Farewell to Russian gas because of the Ukraine war: winners and losers at a glance

Enlarge image

Liquid gas freighter in the LNG terminal in Rotterdam:

heat with shale gas from the USA so as not to become a toy for Russia

Photo: AFP

A halt to the Nord Stream 2 natural gas pipeline, an exclusion of Russian banks from the Swift payment system, 100 billion euros for the German armed forces, rocket-propelled grenades and Stinger missiles for Ukraine: Germany has responded to the Russian attack on Ukraine with measures that are still planned few days hardly anyone would have thought possible.

"We have to find the strength to set limits for warmongers like Putin," said Chancellor Olaf Scholz (SPD) on Sunday.

German companies and citizens are facing burdens, added Finance Minister Christian Lindner (FDP).

But Germany is ready "to bear these burdens, because they are the price of freedom."

And Economics Minister Robert Habeck (Greens) was specific: "We need alternatives to Russian natural gas so as not to become Russia's pawn."

Extremely reduce dependence on Russia

One thing is clear: Germany wants to drastically reduce its dependency on Russian natural gas, and in extreme cases even wants to do without the natural gas of the Russian aggressor Vladimir Putin altogether.

This is still an extreme scenario, because the Federal Republic currently obtains around half of its natural gas requirements from Russia.

The exclusion of Russian banks from the Swift payment system is still designed in such a way that Germany is still able to pay its natural gas bills to Gazprom and Co by individual transfers if necessary.

But EU countries like Poland are already calling for the Nord Stream 1 pipeline to be closed after Nord Stream 2.

Natural gas from Norway and the expansion of renewable energies are not enough

If the conflict with Russia escalates further, the cards in Europe's energy monopoly will be reshuffled.

Then concrete calculations will be made as to how an energy supply in Europe can function without Russian imports, so as not to become a plaything for the warmonger Putin.

Natural gas suppliers such as Norway (covers around 30 percent of German natural gas requirements) or the Netherlands (13 percent) will not be able to close the gap if Russia fails.

The expansion of renewable energies will take a few more years: Wind and solar energy currently only cover around 15 percent of Germany's energy requirements.

And a return to nuclear power is politically hardly enforceable.

Liquid natural gas should fill the gap

Germany will therefore continue to be dependent on energy imports in the medium term - and in doing so relies primarily on liquefied natural gas (LNG), which can be delivered by ship frozen to minus 160 degrees.

So far, Germany has not had its own terminal for this and is dependent on LNG acceptance points such as Rotterdam, where the deep-frozen natural gas is reheated and converted back into the gaseous state in evaporation plants.

This is complex and expensive - which is why LNG is also more expensive than natural gas, which is transported via pipeline.

Now LNG terminals in Brunsbüttel and Wilhelmshaven are to be built as quickly as possible: "We will change course to overcome our import dependency on individual energy suppliers (such as Russia)," Scholz said on Sunday during the historic special session of the Bundestag.

And the winner is …USA

Fracking in Pennsylvania:

America's return to energy superpower

Photo: SPENCER PLATT/ AFP

While Germany is accelerating the construction of the terminals, numerous LNG super freighters are changing course.

They no longer head for Asian ports, but set course for Europe.

Japan has agreed to give up quotas that it does not urgently need itself in the short term in favor of Europe.

In addition, European customers are currently paying almost 20 percent more for the coveted goods - which makes it easier for suppliers to change course.

But even this short-term redistribution is not a permanent solution.

The only country that can ship large quantities of the LNG to Europe at short notice is the USA.

Thanks to controversial fracking technology, which extracts oil and gas from shale rock, the United States has now become the world's largest exporter of liquefied natural gas, ahead of Qatar and Australia.

The USA is once again an energy superpower – and should benefit greatly from the restructuring of Europe's energy supply.

"Freedom Gas" vs. "Putin Gas"

Donald Trump had already promoted the "Freedom Gas" obtained through fracking in Europe - and strongly railed against the construction of Nord Stream 2.

As a result of the war in Ukraine, the tendency among EU countries to purchase energy and gas from their most important ally rather than continue to be dependent on Putin's gas has increased significantly.

A double benefit for the USA: it binds its allies closer to itself – and at the same time earns money from its energy exports.

Qatar is still the largest LNG importer in the EU.

According to the Federal Institute for Geosciences and Natural Resources, Qatar delivered around 27 billion cubic meters of LNG to the EU in 2020, the USA just under 23. While Qatar also serves numerous Asian countries in addition to Europe and the delivery volume reduced by 10 percent, the USA was able to continue its deliveries for the partners in increase by almost 40 percent in the EU.

There is enough gas: In the Marcellus Basin in northeastern Pennsylvania, for example, large amounts of shale gas are suspected.

The Steep Rise of Cheniere Energy

US producers of liquefied natural gas such as

have increased their production sharply in recent months.

