The European Commission (EC) has approved the German government’s request to spend $4.2 billion to subsidize four floating liquefied natural gas (LNG) import terminals, part of Germany’s urgent efforts to reduce its dependence on pipeline gas from Russia, according to the Maritime Executive website.
Under normal rules, state subsidies are strictly limited to ensure competitiveness within the European Union (EU). However, the EC believes that Germany's proposal is reasonable and necessary in the context of the current energy crisis.
The funding will be allocated to Deutsche Energy Terminals (DET), a German state-owned company, to manage four floating storage and regasification units (FSRUs) at the ports of Brunsbüttel, Stade, and Wilhelmshaven, located along the northern coast of Germany.
The floating terminals were rushed to Germany in late 2022, as Europe faced a severe energy crisis due to Russian gas supply cuts. Germany agreed to pay high rental costs to ensure it had enough LNG to keep its economy running.
Deutsche Energy Terminals (DET) was established to market and operate FSRUs, providing gas receiving capacity through short- and medium-term auctions to European gas importers. However, the gap between auction revenues and actual rental costs has caused DET to incur losses. The German government subsidy is designed to offset these losses.
If losses exceed forecasts, the support package could rise to $5.2 billion. However, Germany has pledged to decommission the floating terminals at Brunsbüttel and Stade after completing the permanent onshore facilities, and to lease out the unused FSRUs to the international market.
The massive investment in fossil LNG infrastructure has drawn criticism from environmental groups, who say it could keep Germany dependent on natural gas for decades to come, undermining its goal of reducing greenhouse gas emissions.
However, according to the Institute for Energy Economics and Financial Analysis (IEEFA), the trend of LNG imports into the EU has slowed down. “Europe’s LNG terminal construction may be coming to an end. Several countries have postponed or cancelled new LNG infrastructure projects, including Albania, Cyprus, Ireland, Latvia, Lithuania and Poland. It is unclear whether three projects in Greece will proceed,” said Ana Maria Jaller-Makarewicz, energy analyst at IEEFA.
