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Germany Signs Preliminary Deal To Ramp Up LNG Import Capacity

The German federal government has signed two memoranda of understanding with the country's top gas utilities for the delivery of two floating LNG import terminals.

Per a Reuters report, the deals, with Uniper, RWE, and EnBW, will see the vessels, due to be completed this winter, delivered by March 2024.

"This is an important date in the series of steps that we have been taking since the beginning of the year, to make ourselves independent and less susceptible to blackmail from (Russian President Vladimir) Putin, and to give Germany a robust and resilient energy infrastructure, or in this case gas infrastructure," Economy Minister Robert Habeck said.

LNG has become the last resort for energy-hungry Germany when Russia reduced flows via the main artery supplying the EU's biggest economy with natural gas. Most of it comes from the United States, but Germany has no import terminals for the superchilled fuel that needs to be regasified at the point of entry into the country.

Stationary LNG import terminals take years to build while floating storage and regasification are much faster to install once their construction is completed.

U.S. LNG volumes, however, are not large enough to fully replace Russian gas flow via pipelines due to production capacity constraints, so Germany needs alternative suppliers, too.

Chief among these could be Qatar, but negotiations between Berlin and Doha ended without a deal earlier this year as the Qataris insist on long-term contracts and a clause that would oblige Germany not to resell any gas it is not using.

Meanwhile, the head of Germany's energy regulator warned that gas consumption would have to be cut deeper than the EU-wide voluntary 15 percent, to 20 percent if the country is to avoid a harsh winter of shortages.

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"If we fail to reach our target [of 20 percent gas savings] then there is a serious risk that we will not have enough gas," Klaus Mueller told the FT earlier this week, which would lead to gas rationing.

By Irina Slav for Oilprice.com

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