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Nand it’s okay. In order to reduce Germany’s great dependence on gas supplies from Russia as quickly as possible, the first terminals for the delivery and distribution of liquid gas LNG are to be built on the North Sea in Wilhelmshaven and in Brunsbüttel. In Brunsbüttel, the Dutch terminal specialist Vopak LNG Holding threw in the towel in December and wrote off its investments. Now the federal government is getting involved via the KfW development bank with 500 million euros and 50 percent of the operating company, 40 percent is taken over by the state-owned Dutch gas network operator Gasunie and ten percent by the supplier RWE. Gasunie is to be the operator of the plant.
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In addition to Brunsbüttel and Wilhelmshaven, Stade and Rostock are also being discussed as locations for LNG terminals. According to the energy association VDEW, 36 LNG terminals are in operation across Europe.
According to the VDEW, the Federal Republic of Germany can obtain LNG via existing pipelines from the terminals in Gate in the Netherlands, from Dunkerque in France and from Zeebrugge in Belgium until Germany’s terminals are operational, which according to initial estimates is in Brunsbüttel at the earliest in 2025.
Oil and gas together accounted for 59 percent of Germany’s energy consumption in 2021. Two thirds of the gas supplies come from Russia, 21 percent from Norway and just over eleven percent from the Netherlands.
In order to secure Germany’s LNG supplies, Federal Economics Minister Robert Habeck traveled to Doha, the capital of the desert state of Qatar. The world’s second largest producer of liquid gas after Australia intends to significantly expand its capacities over the next few years. Habeck managed to agree “a long-term energy partnership” with Qatar. In the short term, however, the agreements do not help Germany to replace gas from Russia. This is probably one of the reasons why Habeck warned that the planning and construction work for LNG terminals in Brunsbüttel and Wilhelmshaven must be significantly shorter than the five years that have been usual up to now.
Substitute for 40 percent of EU gas
On March 23, Russia announced that it would only accept rubles for gas exports in the future. This radical measure by the Kremlin, which also breaks existing supply contracts, made gas more expensive by 30 percent on Wednesday. In Europe, Russia covers around 40 percent of gas requirements. The Kremlin’s maneuver to prop up the national currency is likely to affect the EU’s plans to replace a significant portion of Russian gas with additional LNG within a year. According to calculations by the US stock exchange service Bloomberg, this would require imports in the order of almost 40 million tons. That almost corresponds to the annual requirement of South Korea. The country is the third largest buyer on the world market. DEU demand would far exceed the additional supply available. Around 65 percent of LNG production is secured by long-term contracts: “This would put enormous upward pressure on spot prices,” warns Saul Kavonic, energy analyst at Bank Credit Suisse. Global gas supplies are scarce. Europe’s LNG plan is likely to boost efforts by Asian countries to secure gas. “It’s very inefficient when Australian LNG goes to Europe, but that could happen. Most of the rules of the energy markets have been thrown overboard,” says expert Kavonic.
Reorganization in the gas market
Meg O’Neil, CEO of Woodside Petroleum, said: “The world will think soberly about the path to energy diversification and look to countries like the US and Australia to see how they can support like-minded countries, theirs energy supply,” she said recently at a conference in Sydney. Woodside Petroleum is Australia’s number 1 in natural gas and LNG.
The global effects of Russia’s war in Ukraine will change the gas market forever. According to the VDEW, Europe’s LNG terminals were 40 percent utilized in 2020, so there is potential for higher delivery volumes even without new buildings. However, it remains to be seen how well the additional LNG can be distributed via the infrastructure in Europe. Norway’s Equinor, Germany’s second largest gas supplier, is also expected to increase its export capacity.
On his trip to the Persian Gulf, Economics Minister Habeck also visited the United Arab Emirates with a delegation of representatives from German companies, including RWE boss Markus Krebber and Thyssenkrupp director Martina Merz, to negotiate hydrogen cooperation in Abu Dhabi.
Hydrogen is a business with great potential for both RWE and Thyssenkrupp. RWE, once Germany’s second-largest supplier of electricity from gas and coal, is now aligning its business model with renewable energies and hydrogen. After swapping business areas with ex-competitor Eon, now Europe’s largest network operator, RWE is Germany’s largest supplier of green electricity.
In Brunsbüttel, RWE is also building a terminal for green ammonia in parallel with its participation in the LNG terminal. Green because the gas is produced from three hydrogen and one nitrogen molecule using electricity from renewable energies.
