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Natural Gas & Liquid Natural Gas (LNG): Energy Transition

What role will natural gas play in reducing emissions? What will influence integration of LNG into German energy markets?

Natural Gas’s global growth position is underpinned by: its advantages over other fossil fuels in emissions abatement, its cost competitiveness, and its complementary (non-disruptive) integration into existing energy infrastructure and smart energy solutions that can balance the fluctuating supply of renewable energy. Its efficiency, storage capabilities, abundant availability, and economic viability legitimizes its “keystone” role in Germany’s Energy Transition.

Gas is widely accepted as best practice in bridging the German Energy Transition. Germany’s continued commitment to a cleaner and renewable-based energy market will require additional gas infrastructure investment. To hedge against ever-tightening emissions regulations and a projected natural gas import gap, the German government has announced its support for investments in LNG propulsion systems and infrastructure.

Opportunities: Market Making Legislation

  • Currently, Germany has no significant LNG market. Except for minor bunkering facilities, LNG infrastructure is non-existent.

  • Market driver: Germany’s Energiewende (“Energy Transition”) and the country’s ambitious climate goals, necessitate the construction of additional gas infrastructure. German Government and EU Legislature view investments in Natural Gas infrastructures as a priority.

  • With coal-fired and nuclear power phase-out and strong demand for clean mobility solutions, domestic gas demand is predicted to experience continued growth through 2040.

  • By requiring Transmission System Operators (TSO) to foot 90% of the grids connection costs, governmental regulators (June 2019) have confirmed Germany’s political pledge to establish large scale feed-in infrastructure domestically.

  • With large-scale LNG (import terminals with pipeline feed-in) maritime delivery the following LNG market segments should attract investment: bunker supply (bunker barge, road tanker, rail bunker), LNG depot (inland port, refueling station, peak-shaving storage, small-scale liquification), off grid (local regasification, virtual pipeline), LNG fuels (heavy road and mining, maritime vessels and marine APU, inland barges).

  • Germany is facilitating small-scale LNG investments with incentives aimed at diversifying German LNG demand.

Industry Numbers: Gas in Transition

  • Rising gas consumption predicted; annual growth rate: 2.2% until 2040
  • Germany as a net gas importer: 89 BCM in 2018, equals 95% of total demand
  • German (Europe’s largest) natural gas market over USD 200 bn in 2018, LNG share of less than 1 percent is 94.5% dependent on pipeline imports.
  • German production is in steady state of decline: from 20% of it national consumption in 2000 to around 5% in 2018.
  • Biggest growth segments: power generation, district heating and mobility.
  • European Union’s gas demand: ~500 Billion m³ (BCM) in 2017
  • European domestic production, current 30% of EU consumption, has started a descent. By 2030, EU production will account for < 10 percent of its demand.

Investment Environment/Legislative Policy: Securing Supply and Diversifying Demand

  • Germany is buoying LNG fuel demand in trucking and water-transport by offering incentives, which make LNG propulsion-systems more affordable.
  • By requiring transmission system operators (TSO) to foot 90% of the grid connection costs, governmental regulators (June 2019) have made the framework for large-scale LNG investments more feasible; three re-gas terminal currently in the planning phase.
  • EU regulation mandates clearer fuel solutions in transport and cross-border mobility.
  • Germany is a large contributor to globe’s gas sectoral know-how and engineering procurement and construction (EPC) workforce.

Statistical charts slide show: Energy Streamlined

Streamlined Energy Transition
Streamlined Energy Transition | © GTAI
German Primary Energy and Power Generation - Natural Gas’s Crucial Role in Nuclear/Coal Phase-out
German Primary Energy and Power Generation - Natural Gas’s Crucial Role in Nuclear/Coal Phase-out | © RWE: (BDEW Statisches Bundesamt (Feb. 2018)), Arbeitsgemeinschaft Energiebilanzen e. V. (May 2018)
Cleaner and More Efficient Energy Market - Gas Capturing Market Share in Germany
Cleaner and More Efficient Energy Market - Gas Capturing Market Share in Germany | © Exxon (Energieprognose Deutschland 2018–2040)
Gas vs. Coal Effluents
Gas vs. Coal Effluents | © Energy Institute Administration (Natural Fuel,
European Gas Imports in 2018 (BCM)
European Gas Imports in 2018 (BCM) | © Cedigaz 2019
EU Natural Gas Imports
EU Natural Gas Imports | © Energy Insights, McKinsey & Company (Feb 2018)
LNG Global Snapshot
LNG Global Snapshot | © International Energy Association, OECD Stats 2018
Regulations: Maritime Fuel Emission
Regulations: Maritime Fuel Emission | © International Maritime Organisation (IMO) , MARPOL
Global Double-Digit Growth in Maritime LNG Fuel
Global Double-Digit Growth in Maritime LNG Fuel | © Shell LNG Outlook 2019; Shell interpretation of DNV-GL & Woodmack
LNG Fueling European Transport
LNG Fueling European Transport | © Shell LNG Outlook 2019; Shell interpretation of DNV-GL & Woodmac
Europe’s Diversifying LNG Demand
Europe’s Diversifying LNG Demand | © GTAI
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