RWE AG (RWE.XE) is seeking political assistance for a planned entry point for liquefied natural gas in northern Germany, Stefan Judisch, chief commercial officer at RWE Supply & Trading, told Dow Jones Newswires in an interview conducted earlier this week.
RWE wants the LNG hub dubbed GasPort to be hooked to the E.ON AG (EOAN.XE) operated gas storage in Etzel, located around 20 kilometers west of Wilhelmshaven. From there it would have access to the German natural gas grid.
However, "E.ON is asking for around EUR22 million per year for such a connection and feed-through charges, which would equate to around EUR400 million over a 20 year period," Judisch said.
"These are dimensions that would make the GasPort economically unviable."
The crucial point for a final investment decision is the grid connection, he said, adding that the company is therefore in talks with the federal government and the government of the state of Lower Saxon to find a solution for grid access that would make the project economic over the long-term.
Such a solution could aim at "socializing the grid connection fees according to the model we know from the electricity market," Judisch said.
For example, in the German electricity market, operators of wind farms don't have to pay grid connection fees to provide an investment incentive for such infrastructure. Grid connection and feed-through charges for such wind power facilities are passed directly to the customer via by the grid operator.
E.ON Gastransport, the company's gas grid operator, and the federal economics ministry couldn't immediately comment on the issue.
Traditionally, markets like North America and Southeast Asia are relying more heavily on LNG because they have less access to pipeline gas. As a result, LNG prices are higher in those markets than in Europe. Hence the Wilhelmshaven GasPort would likely be frequented less often by LNG tankers than similar facilities in regions where prices are higher, making the connection and feed-through charges uneconomic.
RWE would like to make the investment decision as soon as possible and has said it would around one year from the construction of the facility to beginning its operations.
Last year RWE, acquired a 50% stake in U.S. LNG company Excelerate Energy LLC, which owns a fleet of specially designed LNG tankers capable of regasifying the LNG before delivering directly into the pipeline grid. This by-passes the need for traditional onshore LNG regasification terminals and storage tanks.
GasPorts like the one RWE plans in Wilhelmhaven are the entry points for LNG shipped by the Excelerate vessels.
Excelerate already operates such GasPorts at Teesside in the U.K. and Bahiah Blanca, Argentina. Another one is under construction in Mina Al Ahmadi, Kuwait.
The plans for Wilhelmshaven foresee a capacity to feed up to 600,000 cubic meters an hour of regasified LNG into the German gas grid. This would equate to up to around 5.3 billion cubic meters a year.
Judisch said for Germany, which due to its geographic location is well supplied with pipeline gas from producing countries such as Russia and Norway, LNG isn't destined to become a source for baseload supply.
But in times of high gas consumption and during bottlenecks, as recently seen in the row between Russian and the Ukraine, LNG could be a useful source for additional gas supply, he added.
"We therefore stick to our plans for the GasPort in Wilhelmshaven, Judisch said."
Given the investment volume of only around EUR80 million for construction and pipeline connection to the grid the GasPort technology offers a cheap and flexible alternative for LNG supplies, Judisch added.
By contrast, a traditional onshore LNG regasification terminal costs some EUR1 billion to build.