Germany retains foothold in US LNG: Update

Market: Natural gas
03/05/23

Context throughout

The German state continues to finance gas and LNG projects overseas despite having pledged to end all direct public financing for unabated fossil fuel projects by the end of 2022 — a commitment made during the UN Cop 26 climate summit in Glasgow in 2021.

KfW IPEX-Bank, responsible for international project and export finance within the German state-owned development bank KfW, has committed to providing around €90.79mn ($100.3mn) in credit for the planned 6.67mn t/yr second phase of the US' Plaquemines LNG export terminal in Louisiana, according to documents seen by Argus. Terminal operator Venture Global announced the final investment decision (FID) for the phase in March, suggesting that the formal commitment to finance the facility could have been taken several months after the government pledged in November 2021 to end all public spending on overseas fossil fuel projects.

A spokesperson from KfW Ipex-Bank confirmed to Argus that it was involved in financing the project, but did not disclose any further details.

It remains unclear when Plaquemines' second phase could come on line, but if construction mirrors Venture Global's other projects, loadings could start in 2025-26. And LNG from Plaquemines could likely reach the planned German onshore import terminals in Stade or Brunsbuttel, with German utility EnBW having agreed to take around 750,000 t/yr from the second phase.

Several other German banks such as Deutsche Bank, DZ Bank, Helaba and Landesbank Baden-Wuerttemberg (LBBW) have also committed to financing the site in Louisiana, with a credit amounting to roughly €746.34mn, documents from German environmental group Deutsche Umwelthilfe (DUH) show.

Deutsche Bank and LBBW declined to comment on the financing for specific projects when asked about their involvement in the funding of US LNG sites. LBBW said that it was willing to finance investments in gas and LNG "if certain conditions are met", as it considers the fuel as a "bridging technology" to renewable energies.

Deutsche Bank's outstanding loans for the oil and gas sector amounted to €6.5bn at the end of 2022, a year-on-year decline of roughly 20pc of the bank's exposure to these projects, a spokesperson of the bank told Argus.

KfW has committed to provide a total of €232.97mn in credit for US LNG terminals since 2017, DUH data show.

In addition, the government is involved in long-term gas supply contracts through the recently nationalised utility Uniper, and through a loan-agreement with trading firm Trafigura which is to supply a significant amount of gas to Germany for the next four years.

Caveats

Many governments and public institutions have deviated from the pledge made two years ago after Russia's invasion of Ukraine at the start of 2022 and the subsequent rush to phase out Russian fossil fuels use that created new momentum for LNG.

Last year, the G7 countries added a caveat to the commitment, saying "publicly supported investment in the gas sector can be appropriate" in order to reduce dependency on Russian gas.

Civil society organisations (CSOs) warned earlier this year that G7 countries the US, Japan Italy and Germany are still lagging behind their 2021 commitment.

But last month the G7 climate and energy ministers said that public support for the international unabated fossil fuel energy sector ended last year, "except in limited circumstances clearly defined by each country consistent with a 1.5°C warming limit and the goals of the Paris Agreement". The G7 countries said they would provide an update on their "approach to implementation by the end of this year.

Mozambique LNG

The Dutch government last year extended the deadline for ending financing of foreign fossil fuel projects until the end of 2023, while providing new guidance for gas and LNG projects that could still receive funding after the deadline.

Dutch export credit agency Atradius DSB — in charge of the country's public financing — received 10 such applications before the end of last year that amount to €3.9bn in state funding if granted, according to a government document.

Atradius — alongside export credit agencies from the US, Japan, UK, Italy, South Africa and Thailand — already granted export credit insurance for TotalEnergies' delayed Mozambique LNG export terminal and told Argus that the policy would not be withdrawn because of a delay to the project.

"Current force majeure status still applies and the involved Export Credit Agencies (ECAs)/banks have not been informed about a possible restart of the works", Atradius told Argus in April. The liquefaction terminal has been under a force majeure since April 2021 because of attacks by militant groups, halting construction at the facility.

The project financing was said to amount to $14.9bn.

By Florence Schmit

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