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Germans will buy American LNG in exchange for "Nord Stream - 2"

Germans will buy American LNG in exchange for "Nord Stream - 2"

July 25 2018
Tags: Germany, Nord Stream, Gas, Economy, USA, Analytics, Russia, Europe

The US forces Germany to build an LNG terminal that is absolutely unnecessary to it from an economic point of view. However, Berlin is ready to take this political step to get rid of Washington's attacks on the "North Stream - 2" and Russian gas. Gazprom will only benefit from such competition - it will easily prove its economic superiority.

Germany still intends to build the first in the country terminal for the reception of liquefied natural gas (LNG), according to the local edition Handelsblatt. It will be located in the city of Brunsbüttel in the federal state of Schleswig-Holstein. Local authorities and Berlin support this initiative.

This, apparently, is about the approval of the project, which Bloomberg reported in April, citing sources. It was about the LNG terminal next to Hamburg, and the city of Brunsbuttel is just a short distance away. The cost of this terminal capacity to 5 million tons of LNG will be 600 million dollars. To begin to build it planned in 2019 year to start in 2022 year. In addition, it was previously reported that the company RWE is going to build another LNG terminal near the city of Duisburg at a cost of 500 million dollars.

There are no economic reasons for the construction of even one LNG terminal in Germany. It is enough to look at the unsuccessful experience of Poland and Lithuania, who built LNG terminals, but still can not load them at full capacity.

In recent years, Europe has built many LNG terminals. And what in the end? They fill less than a third, and the remaining capacity is simply idle. The reason is banal - liquefied gas is more expensive than pipeline. Thus, the capacity of all LNG terminals built in Europe is 235 billion cubic meters, whereas in 2017, Europe had only 55 billion cubic meters of LNG, that is, 23% of the total capacity.

"This step of Germany will be for pro forma, so as not to stand out from the general sect of" lovers "of LNG. In Europe, there is a mantra that once you built an LNG terminal, Gazprom should give you a discount right away, which means that you won a monopoly. In fact, this is a big fiction, "says Igor Yushkov, a professor at the Finance University under the Russian government, an expert at the FNEB. After all, LNG is more expensive than Gazprom's gas, and plans to earn LNG due to its transit remain unrealized.

Poland and Lithuania counted on LNG terminals to become gas hubs in Eastern Europe, that is, they wanted to earn not only supplies for their own market, but also for exports. But in the end they began to compete only with each other.

In Lithuania, for example, they built an LNG terminal and did not know what to do with it. A long-term contract for the supply of LNG was signed only by a state-owned company - under pressure from the authorities. There were not any more interested - it is unprofitable, when there is a cheaper network gas near by. As a result, the company barely made ends meet. But the Lithuanian authorities failed to endure this failure - and issued a law that forced all consumers to buy certain volumes of LNG from the state company without fail. As a result, even existing LNG terminals work only due to non-market pressure mechanisms.

"If the competition was fair, without double standards - it would be more profitable for Gazprom. Because from an economic point he wins this competition. But they are starting to put sticks in the wheel, and his competitors - to arrange a privileged position, "- continues the source.

In the Kaliningrad region, Gazprom is going to supply an LNG terminal. "But if Kaliningrad is necessary to improve the energy security of the Russian region, since there is a threat of interruption of gas transit from Russia through Lithuania, for Germany, the need for such a terminal from an economic point of view is a rather controversial issue," Yushkov said.

Why did Germany intend to join the ranks of the losers? The German edition speaks about political arguments in favor of this project. This LNG terminal will be able to refute the accusations of the White House that Germany is very dependent on Russian gas and does not allow American LNG to enter the German market. "Nord Stream - 2" is a real thorn in the eyes of US President Donald Trump, who resorts to all sorts of pressure on European countries to make them buy expensive American LNG.

But if everything went smoothly with Poland, then Germany turned out to be a much stronger rival. Berlin rebuffed, and then followed Trump's statement (after a meeting with Vladimir Putin), which gave reason to believe that sanctions against the "Nord Stream - 2" will still not be. Although the US will not abandon attempts to stake out the European market and push back Gazprom. The LNG terminal in Germany will become, in fact, a bargaining chip.

"Germany can be forced to build an unnecessary LNG terminal, but it will be a project solely to lag behind, and nothing more,

- says Yushkov. That is, Berlin will spend 500-600 million dollars on the terminal in exchange for "Nord Stream - 2".

In principle, the price is not so high. In addition, in the long term this LNG terminal may be required, but again only in order to comply with the formal requirements of the EU on the availability of three sources of energy suppliers. Now Germany meets this requirement without the LNG terminal. It receives gas through pipelines from Russia, the Netherlands and Norway. True, in five years the Netherlands can turn from an exporter to an importer of natural gas due to depletion of its own deposits. And then Germany may need a third source of gas, which can become LNG.

In any case, this project does not carry any danger for Russian gas or the Nord Stream-2. In addition to the price, and Germany receives Russian gas in general at the lowest price in Europe, volumes and stability of supplies are important. The capacities of LNG terminals are not comparable to Russian pipelines. Only Nord Stream - 2 has a capacity of 55 billion cubic meters - so much of LNG was taken by the whole of Europe in 2017. The capacity of one LNG is less than 10%. Stability and efficiency of supplies of tankers with LNG also can not provide - it is the prerogative of pipelines.

Olga Samofalova
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