Ammonia, a coveted raw material for nitrogen fertilizers, is also a convenient transport medium for hydrogen. From 2026, 300,000 tons of green ammonia are to be delivered to Brunsbüttel each year in order to distribute it to RWE’s customers. In the next expansion stage, green hydrogen is also to be produced from the ammonia. RWE wants to deliver the energy source directly to industrial customers via pipelines. For this purpose, up to two million tons of ammonia are to be delivered to Brunsbüttel every year.
The potential of hydrogen
Meanwhile, the industrial and steel group Thyssenkrupp is preparing for the IPO of its hydrogen subsidiary Nucera. The company has developed a new alkaline water electrolysis technology to produce green hydrogen on an industrial scale. At the turn of the year, Nucera’s order backlog was 900 million euros. At the end of December, US industrial gases manufacturer Air Products ordered a plant with a capacity of two gigawatts for one of the largest green hydrogen projects.
The market potential for companies like Dortmund’s Nucera, NEL Asa from Norway and Plug Power from the USA is enormous. The high gas prices should accelerate the technological change from gray to green in the production of hydrogen, i.e. the replacement of natural gas with water electrolysis with electricity from the sun and wind. According to Nucera, 110 billion dollars were recently sold worldwide with gray hydrogen. With the use of water electrolysis for green hydrogen, experts expect a sevenfold sales volume by 2050. The world’s largest industrial gases group, Linde, which generates around seven percent of its sales with hydrogen, is also one of the big winners.
The power of sun and wind
Electricity from wind and sun is the basis not only for hydrogen, but for the entire climate-friendly conversion of the economy – i.e. also for the change from gray to green in the production of ammonia, methanol and refinery products. In the EU, 50 billion cubic meters of gas are used for this purpose each year. Switching to electrolysis with green electricity would reduce Europe’s gas consumption by an impressive twelve percent. Here, too, the high gas prices should accelerate the switch to green and thus also the expansion of capacities for electricity from the sun and wind.
A good fifth of Russian gas supplies, which according to the EU Commission’s RePowerEU agenda will be replaced within a year, are to be offset by green electricity from wind and solar parks. This is good news for RWE and the world’s largest operator of offshore wind farms, Denmark’s Ørsted.
Because wind farms and solar parks can be set up much more quickly on land than green power plants at sea, business at Bremen-based utility Energiekontor should also pick up. In Germany, the Hanseatic League supplies electricity from 28 wind farms and a solar park. In order to grow quickly and to supply companies directly with green electricity in the future, Energiekontor is now taking over half of its projects in its own portfolio.
The business of large suppliers is also likely to pick up speed: for example at the Danish wind turbine developer Vestas or at First Solar, whose thin-film solar modules are slightly more expensive but more efficient than the mass-produced goods from China. Enphase Energy, also from the USA, sets trends with its microinverters. The modules that convert the direct current from the solar cells to the alternating current for the grid are much smaller than competing inverters and connect individual solar modules directly to the grid. This makes their use flexible.
INVESTOR INFO
Norway’s energy giant, formerly known as Statoil, is Europe’s second largest supplier of gas. The EU’s goals for a quick replacement for Russian gas are ambitious. Supply is scarce and reserves in gas storage facilities are low. Higher prices and additional deliveries from the Norwegians are therefore likely. For 2022, analysts expect sales of $112.6 billion, an increase of more than 25 percent. Profits are expected to increase by almost 30 percent.
Europe’s plan to become independent of Russian energy resources as quickly as possible and Germany’s plan to use 100 percent renewable energy from 2035 is driving RWE forward. By 2030, the group wants to add 2.1 gigawatts of wind and sun to its portfolio every year. It will be exciting at the Annual General Meeting on April 28th. Investor Enkraft demands the spin-off of the coal division.
The Perth-based natural gas giant has the equivalent of a good 100 million barrels in reserves. Woodside is benefiting from strong demand from major Asian countries. High gas prices, which provide 80 percent of revenues, should give Woodside a record year. With sales of a good nine billion dollars, analysts expect an increase of 34 percent. Net profit could increase by 40 percent to two billion dollars.
On Thursday, the operator of solar and wind parks in Europe presented the balance sheet for 2021 and the outlook for the current year. For 2022, analysts expect sales of EUR 252 million, a significant increase of 50 percent, and net profit of EUR 45.7 million, growth of more than 60 percent.
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