The company only started production in 2016;

Cheniere is now the largest LNG producer in the United States and the second largest LNG operator in the world.

Headquartered in Houston, the company operates two liquefaction plants with a total capacity of approximately 45 million tons of LNG per year and serves markets on five continents.

In Texas, the group is currently expanding its capacities.

Biden promotes fracking boom

This expansion is also politically desired.

President Joe Biden, who months ago described his counterpart Vladimir Putin as a "thug" ("rogue"), has put his eyes firmly on Europe: not the "rogue state" Russia, but the USA should supply Europe with energy in the future.

Should the Iron Curtain come down again soon on Poland's eastern border, the Europeans would at least not have to freeze.

The USA has built seven export terminals for liquid gas in the past 6 years.

Experts estimate that exports to Europe increased by around 75 percent between November and December 2021.

And with the current high prices, the production and export of fracked gas is a brilliant business for the USA.

Qatargas also benefits from high prices

Another winner of the "turning point" that Chancellor Scholz announced with regard to security policy and energy supply will in all probability also be

.

The Doha-based energy company, controlled by the State of Qatar, operates 14 gas liquefaction plants for LNG with a total annual production capacity of 77 million tons.

The Qatari ambassador in Berlin said the country was basically ready for larger gas deliveries to Germany.

However, suppliers in Qatar are tied to long-term contracts with Asian customers for large volumes of their liquid gas.

Therefore, Qatar is not likely to expand its supply for Europe as much as the US.

Norway's Equinor at the limit

(formerly Statoil), which is Germany's second largest natural gas supplier after the Russian Gazprom

, is also currently producing almost at the limit .

Equinor is currently undergoing maintenance on its facilities, which is limiting production.

The Norwegian natural gas is produced in the Troll gas field in the North Sea and, after being processed and cleaned, is transported through the offshore pipelines to terminals in Emden and Dornum on the German North Sea coast.

From there, the natural gas is either routed to natural gas storage facilities or fed into the long-distance gas network.

LNG providers, renewables and defense companies benefit

Liquid gas providers who still have free capacities or can quickly increase their production are among the biggest short-term winners of the new energy order.

In the medium term, providers of renewable energies should also benefit, because the expansion of wind and solar energy should serve as a long-term solution and ensure that Germany gradually has to import less energy.

At the same time, Germany is investing more energy in better equipping the Bundeswehr.

The shift in foreign and security policy and the €100 billion special budget for the German armed forces will bring full order books to European armaments companies.

In the future, Germany intends to invest more than two percent of its GDP in defense every year – this two percent has been NATO's target for years.

Losers: Uniper, Wintershall DEA, OMV

Enlarge image

Stopped:

The Nord Stream 2 natural gas pipeline will not be put into operation for the time being

Photo: ODD ANDERSEN / AFP

The losers of the new German policy include those companies that financed the Nord Stream 2 pipeline together with the Russian gas company Gazprom.

Gazprom holds 50 percent of the project company and thus finances half of the costs.

The rest of the costs are shared by the German companies Uniper and Wintershall DEA, the British oil company Shell, the French supplier Engie and the Austrian supplier OMV.

The oil and gas company Wintershall DEA assumes that the project company will be compensated if Nord Stream 2 is canceled.

The BASF subsidiary expects that "the contractual obligations towards the financial investors would be fulfilled".

Wintershall has provided the Nord Stream 2 project company with a loan of EUR 730 million.

The total costs were estimated at 9.5 billion euros.

It is still too early to say whether the stop for Nord Stream 2 is really the final end of the pipeline, said Wintershall DEA CFO Hans Ulrich Engel.

Wintershall has been working with Gazprom for decades.

In western Siberia, the German company has a stake in two large natural gas fields from which the substance is fed via Nord Stream into German heating systems,

The Düsseldorf-based energy group Uniper also has to worry about loans of almost one billion euros that the company made available for Nord Stream 2.

The pipeline is a "significant individual risk," Uniper announced last week.

It is not just about a possible default on the loan, but also about the loss of the expected interest.

Apart from its investments in Nord Stream 2, Uniper also buys large amounts of gas from its Russian partner Gazprom to meet its own supply obligations.

If the connection to Gazprom were to be cut, Uniper would have to change course and buy from other suppliers – at probably significantly higher prices.

Overall, the Federal Association for Wholesale and Foreign Trade reassures, the importance of Russia with a share of 2.3 percent in German foreign trade is quite manageable.

However, this does not apply to companies in the energy sector; they have to adapt to a new competitive situation.

In the long term, a restructuring of the European energy supply is pending, said Dekabank chief economist Ulrich Kater.

Russia's war of aggression in Ukraine is fundamentally changing the geopolitical and economic framework for Europe.

It is still unclear whether the "price of freedom" that Finance Minister Lindner and German taxpayers are willing to pay also includes compensation for the energy companies Uniper and Wintershall.