"Since the beginning of this year, we have made a far-reaching decision in Germany to secure the supply of coal, oil and gas." On September 24, German Chancellor Scholz said in a weekly video message, "We can say today that we will get through this period. But we succeeded this time, and the next task will come right away. ”
As soon as the words fell, Scholz led a group of German energy executives to the Middle East to try to promote a new LNG supply agreement to make up for the huge gap caused by Russia's gas supply cuts.
On September 25, 2022 local time, Abu Dhabi, UAE President Mohammed bin Zayed Al Nahyan (right) and German Chancellor Scholz spoke before the meeting. The pictures in this article are all Visual China pictures
Russia threatens to cut off gas, European energy prices soar, and Germany is set to have a tough winter this year. Germany is more dependent on Gazprom than many of its EU neighbors, and difficulty finding energy alternatives in the short term would put the economy on the brink of recession. The Scholz government has previously said that Germany's existing natural gas reserves can be maintained until next winter, but Europe's natural gas storage facilities are currently less than a third, well below the average at this time of year.
Later on the 24th, Scholz arrived in Jeddah, Saudi Arabia, to begin a two-day trip to the Gulf. Having shelved "human rights allegations" against Saudi Arabia, Scholz first met with Saudi Crown Prince Mohammed and then traveled to the UAE and Qatar.
Even with all the maneuvering, Scholz's trip seems to have yielded very little. The U.S. government had previously warned that Germany's energy dependence on Russia was dangerous, and the aftermath of the Russian-Ukrainian conflict had led Berlin to the same conclusion, but Scholtz's government found that it might be too late to change course.
The trip to the bay was limited
After the murder of Saudi journalist Khashoggi in 2018, Saudi Crown Prince Mohammed became a "pariah" in the mouth of Western politicians. However, four years on, the world has changed dramatically. Like the stars and the moon, the Crown Prince's Palace welcomed a batch of Western visitors, and US President Biden and French President Emmanuel Macron were on the visitor list. Now, it's Scholz's turn.
Scholz's trip was fraught with controversy in Germany, and as he flew away from Jeddah, a reporter asked if the talks mentioned the Khashoggi case. "We discussed all the topics related to human rights." Scholz reacted quickly, without omitting any "what should have been said."
But in realpolitik, priorities have changed. A German government source said Saudi Arabia's importance as a fossil fuel exporter and regional power meant Germany needed to build a "strong working relationship" with the crown prince.
Saudi Arabia has the world's fourth-largest natural gas reserves after Russia, Iran and Qatar, and the world's ninth-largest producer of natural gas, but the Saudi economy needs a lot of gas for power generation, desalination and industrial production. Saudi Arabia is clearly not a partner who can "quench its thirst", but Riyadh has set a goal of doubling natural gas production by 2030, which could theoretically be a stopgap measure for energy alternatives in Europe.
There is no public information on whether Scholz has reached a specific agreement with Saudi Arabia, but after meeting with the Saudi crown prince, Scholz said he wants to deepen the "energy partnership" between the two countries. Such partnerships should go beyond fossil fuels, including hydrogen and renewable energy, he told reporters.
On September 25, 2022, local time, Abu Dhabi, United Arab Emirates, German Chancellor Olaf Scholz (left) and UAE Minister of Climate Change and Environment Mariam Almheiri visited Mangrove Park.
In the UAE, Scholz has more to offer. Emirates state media reported that Abu Dhabi National Oil Company (ADNOC) has reached an agreement with Germany's Rheinland Group (RWE) to supply 137,000 cubic meters of liquefied natural gas (LNG) to RWE in December this year, which will be delivered for the first time to the LNG import terminal under construction in Brunsbitel on Germany's northwest coast.
The oil-rich UAE, while a relatively small gas exporter, plans to double LNG production by 2026. On September 25, a source with knowledge of the incident told the Financial Times that ADNOC is expected to export five more tranches of LNG to Germany in 2023.
"We need to ensure that the world's LNG production reaches the level of meeting the existing high demand, without resorting to Russia's production capacity." Scholz said so before announcing the deal with the UAE. But compared to the amount of gas needed by Germany under the complete shutdown of Gazprom, the order that could only be delivered in December was of little effect.
Scholz said the gas deal is part of a broader "energy security and industrial accelerator agreement" between Germany and the UAE, which "enables the rapid implementation of strategic lighthouse projects in key areas such as renewable energy, hydrogen, liquefied natural gas and climate action." In addition to LNG, the UAE has signed another agreement with German companies to supply 33,000 tons of diesel to Germany this month, in addition to another 250,000 tons of diesel fuel per month in the future.
In Qatar, Scholz did not mention any energy supply agreements. Qatar's energy minister said on the 24th that it is negotiating long-term liquefied natural gas contracts with German companies RWE and Uniper SE. During talks with the Emir of Qatar, Scholz expressed the hope that "further progress will be made" in the negotiations. In fact, Germany has been engaging with Qatar on the issue in recent months, but Germany is reluctant to commit to a long-term purchase contract at record prices.
"Holding Germans accountable for the energy crisis"
Russia supplies more than half of Germany's natural gas, half of its coal and about one-third of its oil. Bloomberg previously estimated that Germany wants to replace Gazprom and needs to increase imports of 82 LNG cruise ships a month, surpassing Qatar's February production.
In today's German public opinion field, the Green Party is undoubtedly the more radical party towards the Russian government and Russian energy. Green Party leader Belberk has frequently spoken out strongly about the Russian-Ukrainian crisis and the energy problems associated with it, and recently said that he would help Ukraine to the end, regardless of public opinion in Germany.
