LNG IS SEEN AS A SOLUTION TO RESTORE THE ENERGY SECURITY OF THE EUROPEAN COUNTRIES.
DUE TO DWINDLING OIL AND NATURAL GAS RESERVES IN THE NORTH SEA, EUROPE IS LOOKING FOR ALTERNATIVE ENERGY SOURCES.
The real question we have to ask ourselves here is where the advantages of LNG lie relative to petroleum. I have previously talked about the future potential of LNG. Firstly, there is the problem of LNG having to be shipped from port to port, with more and more LNG tank farms having been built in East Asia, the USA and Europe in recent decades, but they are far less extensive than oil tank farms because of their technical characteristics and safety concerns. In the meantime, the situation is such that many LNG ports are no longer profitable because the geographical proximity to other LNG ports leads to high competitive pressure and reduces profitability.
Until recently, the Port of Hamburg, in cooperation with the Federal Republic of Germany, had been considering whether it would make sense to invest in an LNG tank farm, but the preliminary decision fell on a location further down the Elbe, in Brunsbüttel. Now one must know, however, that even since there are no real possibilities to assume sufficient quantities and availability of LNG, due to the existing environmental protection measures in the Elbe area and the constant silting up of the river.
Also, this part of the North Sea is already heavily used by container ships, which further restricts the logistics of the new LNG port. Now the connection to the port of Hamburg is very well suited for transhipment, also due to the good logistical handling of the port of Hamburg with its intermodal connections, as well as the direct proximity of Brunsbüttel to the Kiel Canal, but also the water depth is an additional problem which becomes a problem with the increasing size of the LNG tankers. In the last decades there have been gradual adjustments in the size of the container ships, so that between the largest container ships no longer fit through the Panama Canal. As a result, more and more large ports are handling more and more raw materials, including energy supplies such as liquefied natural gas.
The decision has now been taken by various German energy companies and energy infrastructure companies involved in the project to build a new LNG terminal in Bremerhaven which will then be able to cover a large part of Germany’s import gas requirements. However, the import volume is to be largely covered by LNG supplies from Qatar, and the first political agreements have already been reached. In the spirit of American foreign policy, an American alternative to Russia is thus to be provided for Germany, a report by Reuters stated.
Potential problems could arise because the transport of LNG from Qatar is clearly expensive and geopolitical stability in the Middle East is not guaranteed from the German point of view. I have already gone into the geopolitical situation and Qatar’s energy policy in more detail. However, in contrast to Hamburg there are no problems with the water depth in Bremerhaven, which means larger LNG tankers can deliver Liquefied Natural Gas to Bremerhaven.
However, Bremerhaven is very close to the Dutch ports, especially Rotterdam, which reduces the profitability of the project. It should be mentioned that Rotterdam has only recently expanded its port infrastructure to supply the European market, including the German market, among others.
The ambition to enter the LNG business results mainly from the economic interests of the United States, which is currently able to export part of these quantities, which the American market does not need, to the European Union due to large deposits of shale oil and shale gas, where the demand for LNG is likely to be particularly high, due to the declining gas deposits in the North Sea, the lack of indigenous fossil fuels which are now almost depleted, with the exception of lignite, and the abandonment of nuclear power.
The German energy policy is closely linked to the nuclear catastrophe in Fukushima in Japan, and energy policy was quickly overturned. It must be said that the U.S. energy market exports these quantities to the European market, because this allows refineries and American industry to cover the maintenance costs and operating expenses of the refineries and the oil refining industry. If the countries of the European Union were no longer to purchase these quantities, this would result in additional costs for the American refinery business.
However, one must also consider that European energy policy regarding natural gas supplies is far more complex than it may seem at first glance. The first German liquefied gas terminal is currently being built in the port of Rostock to supply Russian liquefied gas from the St. Petersburg region to Germany with tankers. The geographical distance is only a fraction of that to the United States, and NordStream 1 and Nordstream 2, in combination with the supply of liquefied gas, are also suitable for managing and securing Germany’s energy requirements in the long term, above all to cover base load supplies.
On the other hand, there are the interests of some Eastern European states that are sceptical about Nordstream 2, with Poland forming the leading opposition to Nordstream. The dependencies on NATO should also be taken into account here, because the Eastern European states are particularly dependent on the protection of the United States. Not to forget, however, the self-interest of Ukraine and Poland, if I may say so, because transit charges are a welcome source of income for existing natural gas supplies from Russia to Central Europe.
The political tensions between Ukraine and Russia were the main reason why Russia was considering the construction of Nordstream 2, and the construction of the South Stream pipeline to the south. Bulgaria in particular sees this as a great opportunity, as do other countries in South Eastern Europe close to Russia, to become a major hub for natural gas transit, according to the U.S. Jamestown Foundation. The aim should ideally be to use the existing natural gas pipelines as well as Nordstream 1+2 and Southstream, because Europe’s natural gas requirements cannot be met at all in the long term.
Nevertheless, the European natural gas market is currently hotly contested, and due to the military tensions between the US and Russia, Russia which is in an alliance with China, the American government is trying to exert an economic influence on Russia by depriving Russia of state revenues. The American news channel CNBC mentioned that the United States had never exported as much LNG as in October 2018, namely 25% of total LNG deliveries to the European Union.
This helps us to put US foreign policy statements towards Germany into context, because this plays out along the lines of economic and military interests, both of which are currently gaining in importance and are leading to foreign policy tensions in energy policy. However, it should also be mentioned that the Nordstream 2 is already under construction and from a German point of view, not participating in Nordstream would mean that the gas deliveries will go to China instead. Germany would have to pay a higher price for LNG from Qatar and the United States in that case.
We have to keep in mind that Russia does not only have enormous natural gas reserves, but also enormous oil reserves on top of that. In principle, Russia is in competition with other oil-producing countries such as Iran, but Russia and Iran stand side-by-side on energy issues currently, partly due to their involvement in Syria, and confrontational approach to the United States.
This has also been mentioned by the magazine Modern Diplomacy. Again, military interests have become intertwined with energy issues. The global oil market is a mature global business much more than the global market for natural gas, while the LNG business is, relatively-speaking, still in the start-up phase.
So when it comes to energy issues, LNG has a long way to go to become a viable alternative to oil imports from Russia.