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BERLIN – Chancellor Angela Merkel has offered her support to Germany's efforts to open up US gas, a key concession of President Trump while he was trying to loosen the grip of the Russia on the largest energy market in Europe.
During this month's breakfast, the Chancellor told a small group of lawmakers that her government had decided to co-finance the construction of a 500 million liquefied natural gas shipping terminal. 39; euros (576 million dollars) in northern Germany, according to sources close to the meeting. a crucial boost for a project that had failed to start in years in a country that draws most of its gas from Russia at a lower cost.
Trump has lobbied Europe to buy large quantities of LNG as part of his campaign to rewrite the terms of trade relations. German and US officials said Berlin hoped the US gas would resolve a protracted trade dispute and could even defuse Washington's threats to punish Nord Stream 2, a non-built gas pipeline between Germany and Russia that would double the current gas export capacity from Russia to Germany.
When she informed lawmakers in Germany's northern coastal region, Merkel did not describe her change of mind as a defeat, but as a "strategic" decision that could bear fruit in the long run, according to the population. Experts agree that opening up its energy market will not bring immediate economic benefits to Germany, but could eventually help the country diversify.
For years, the projects of construction of a LNG terminal by several groups were blocked because no governmental support made it possible to make profitable such a project. On 16 October, less than a week after the meeting, an international consortium presented its first official offer of state aid to a terminal in the city of Stade, in the north of the country, near Hamburg.
A ceremony was held on a terrace overlooking the Brandenburg Gate, emblematic of Berlin, in the presence of senior officials and US Ambassador Richard A. Grenell, a confidant of Mr Trump and the main relay of the President in his efforts to lobbying.
"We create jobs and we also deepen transatlantic relations. The United States is fully committed to bringing US LNG to Europe and Germany, "said Mr. Grenell.
A ship lays a pipeline for the Nord Stream 2 pipeline, which will deliver Russian natural gas to Germany.
Photo:
Sean Gallup / Getty Images
The support that Berlin will provide and in what form (cash grants, loans, credit guarantees, loss protection for investors or a mix of all four) remains unclear. But the government has already decided to speed up the review of the application, according to people familiar with the process, making decision-making likely by the end of the year.
The Stade project is supported by
Macquarie
Ltd.
, the Australian financial group,
Port Engineering of China
Co
mpany ltd, a Chinese dredging company, and
DowDuPont
Inc.
the United States
Two competing consortiums are expected to file their own applications for government aid for the construction of a LNG terminal – one in Brunsbüttel, about 30 km north of Stade, and the third at Wilhelmshaven, a nearby maritime base. and equipped with a container container Terminal. German officials said Stade and Brunsbüttel were in the lead because of their stadium and location advantages.
US LNG is mainly extracted from underground rock formations, processed into liquid and shipped by tanker trucks 300 meters in length. It requires special terminals for unloading, storage and reconversion into gas. This complex process means that it remains about 20% more expensive than Russian gas, which is delivered directly to Germany, mainly via the Nord Stream Pipeline.
Government officials derided some of the German projects as white elephants who had no chance of making a profit. A 2016 study by the University of Cologne revealed that the German terminal would not be viable in the short term as the market's LNG needs could be covered via an existing terminal in the Netherlands.
During her conversation with local lawmakers, Merkel said she did not think a methane terminal would be profitable for at least a decade and would require long-term government support.
Dan Brouillette, US Deputy Secretary of Energy, said LNG was a priority for President Trump.
Photo:
adrian dennis / Agence France-Presse / Getty Images
A spokesman for the German government said the decision to finance a terminal was made in accordance with commercial interests and not US pressure.
One of the arguments put forward by the United States in Germany is that the purchase of LNG in the United States would improve Germany's energy security by making it less dependent on Moscow. Russia accounts for more than 50% of German gas imports, with the remainder coming mainly from Norway and the Netherlands, according to BPO's global energy statistics report in 2018. Mr Trump reiterated to several times that Berlin was "captive" in Moscow and would become dependent on Russian exports.
Dan R. Brouillette, US Under Secretary of Energy, said the US government was "very firmly" convinced that Berlin should not put all its eggs in one basket. "LNG is a personal priority for the president and a political priority for the government," he said.
A Dow Chemical plant in Stade sur l'Elbe.
Photo:
Carsten Rehder / dpa / Associated Press
According to some experts, the economy of LNG should improve. Germany wants to get out of the nuclear industry and its dependence on coal, which produces large amounts of CO2 that warms the climate, means that it will have to use cleaner gas to achieve ambitious climate goals, said Oswald Clint, expert in LNG in London.
Gas exploitation in the Netherlands is expected to end within ten years due to environmental concerns, and US LNG could offset this share of the German market, he said.
Manfred Schubert, CEO of LNG Stadium, said his site would be fully operational by 2023 if funding was granted by the end of the year.
"Grants would make our project more attractive, but it has a solid economic base and will be profitable," he said.
The terminal would be based in Dow's 550-hectare (1400-acre) Dow chemical plants located on the shore of the Elbe. Dow did not publicly comment on the project, but senior executives said the plant's connection to the German gas network offered synergies that would make it possible to build a LNG terminal about 100 million euros cheaper than other sites proposed.
Oliver Grundmann, a member of the Merkel conservatives in the Stade constituency, said the terminal could supply LNG to the port of Hamburg to refuel new ships. AidaNova, a luxury cruise ship owned by
Carnival
Corp.
& PLC, which will be launched this month, will be the first to be powered by LNG, in line with new environmental regulations.
"We need to take this step now, not just because Mr Trump demands it, but because it is necessary for our future," Grundmann said. "Stadium will be a symbol of the new transatlantic relationship."
