Germany Blinks First In Ongoing European Gas War

Nord Stream 2

 

The U.S. is increasingly finding itself at odds against not only Beijing as Trump executes a sledge hammer approach to ongoing trade disputes with China, but also with Moscow, a potentially more lethal and unpredictable opponent both geopolitically and on the energy front.

Much of Washington’s angst with Russia includes the country’s annexation of Crimea in 2014, it’s meddling in recent U.S. elections, being on opposing sides in the ongoing Syrian Civil War and having differing views over energy security for Europe.

Russia, for its part, with its long-entrenched hold on European gas markets, seeks to solidify its grasp by keeping its gas monopoly largely unchallenged and also by pushing through with Russian energy giant Gazprom’s controversial Nord Stream II gas pipeline project.

Nord Stream 2 is a 759 mile (1,222 km) natural gas pipeline running on the bed of the Baltic Sea from Russian gas fields to Germany, bypassing existing land routes over Ukraine, Poland and Belarus. It would double the existing Nord Stream pipeline’s current annual capacity of 55 bcm and is expected to become operational by the end of next year.

Washington has long opposed the pipeline, claiming that it undermines EU security, which the U.S. is obliged to defend. Russia and most EU members counter that it’s purely a commercial development. Trump lambasted the EU in July, accusing them of being “captive” to Russian gas and called on Germany to stop its support for the $11 bn gas pipeline.

Many within Germany have also maintained, even vehemently, that Washington’s resistance to the Nord Stream 2 project is purely in its own self-interest since its cancellation would increase EU members’ need for alternative gas supplies, including U.S. LNG imports.

Germany rethinks its strategy

Now, however, German is rethinking its energy security strategy. Uniper, a major German electric utility, said on Monday it’s ready to import LNG into the country and distribute it should a terminal be built at Wilhelmshaven, close to its storage facilities.

Uniper board member Keith Martin said that the company is in talks with a number of parties including those from the U.S. and that more concrete news should be announced before the end of the year.

Martin said the company could build a Floating Regasification and Storage Unit (FSRU) at Wilhelmshaven. A FSRU has several distinct advantages over a land-based LNG import terminal, including being less CAPEX intensive and also having a much shorter construction time. It is also more flexible and can be moved to other locations if needed.

Earlier this month, German firm RWE said it had secured capacity to import LNG at a planned terminal in Brunsbuettel, with a final investment decision (FID) slated for some time next year.

Goodwill gesture

Turning up the heat

Despite Germany’s recent willingness to pivot toward the possibility of future U.S. LNG imports, the Trump administration is still turning up the heat over the matter. Steven Winberg, assistant secretary of fossil energy, said during a Senate hearing Thursday that the U.S. needs to increase its natural gas exports to Europe to counter Russia’s increasing energy dominance in the region.

“Due to a lack of supply routes and insufficient pipeline buildout, Europe is also becoming more, not less, dependent on Russian natural gas,” Winberg said. “That does not have to be the case. Our nation is endowed with vast supplies of natural gas and production is growing rapidly.”

Full article: Germany Blinks First In Ongoing European Gas War (OilPrice)

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