Russian gas is currently flowing into the local gas storage facilities (as of May 2022) and the gas storage levels are slowly increasing. LNG could contribute to substitution as early as this year, after Economics Minister Habeck was able to get the legal basis for an accelerated expansion of LNG terminals through the Bundestag and the Bundesrat. Experts hope that Russia will not turn off the gas tap before then. But not everyone is enthusiastic about Germany’s rapid switch to LNG: parts of the US industry are even calling for US LNG exports to Europe to be stopped, with their own needs at heart.
Gas storage levels in May 2022
At the beginning of May 2022, the European gas infrastructure operator GIE reported a total storage level in Germany of 40.8 %. One month earlier it had been 29.8 %. Habeck had already had the new storage law passed weeks ago, which stipulates a filling level of 90 % every year on 1 November. This target could be reached in 2022 if the storage facilities continue to fill up so quickly. However, consumption behaviour also contributes to this. But there is one crucial uncertainty factor: Russia may not stop its gas deliveries. The first LNG terminals will go into operation in December at the earliest, so they cannot influence the storage level on 1 November.
Image: Zivica Kerkez/Shutterstock.com
Preparations for a loss of Russian gas supplies
In an internal paper, the EU Commission has evaluated measures for the total loss of Russian gas supplies. For example, there are to be Europe-wide price ceilings for natural gas that would also apply in the event of an acute shortage. Critics note, however, that this is a half-hearted solution that a) does not eliminate the de facto shortage and b) could lead to LNG suppliers delivering less liquefied gas to Europe on their own initiative because they fear downward price pressure. In the worst case, a European purchasing group would have to buy the LNG with the help of European subsidies and sell it to consumers (private and industrial?) below the purchase price. The German government, among others, is against this. Its experts fear that state price caps would lead to a drying up of exchange trading in gas futures. Either the EU would have to subsidise massively, or the price cap would not work in principle. This would cause gas prices to rise sharply for all consumers.
Can Germany’s gas demand be met by LNG?
Experts also doubt this. One supplier would be Qatar. The emirate is insisting on long-term supply contracts, which Germany actually does not want. They would possibly lock in gas consumption for decades to come, which would run counter to German and European climate protection goals. In the USA, on the other hand, which also supplies LNG, there are more and more voices pointing to its own demand and rising prices, which would increase even more through increased exports to Europe. According to the Reuters news agency, there are even US industry managers who want to stop LNG exports to Europe altogether. On the other hand, this is only one opinion in the US. The US fracking industry is very keen to export to Europe. Gas extracted from fracking can be liquefied into LNG and then shipped by tankers. Fracking gas is very controversial in this country, but in the event of an energy crisis, relevant concerns are likely to fall across the board.
Concerns of the environmentalists
German environmental protection associations also oppose LNG. Whether they will be able to prevail and actually prevent the construction of LNG terminals may be doubted after the Green Minister of Economics, Robert Habeck, was able to get the LNG Acceleration Act through the Bundestag and the Bundesrat in May 2022. But they will not give up their resistance and could slow down a very rapid LNG supply at least somewhat. So all factors taken together, as of May 2022, a slight sigh of relief is in order regarding our gas storage levels, but the supply for the coming winter is still far from being in the bag.
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