The Global Barrel

“Natural gas instead of Diesel” © REUTERS/Hannibal Hanschke

My latest at: Berlin Policy Journal (German Council on Foreign Relations), June 28, 2018:

The German federal government has decided in favor of building liquid natural gas (LNG) import terminals and infrastructure. In March, Chancellor Angela Merkel’s CDU/CSU-SPD government, in its “coalition contract,” pledged to “Make Germany the site for LNG infrastructure.” This is a notable policy change, because in Germany the opposition to LNG imports and use has been so much stronger than anywhere else in Europe.

The aim of this new endorsement is to reduce maritime and roadway heavy-transport emissions. However, many in Germany argue that using “small-scale” LNG in this way, as a “bridging” fossil fuel, is “wasted investment”. They contend that Energiewende-mandated electric vehicles can and will rapidly de-carbonize heavy transport. Still others oppose LNG imports on the grounds that they would unnecessarily diversify Germany’s gas suppliers with the aim of offsetting increasing reliance on Russian pipeline gas. They insist that Russian pipeline gas has been “historically reliable” and is cheaper for Germany than building large-scale import terminals for LNG.

Though the federal bureaucracy had been advancing this policy change for over a year, top government officials did not make any particular effort to bring the issue to public attention or to drum up support. Accordingly, media and public understanding of the federal government’s motivations has been less than ideal.

Small-Scale Imports for Cleaner Transport

There are two main points to understand. First, the aim of the new policy is clearly to address long-standing environmental and competitiveness problems in German marine and heavy road transport: compared to diesel, LNG as a transport fuel is much cleaner, emits less CO₂ and is generally cheaper. Second, the approved small-scale LNG import facilities will not reduce German dependence on Russian pipeline gas, which is used for conventional purposes. The new policy is not intended to reduce dependence on Russian gas and the controversial Nord Stream 2 pipeline, contrary to various press reports.

The first facility to win approval from Berlin (and previously from Brussels) is planned for the North Sea port of Brunsbüttel, near Hamburg. The initial focus on the Hamburg region is logical. From there, LNG can be shipped up the Elbe River as an inland-shipping and road-transport fuel. In addition, there is access to the Kiel Canal, the world’s busiest artificial waterway, where LNG can be used or delivered into Scandinavia and the Baltic region. Hamburg is also Germany’s major container port, and the shipping industry has begun converting engines to LNG fuel globally.

However, as well as facilities for fueling ships and trucks in the immediate port area with liquid natural gas, and shipping some gas onwards, the plan also includes an onshore regasification unit and connections to the existing gas-distribution network for conventional gas applications—heating, electrical generation, etc. Experts feel this will provide the project’s developers with flexibility, as it will take time for LNG road-transport infrastructure to develop in Germany. Currently, it is almost nonexistent.

The €500 million terminal will have facilities to transfer, store, and redistribute the liquid for use as maritime-bunker fuel, road-transport fuel, and various industrial applications. Such direct use of LNG as a liquid fuel, without regasification, is known as “small-scale” LNG. This is distinct from “large-scale LNG,” which involves much-higher volumes that are re-gasified in huge facilities and injected into the gas grid for conventional uses.

A sense of scale is important. The Brunsbüttel facility will receive LNG equivalent to 5 billion cubic meters (bcm) of gas per year. In 2016 Germany consumed 80.5 bcm of gas. So the Brunsbüttel facility’s capacity to re-gasify a portion of the LNG could help replace a part of the gas Germany now receives from the Netherlands, whose Groningen field is mandated to close soon. But the small scale of the new facility’s means it cannot significantly diminish Germany’s great dependence on Russian and Norwegian pipeline imports.

Indeed, despite a spate of articles claiming the contrary in major media outlets, including Der Spiegeland Bloomberg, the goal of the federal government’s new LNG policy is not to cut dependence on Russian gas. The entire regulatory and ministerial review process clearly focused on fueling maritime and heavy-road transport. Clearly, this small-scale facility provides no serious counterweight to Germany’s Gazprom imports, which are projected to rise from current levels of 55 bcm via Nord Stream 1, to 110 bcm of gas per year when Nord Stream 2 is complete, or about 60 percent of total German gas imports. At present, Germany receives 31 percent of its gas from Russia and 24 percent from Norway. Reversing this reliance on Russia would require multiple large-scale LNG regasification terminals capable of fueling a major portion of the country’s conventional gas demand for electricity generation, heating, etc.

Stalled Transport Cleanup

So what is the motivation for the new LNG policy? 46.1 percent of German GDP is dependent on exports (2016 data), compared to 26.9 percent for OECD states overall. Therefore, it is especially important that Germany be competitive in its maritime and heavy road transport to move all those goods. Yet despite having pinned the nation’s commercial future on the success of the Energiewende, actors from government, industry, political parties, and climate/environmental institutions have, embarrassingly, accomplished virtually nothing when it comes to cleaning up air-pollution and carbon emissions from transport. The so-called Verkehrwende (transport transition) is going nowhere. The ongoing diesel scandal is but one aspect of this, involving passenger vehicles. However, in maritime and heavy trucking, Germany has fallen disconcertingly behind many other European states and the United States.

For example, in California, after some 15 years of efforts, in 2015 fully 60 percent of all buses were running on compressed natural gas (CNG), as were 17 percent of all U.S. buses. This means their engines were emitting about 99% less particulates and sulfur dioxide, 70% less nitrogen oxides, reducing noise pollution about 50% and emitting from 12 to 20 percent less CO₂ than diesel fueled engines, which remain ubiquitous in most German cities. Using LNG in buses would bring similar environmental benefits to Germany.
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