Germany’s Russian gas fix raises alarm in Merkel’s backyard

Bloomberg

Hidden by pine forests near the deserted site of what was once East Germany’s biggest nuclear reactor, two shiny pipelines emerge from the Baltic Sea to mark the spot where Chancellor Angela Merkel is trying to secure the country’s energy future.
Not far from the Hanseatic town of Greifswald — an area Merkel represents in parliament — the chancellor wants a $10 billion pipeline expansion built to increase the amount of Russian natural gas imported from Siberia, more than 3,000 kilometers (1,864 miles) away. The project, led by Russia’s state-run Gazprom PJSC, is intended to bolster German confidence that it has enough gas to underpin an unprecedented transition from the coal and nuclear plants, which are being closed, to a future dominated by renewable energy.
But the plan has opponents, both close to home and further afield. People living in the sparsely populated area have filed almost 160 objections. Local approval is still pending and the site also requires removal of two shipwrecks sunk by the Swedish navy in the 18th century. European allies have also objected — worried that the project will deepen Europe’s reliance on supplies from an increasingly antagonistic Russia — and US lawmakers have proposed stiffer sanctions on energy companies that do business with Russia.
“There are not many other places apart from Russia where Germany can get a lot of gas quickly,” said Jonathan Stern, chairman and senior research fellow at the Natural Gas Research Programme of the Oxford Institute for Energy Studies.
Already Europe’s biggest gas user, Germany gets about 40 percent of what it consumes from Russia, the world’s largest exporter, according to industry consultant Wood Mackenzie Ltd. in London. That dependence is only going to increase by 2025 to more than 50 percent, especially with output from the Netherlands, Germany’s western neighbor, set to drop in coming years.
The Gazprom project, known as Nord Stream 2, also will allow for deliveries elsewhere in Europe, making Germany an even more important hub for distributions across the continent. Russia already supplies more than 20 countries with gas used to run power plants, heat homes and make chemicals.

DOUBLING SHIPMENTS
The existing link was commissioned in 2011 and runs for 1,224 kilometers under the Baltic Sea from Vyborg, Russia, to Lubmin in Germany. It is able to carry 55 billion cubic meters of gas, or two-thirds of German gas demand, and the expansion will double that.
Transporting gas through Nord Stream to Germany is about 40 percent cheaper than through land-based pipes via Ukraine, according to Wood Mackenzie. Natural gas futures rose 4.8 percent to 37.94 pence a therm on ICE Futures Europe on Monday.
Germany, the UK, France, Belgium and the Netherlands will likely benefit from lower prices, according to Brussels-based think tank Bruegel. Gazprom would also avoid transit fees paid to use pipelines in Ukraine and Poland, Bruegel said. The company plans to reduce flows via Ukraine after 2019.
Germany’s approval procedures mean that infrastructure projects can be delayed by local opposition. A hearing is scheduled to start July 17 in Stralsund, Germany, according to the Ministry of Energy and Infrastructure in the state of Mecklenburg-Vorpommern.
Meanwhile, time is running out for Merkel to help Germany meet its 2020 climate goals. Despite the transition known as the Energiewende, the country is at risk of missing its target to reduce carbon emissions by 40 percent from 1990 levels. After federal elections in September, the new government may have to present proposals for closing down power plants that run on coal, which still provides about 40 percent of the nation’s electricity generation.
Gas may provide a fifth of Germany’s power in five years, almost double current levels, according to HSBC Holdings Ltd. Germany’s journey toward a renewable energy system began almost two decades ago.