German LNG "optimistic" of closing RWE deal in 3 months: interview
The project to build what could be Germany's first LNG import terminal is moving closer towards a final investment decision (FID), with talks on the reservation of a significant share of its capacity expected to reach a conclusion within two or three months.
German LNG Terminal (GLT), a joint venture between Dutch gas grid operator Gasunie, Dutch chemical storage firm Vopak and German logistics group Oiltanking, aims to develop an 8bn m3/year regasification terminal in Brunsbuettel in north Germany. German power utility RWE signed a provisional deal in September 2018 to secure a "substantial" part of its capacity, with press at the time reporting it had booked 5bn m3/yr.
Talks between GLT and RWE were expected to lead to a finalised agreement before the end of last year. But progress was held back by the permitting procedure, GLT business developer Marcel Tijhuis tells NGW, noting that this was a bigger cause for delay than the coronavirus pandemic. "The timelines for the permitting and commercial discussions are more in step now," he says.
Tijhuis says he is "very optimistic" that commercial arrangements with RWE will be finalised in two to three months. In June last year, GLT shortlisted a group comprising Spanish firms Cobra Instalaciones y Servicios and Sener Ingenieria y sistemas and Germany's TGE Gas Engineering for the EPC deal for the project.
"Having the EPC contract and a commercial contract with customers ready will trigger a commercial decision by the shareholders," Tijhuis said. "And then the only thing is waiting for the final permitting from authorities and that will trigger a final investment decision."
Germany does not currently have any LNG import capacity, relying as it does mostly on Russian gas and supplies from North Sea fields. But advocates argue that having a regasification terminal would help the country to lower gas prices, providing support to German industry, improve energy security and enable the country to act as a hub for supplies across central Europe. There are other projects in the pipeline besides GLT's plan in Brunsbuettel, but they are at a less advanced stage.
Hanseatic Energy is leading Stade LNG, the largest of the import schemes with an expected capacity of 12bn m3/yr. A non-binding phase of an open season for the terminal's capacity was concluded in mid-February, with Hanseatic saying the result confirmed sufficient market interest. The binding phase will start sometime before July.
Hanseatic also welcomed Belgium's Fluxys, the operator of the Zeebrugge import and transhipment terminal, as an industrial partner for the project last month.
Germany's Uniper was also working on a plan to build a regasification terminal in Wilhelmshaven, but said last November it was considering converting the project to import hydrogen instead, after failing to attract enough binding booking for its capacity. The company now appears to have decided against LNG, reporting on April 14 that it intended to establish Wilhelmshaven as a national hub for hydrogen in Germany.
GLT is still set on its original plan, however. Germany will phase out nuclear power from its generation mix by the end of next year, and intends to do the same for coal power by the late 2030s. While renewables are expected to primarily benefit from these developments, according to government plans, gas demand too will grow while domestic gas production falls.
Germany will gain an extra 55bn m3/year of import capacity if and when Russia's delayed Nord Stream 2 pipeline comes on stream. But it is also a question of the diversity of the supply mix, according to Tijhuis.
"We have considered all these developments and discussed them with the market and the market thinks it is effective to have an LNG inlet for Germany," the director says. "Our customers value our location, which is on the mouth of the Elbe close to the open sea, avoiding all kinds of difficulties sailing in, so there's a very quick entrance and exit to the terminal. "
There are many industrial facilities nearby the terminal that can serve as customers, he says, noting that the project will also be able to refuel vessels and trucks with LNG. Its close proximity to the Kiel canal linking the North and Baltic seas also facilitates small-scale LNG distribution by providing easy access to the Scandinavian countries and the Baltic states.
While GLT is sticking with its original plan for LNG, it does see potential for the terminal to import hydrogen at a later stage. Germany published its national hydrogen strategy last year, heavily prioritising the domestic production of green hydrogen, with plans to have up to 5 GW of electrolysers up and running by 2030, producing 14 TWh of the fuel. But the government also acknowledges that hydrogen imports will also be needed to help industries decarbonise.
GLT agreed with RWE to explore options for hydrogen supplies last summer. According to Tijhuis, GLT is having technical discussions about the potential conversion of the terminal. "It all starts with the question of what the market wants us to do," he concludes.