Climate policy
classification for LNG

The war of aggression against Ukraine embarked upon by Russia in February 2022, has given the German government cause to reassess Germany’s energy and security situation. A diversification of gas supply sources and greater independence from Russia will be required to ensure the security of the energy supply. Liquefied natural gas (LNG) from the USA and Qatar plays a crucial role in this.

Equally, in accordance with climate targets, the Federal Government is seeking to limit the use of fossil fuels. It then begs the question: How much LNG is enough?

Prognos conducted two studies for the German Federal Government's Climate Protection Science Platform (WPKS) to address this question.

Core results “LNG demand for the German energy supply on the path to climate neutrality”

Supply situation in Germany:

• As of today, Germany has planned eight stationary, floating regasification terminals (FSRU) and three fixed terminals on land to ensure LNG supply.
• At the same time, all of the climate neutrality scenarios – e.g., the Big Five – point to a rapid reduction in gas consumption from 2030, at the latest.
• Prognos calculated terminal requirements according to different scenarios. In the worst-case scenario, if the largest remaining pipeline fails and gas imports from Russia to Europe are completely reduced, Germany will need all the FSRUs mentioned, in the short term.
• In the long term, however, the fixed LNG import terminals could represent overcapacity due to declining gas demand.

Worldwide supply situation:

• Currently, global gas liquefaction capacities (export terminals) are scarce and there is competition for LNG quantities.
• In the event of a decline in global gas demand, the LNG market could already see a significant easing from 2024 onwards.
• Liquefaction capacities will be ramped up in the next few years for the worldwide supply of LNG. This will mean an increase of 30 percent by 2026.
• If global demand does not noticeably fall, demand can nevertheless be met by 2026 at the latest. The construction of further liquefaction capacities would then no longer be required.

Read the entire study (PDF in German)

Core results “Stranded assets and lock-ins through LNG imports to Germany – classification of the situation”

• A large proportion of the fixed LNG import terminals currently planned, run the risk of ending up as stranded assets, unless they can be re-used via ammonia imports or are refinanced over a shorter period of time.
• Plans for re-use of the fixed terminals should already be set today.
• The danger of lock-in effects of liquefaction plants (export terminals) exists due to the long contractual acceptance guarantees.
• LNG import contracts should be as short-term and flexible as possible (place and duration of delivery). If possible, only export capacities should be secured and not energy volumes.
• In terms of gas extraction and exploration, the risk of lock-in is particularly high when the development of new gas fields is required.

Read the entire study (PDF in German)

Our approach

In the first study “LNG demand for the German energy supply on the way to climate neutrality,” calculations on the German and European gas supply are conducted on the basis of historical gas flow data from ENTSOG. With the help of our gas balance tool, the historical development of gas flows is updated and extended into the future and the planned LNG import terminals in Germany are added. In addition, appropriate assumptions were made where changes were necessary due to expected events (e.g., gas supply from Norway is expected to decrease from 2030). This results in the future supply situation for Germany and Europe up to 2050. The gas supply is compared with the range of gas demand, which results from the climate neutrality scenarios (e.g., the Big Five). From this, the future supply situation in Germany and Europe can be deduced as well as whether more capacity will be available than is required.

The global LNG balance is derived from the demand of individual world regions and the projected expansion of LNG liquefaction capacities. In terms of demand, we have oriented ourselves to the IEA’s demand scenarios. The offer is based on the availability of LNG liquefaction capacities. To this end, the stock and expansion plans for LNG liquefaction capacities were collected. A comparison of the global demand for LNG and available liquefaction capacities shows when a sufficient global supply can be expected.

The second study, “Stranded assets and lock-ins through LNG Imports to Germany – classification of the situation” analyses possible lock-in effects that could arise from the construction of an LNG infrastructure, especially in Germany. For the individual parts of the supply chain (import terminal, liquefaction, as well as exploration and production), it was investigated whether certain aspects create or strengthen lock-in effects. In particular, the risk of stranded assets, contractual ties, and economies of scale have been identified as factors that favour a lock-in in LNG infrastructures. The studies on stranded assets are also based on the results of the first study that investigates the gas supply situation in Germany and Europe.

Links and downloads

Further information on the WPKS website (in German)

Study LNG Requirements (PDF in German)

Study Lock-in Topic (PDF in German)

Project team: Ravi Srikandam, Sven Kreidelmeyer

Last update: 29.06.2023

Contact for press inquiries

Antonia Wentrot | E-mail: presse@prognos.com | Telephone: +49 30 58 70 89 118