilience by developing LNG infrastructure in Germany. The plans follow these principles. The report (in German) can be found here.
Federal Minister for Economic Affairs and Climate Action Robert Habeck commented,
“Russia’s war of aggression against Ukraine has made us understand how dangerous one-sided dependencies are and that they come at a cost for us. We would be foolish not to learn from this. We are therefore making Germany more resilient. There is no question that the accelerated expansion of renewable energy and the building of a climate-neutral energy supply – combined with energy conservation, efficiency and the gradual phase-out of fossil fuels – are key to this. This is the focus of our actions. To ensure security of supply during the transition period, we must, however, develop our own infrastructure for LNG for the next few years. We are basing our plans on clear principles: we are pricing in risks, making sure we have more than enough capacity, creating flexibility, and acting in the spirit of European solidarity. These are the lessons learned from the energy crisis and we are working in line with them.”
The report presents last year’s starting point and comments on the sites and plans for floating and fixed LNG terminals. Also included in the report is a study by the Institute of Energy Economics at the University of Cologne (EWI), commissioned by the Federal Ministry for Economic Affairs and Climate Action, which creates gas scenarios for potential future developments in view of the dynamic development on the gas markets. The study by the EWI – Institute of Energy Economics at the University of Cologne can be found (in German) here (PDF, 2 MB).
1. More information on the contents of the report by the Federal Ministry for Economic Affairs and Climate Action:
What is the starting point and why is new infrastructure needed?
Russia’s war of aggression against the whole of Ukraine has fundamentally changed the parameters of security architecture and, along with it, the requirements for the energy security structure. Due to Russia’s actions, the Federal Government had to prepare for disruption and a potential halt to Russian gas supplies, which then transpired. Hard work and great speed was therefore needed to create alternative means of securing gas to ensure security of supply. Thus began the building of new infrastructure consisting of Floating Storage and Regasification Units (FSRUs) and fixed LNG terminals last year.
Through these developments and additional plans, the Federal Government is heeding a key lesson learned from the energy crisis triggered by Russia’s war of aggression, namely that the vulnerability that is the result of one-sided dependencies must be replaced with resilience. In the interests of security of supply, the task is to construct resilient energy infrastructure, which is based on the precautionary principle, prices in risks, is flexible and adopts an approach of European solidarity. Just as other European countries have enabled the delivery of LNG to Germany via their infrastructure, Germany must also be able to support its neighbours.
Sufficient buffer capacity is also necessary so that Germany is prepared for critical situations and able to act flexibly in changing supply situations. The Federal Government is planning to provide such extra capacity from 2024. From 2027, there will be enough extra capacity even to absorb the loss of significant imports from existing sources.
In mapping demand, the Federal Government is also working with a risk premium in its drawing up of gas consumption scenarios. This will ensure that Germany is also prepared in the event that peaks of gas consumption are higher than intended. In the event that gas consumption is lower, FSRU infrastructure bids can also be flexibly reduced.
FSRU terminals were and will be deployed to enable the swift implementation of solutions for the winter of 2022/2023 and the winter of 2023/2024. Onshore LNG terminals will then follow. Given the construction period of approx. 3.5 years, these could not have helped to provide short-term compensation for Russian gas supplies. Conversely, only fixed terminals can be converted for the use of green gases. Building both types of infrastructure is thus necessary, whereby it is clear that fixed terminals will replace FSRUs as soon as they are ready. Overall, it should be noted that there are also always risks attached to the realisation of each of the planned projects.
Planned LNG infrastructure in Germany
At the beginning of 2023, two FSRUs initiated by the Federal Government in Wilhelmshaven and Brunsbüttel entered into operation/are currently close to completing measures necessary to enter into operation. In addition, an FSRU in Lubmin has been privately operated since the beginning of the year. The capacities of these three terminals will allow LNG for approx. 13.5 billion m3 of gas to initially be landed in Germany in 2023. Three further FSRU sites initiated by the Federal Government are also under construction. These include Wilhelmshaven II, Stade and Lubmin.
The FSRU used in Brunsbüttel has a nominal capacity of approx. 7.5 billion m3/year, but can initially only be used for 3.5 billion m3/year due to the local grid situation. Following the completion of a new connection line at the end of 2023, the full capacity of 7.5 billion m3/year will be possible.
The nominal capacity of the remaining FSRUs chartered by the Federal Government is approx. 5 or 4.5 billion m3/year. According to current plans, all five of the Germany’s FSRUs will be in operation all year round and deliver a (nominal) regasification capacity of around 27 billion m3/year in 2024 and 2025. The regasification capacities of the privately-funded project in Lubmin are to be expanded from 5 billion m3 to a total of 10 billion m3 from 2024.
The three fixed terminals currently planned in Stade, Brunsbüttel and Wilhelmshaven are to enter into operation in 2026 and 2027. The LNG import capacity would thus increase to around 54 billion m3. It should be noted, however, that a final investment decision has not yet been made for any of the terminals.
As far as is possible, Brunsbüttel and Stade will be built to be ‘green ready’, i.e. equipped for subsequent operation using hydrogen derivatives, particularly ammonia (stronger foundations, coating/steel). From the outset, the fixed terminal at Wilhelmshaven has been designed as a green gas terminal for synthetic methane produced from green hydrogen.
The fixed terminals are to replace the FSRUs stationed at these sites up to this point.
What are the costs?
The expansion of LNG infrastructure for FSRUs spans a very long planning period, namely 2022 to 2038. Over this long timeframe, the expansion will include different project phases, of which many will also stretch into the future and therefore be subject to adjustments. Cost estimates will be and have been made for the period 2022 to 2038. These are subject to constant adjustments and a maximum budget has been set that may change over time. It may be that not the entire budget amount is required. For example, when the FSRUs were chartered, rental contracts rather than purchase contracts were very deliberately concluded, as changes can occur here in subsequent years if demand decreases. At the same time, infrastructure measures, such as connection lines, are being funded, and grid infrastructure is being expanded and improved. This can then be used for follow-up investments and is available in the long term. This is precisely why attention is being taken to ensure this grid infrastructure can also be used in the future for hydrogen and/or hydrogen derivatives. When regasification and/or the regular operation of the FSRUs begins, the costs are in turn balanced out by revenue, in particular through regasification fees.
We predict costs of around €9.8 billion for the period 2022 to 2038. The German Bundestag has already allocated this funding. It is, however, already becoming apparent that there will be additional costs.
2. More information about the EWI study
A study by the EWI, the Institute of Energy Economics at the University of Cologne, was included in the report. The EWI conducted an analysis commissioned by the Federal Ministry for Economic Affairs and Climate Action on the development of global gas markets and of Germany’s gas supply. The analysis was completed in February 2023. The first part of the study examines the development of global gas markets by means of a simulation model, taking into account different supply and demand scenarios. The aim of the simulation is to determine trade flows for LNG and pipeline gas, the possible development of gas prices, and the resulting capacity utilisation of LNG infrastructure in 2026, 2030 and 2035. The second part of the analysis calculates Germany’s gas production and demand until 2025. The aim of this calculation is to estimate the availability of natural gas over the course of a year and maximum storage levels, assuming different developments in demand in each case. The analysis did not include an estimation of future gas demand, a calculation of the exact LNG capacities required, issues of resilience, or the effects of the potential breakdown of individual components in the gas supply.