But some professionals have pointed out that it is a part of Germany's political elite itself that is contributing to Germany's energy dependence on Russia today, and the leadership of the Green Party has also played a great role. This is in stark contrast to their posture today of shouting about the decoupling of Russian energy.
Samuele Furfari, a former senior European Commission energy official, recently wrote an article titled "Holding Germans Responsible for the Energy Crisis" that as early as the 2000s, the German government had discussed plans to extract oil and gas in Germany itself, but it was fiercely opposed by the Green-dominated environmental group, which at the time supported the Nord Stream oil and gas pipeline plan in exchange for "denuclearization" in Germany as soon as possible.
Fulfari referred to the Naturschutzstiftung Deutsche Ostsee, which was supported by some German environmental groups at the time, which supported the Nord Stream project. Behind it is not only the support of German environmental organizations, but also the WWF, Nord Stream AG, which is responsible for the construction of oil and gas pipelines, and the Russian energy giant Gazprom has even provided 10 million euros of financial support.
"The German Greens had traded support for Nord Stream for 'nuclear withdrawal,' and they also opposed the construction of LNG gas storage facilities at the port." Fulfari writes, "German industry could not have been ignorant of this, so they were responsible for [today's Russian dependence], as was the German political elite." ”
The effect of "denuclearization" is remarkable. From 2000 to 2019, the share of nuclear energy in Germany's energy mix fell from 30% to 12%, while reliance on Gazprom grew, with imports mainly through the "Yamal" pipeline and "Nord Stream" through Ukraine, Poland.
As for the use of natural gas, 70% of Europe's gas consumption is concentrated on heating, and in Germany the proportion is even higher, reaching 94%, and only 6% of natural gas consumption is used to generate electricity. Nuclear power, on the other hand, is largely used to generate electricity rather than heat. Therefore, once the "denuclearization" leads to a power gap, fossil fuels such as coal and natural gas need to be mobilized to generate electricity, exacerbating the pressure on heating.
The influence of this strategy of the Greens at that time was not limited to Germany. According to Fulfari's recollection of his work experience, the German Green Party's ideas successfully influenced the European Commission and gradually became a Europe-wide policy. The first was Germany's neighbor, France, which then President François Hollande proposed to reduce the proportion of nuclear power in France's energy consumption to less than 70% (this policy goal was not achieved under Hollande, after which Macron's government adjusted its approach in time to re-emphasize the importance of nuclear power). Belgium has since made a similar move.
Today, the EU wants to address gas shortages at a Europe-wide level. The Polish news website TVP reported that the EU has proposed that member states take the initiative to reduce natural gas consumption by 15%, and Germany hopes to control the total consumption of natural gas in the EU through this collective action at the EU level to make some room for the normal operation of its own economy. However, some southern European countries (Portugal, Spain, Italy and Greece) have clearly objected to this.
In fact, these southern European countries on the Mediterranean coast have already begun to prepare on their own, and they have already invested in the construction of new LNG gas storage facilities, Spain built the first LNG gas terminal as early as 1969, and Poland and Lithuania have recently joined the ranks.
"Under normal circumstances, if Germany is abandoned, most EU countries will not be in the dilemma of having to ration gas supply." Fulfari writes, "Because most of them have already implemented some initiatives to diversify the structure of energy consumption. ”
Europe's "Energy Hunt"
Although it was too late to explore diversifying the energy mix, Germany immediately began to push for two major initiatives after sanctions against Russia, the first being to strengthen the mechanism for the transmission of natural gas into Europe.
On May 20, 2022, local time, Berlin, Germany, German Economy Minister Habek and Qatari Minister of State for Energy Affairs Kabi signed an agreement in Berlin to deepen the partnership in the energy field between the two countries.
Germany and Qatar signed a statement of intent on energy cooperation in May, aiming to increase the supply of liquefied natural gas into Germany by enhancing existing import routes through new infrastructure. According to the EU Energy Security Agency, OilPrice.com by the energy news website, the plan includes the deployment of four floating LNG import storage facilities and two permanent onshore terminals on Germany's northern coast, which are currently under development.
The second initiative aims to boost local gas production in Qatar, thereby increasing supply to Europe. Previously, France's Total and Italy's Eni have reached cooperation intentions with Qatar to invest in the development of the world's largest natural gas field in the northern gas field. But the project's expansion plans are still years away, and during these years, Qatar is still struggling to meet Europe's supply gap.
To the chagrin of European countries, Qatar now knows it is in a seller's market and wants to keep it that way until energy sanctions against Russia are lifted — something that doesn't look like it will happen anytime soon. Given that it stands on a strong side, Qatar wants to sign contracts at higher prices and will remain priced unchanged in long-term deals for at least 20 years.
Therefore, Germany and Europe need to ensure that huge contracts are signed with other gas suppliers as soon as possible, but it is clear that all suppliers are aware of this and the asking prices have become very high. In order to fill the gap as soon as possible, European countries are struggling to carry out an "energy hunt". With autumn upon us, governments are entering the final stages of a race against time.
France's Total and Italy's Eni are both looking for other opportunities in the Middle East. Recently, Eni CEO Claudio Des Scarzie met with the head of ADNOC in Abu Dhabi to discuss accelerating the development of the UAE's Ghasha giant acid gas project and the country's offshore Block 2 gas project.
Just after Scholz ended his trip to the Middle East, French media reported that French Prime Minister Mario Borne would lead a large delegation to Algeria from October 9 to 10. It will be the fifth meeting between the two governments since Macron's state visit to Algeria in August. France's Euro 1 report predicts that Borne's visit to Algiers could increase Algeria's gas exports to France by 50 percent.