German Antitrust Approves Coordinated Utility LNG Import Plans

Strong points

Uniper, RWE, EnBW/VNG signed a supply memorandum of understanding in mid-August

Benefits of plan outweigh competition concerns: Mundt

German government in talks over gas nationalization

Germany’s antitrust authority has approved plans for three key German gas importers to coordinate LNG supplies from two floating LNG terminals, saying the urgent need for new gas supply outweighs competition concerns.

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In a September 15 statement, the Bundeskartellamt said it had no competition concerns about how Uniper, RWE and EnBW/VNG currently plan to work together at the Wilhelmshaven and Brunsbuttel FSRUs.

The three companies signed a memorandum of understanding with the German Ministry of Economics in mid-August on the operation of the two FSRUs and on the supply of LNG to the terminals in order to guarantee their full use.

“The rapid commissioning of LNG terminals can create urgent and price-reducing gas import capacities in a relatively short period of time,” said Bundeskartellamt President Andreas Mundt.

“The consumer benefits associated with this outweigh the negative effects on competition.”

Germany – which currently has no LNG import infrastructure – is accelerating work to deploy FSRUs in Wilhelmshaven and Brunsbuttel to compensate for lost Russian gas volumes.

The reduction in Russian flows to Germany via Nord Stream since mid-June and then the complete halt in deliveries at the end of August have helped keep European gas prices at sustained levels.

Platts, part of S&P Global Commodity Insights, priced the price of Dutch TTF at an all-time high of 319.98 euros/MWh on August 26. It was last assessed on September 15 at 212.25 euros/MWh, still 220% more year-on-year.

Germany is developing a total of five state-supported FSRU projects, but the initial focus is on supplying LNG to the Wilhelmshaven and Brunsbuttel sites.

As part of the MoU with the Ministry of Economy, it was agreed that the two terminals would be operated by Uniper and RWE on a transitional basis until a special purpose vehicle takes over operation.

In addition to Uniper and RWE, EnBW and its subsidiary VNG have been tasked with ensuring the supply of LNG to the FSRUs, with the corresponding legally binding contracts being drawn up.

The three companies will be responsible for supplying LNG to the two FSRUs for a limited time until March 2024.

‘Exclusive use

The two terminals combined will have a regasification capacity of up to 12.5 bcm/year and will give Germany direct access to the global LNG market for the first time.

Mundt said the LNG cooperation agreement was considered to be of crucial importance for the security of German gas supply.

“In normal times, the cooperation between these three very important gas importers and wholesalers – and in particular the exclusive use of import capacities at the terminals – should possibly be assessed more critically,” he said.

“It was also important to us that the planned operator model was initially in place for a limited period until March 2024.”

The Bundeskartellamt said LNG would be supplied by the three companies based on fixed supply quotas.

“The companies involved will continue to source LNG independently from each other on the global market,” he said. “The marketing of imported gas will also be carried out separately.”

He added that it should also be taken into account that developing a viable access model for other gas importers would require some time.

“A complex access model also including additional providers might not guarantee the maximum use of terminals that we urgently need, at least not in the short term,” he said.

Nationalization talks

Meanwhile, the German government remains in talks with Uniper over the possibility of taking a “significant” majority stake in the utility.

In July, the German government said the state would take a 30% stake in Uniper and allow the cost of purchasing gas to replace lost Russian volumes to be passed on to consumers from October as part of a a stabilization program.

However, with gas prices surging again in August, the state is now considering a higher stake.

VNG also requested stabilization measures due to the high cost of purchasing gas to replace lost Russian volumes.

VNG is Germany’s third-largest gas importer and storage operator and has been forced to purchase replacement gas on the open market at high prices due to reduced Russian gas supplies.

The German government is also reportedly considering a majority stake in VNG as well as trader SEFE – formerly Gazprom Germania – which is currently under the supervision of the German energy regulator.

James R. Rhodes