Gas

Natural gas has a wide range of possible uses

Natural gas will continue to make a significant contribution to energy supply in Germany over the coming decades. The heat market is still by far the most important market for natural gas. Nowadays, however, the use of gas is not restricted solely to heat generation. In addition to its role as a raw material primarily in the chemical industry, gas is a flexible and versatile energy source for generating electricity, storing energy and – looking to the future – as a storage facility for renewable electricity as well as for mobility. Natural gas is also more climate-friendly compared to other fossil fuels as it produces less CO2. Finally, as a cheaper and more climate-friendly fuel, natural gas is also playing an ever more important role in the area of mobility.

With the appropriate level of processing, biogas (biomethane) can be upgraded to the quality of natural gas and fed into the existing natural gas grids. It can therefore help to reduce the burden not only on the heat market, but also on electricity and fuels.

With the electricity generated from renewable sources varying considerably depending on factors such as weather conditions and season, natural gas-fired plants can play an important role in offsetting such fluctuations.

Another important and promising use for the natural gas grid is emerging. By converting electricity from renewable sources into hydrogen or methane and feeding it into the natural gas grid, the latter could serve as a huge reservoir for several billion kilowatt hours (kWh) of energy. A number of very encouraging research and demonstration projects aimed at using this technology on a large scale over the next decade are currently underway.

Natural gas is the second most important primary energy source in Germany’s energy mix, after petroleum. In 2016, its share of primary energy consumption (i.e. the total amount of energy used in a country each year) amounted to 22.6%. According to the Arbeitsgemeinschaft Energiebilanzen e.V. (Working Group on Energy Balances - AGEB), domestic consumption in Germany stood at 3,022 PJ (LHV).

Europe’s biggest gas markets are Germany, the United Kingdom and Italy. Germany will in future continue to be highly dependent on imports of natural gas. In relation to this issue, serious consideration of whether and to what extent any future extraction of natural gas from unconventional deposits (tight gas, shale gas, coal gas [coal bed methane, firedamp], aquifer gas and gas hydrate) would be able to decrease this share further is still not possible at the present time (cf. also study by the Federal Institute for Geosciences and Natural Resources: “Schieferöl und Schiefergas in Deutschland - Potenziale und Umweltaspekte” (in German) (Shale oil and shale gas in Germany - potential and environmental aspects).

The growth in domestic demand is largely determined by trends in consumption in the individual sectors. In private households, natural gas is the most important energy source on the heat market, accounting for approximately 44%. Here, more than 90% of natural gas is used as a source of heating.

Natural gas and biogas (biomethane) as fuel are important elements in the fuel mix of the future. According to the Federal Motor Transport Authority, 80,300 bivalent passenger cars powered by natural gas were registered on 1 January 2016, and 475,711 LPG passenger cars. In Germany, there are currently 882 natural gas filling stations.

Infrastructure

The pipelines which go to make up the gas grid are essential for transporting and distributing natural gas. They enable widely varying quantities of gas to be delivered safely over long distances. Considerable amounts of gas are transported across Germany to other EU states. The map below shows the main natural gas pipelines in Germany as well as the points at which they cross the border from and into other countries:

In addition to this is a closely intermeshed network for distributing gas right through to the end consumer. The total length of Germany’s gas grid is 511,000 km.

The EU’s Third Internal Energy Market Package created a planning instrument for setting up and preserving a network infrastructure required to achieve a unified single market. According to this, the long-distance grid operators must regularly present a ten-year Network Development Plan to the regulatory authorities. In line with the Energy Industry Act, which was revised in response to the internal market package in June 2011, the long-distance grid operators presented their first nationwide Gas Network Development Plan in accordance with Section15a on 1 April 2012. The amendments to Sections 15a and 15b of the Energy Industry Act, which entered into force on 1 January 2016, altered the annual ascertainment of the need to expand the grid to every two years in order to avoid overlapping between the production of the Gas Network Development Plan and the drafting of the scenario framework for the following Plan. In every even calendar year, a joint national Network Development Plan must be presented, and in every odd calendar year there must be a joint implementation report, starting on 1 April 2017.

The Gas Network Development Plan includes measures for the expansion of the network in line with demand and for ensuring secure supply and safe and reliable network operation.

On 1 September 2015, the Federal Network Agency completed the procedure for the fourth Gas Network Development Plan. The Gas NDP 2015 lists 84 measures for expanding the national gas infrastructure. The planned investments include grid expansion amounting to 810 km as well as the construction and expansion of compressors with an increase in capacity of 393 MW. The investment volume will increase to a total of €3.3 billion by 2025. Further information can be found here (in German).

On 18 November 2015, the European Commission presented a revised list of Projects of Common Interest, the PCI List. It contains 195 infrastructure projects in the energy sector - 108 projects for electricity, 77 for gas, seven for oil and three for smart grids. The PCI List can be found here. It was updated in 2017. A map of ongoing and completed energy infrastructure projects can be found here.

The PCI projects enjoy expedited approval procedures and enhanced regulatory conditions. The approval procedures for this must be completed within 3.5 years, and only a single national authority should be responsible for the project management. In Germany, this is the Federal Network Agency (BNetzA). In certain circumstances, companies can apply for financial assistance under the Connecting Europe Facility. €5.35 billion is available from the EU for the 2014-2020 period.

Regulation and trade

The Federal Network Agency and the regulatory authorities for the Länder are responsible for regulating the electricity and gas supply grids.

The German gas market is characterised by a large number of privately organised operators in the areas of networks, storage operations and gas trading. There are currently two market areas in Germany (NCG and Gaspool), each with their own coordinator who ensures that access to the gas grid and market activities are both carried out in an efficient fashion. There are currently 16 gas transmission system operators in Germany. Other players are the distribution system operators, storage facility operators and commercial enterprises.

The EU internal market package for the liberalisation of the market for electricity and natural gas, most recently amended by the Third Internal Energy Market Package, redefines the areas of activity of market players. To promote competition, the operators of gas supply networks and storage facilities are separated from natural gas trading activities.

Natural gas: import and domestic production

In 2016, overall consumption on the German gas market came to roughly 95 billion cubic metres. Demand for gas in is forecast to fall slightly in future due, among other things, to technical progress and energy conservation.

Prospective regions, natural gas fields and characteristic natural gas structures

Domestic production of natural gas, although falling slightly, is currently sufficient to cover just under 6% of gas consumption (Infographic; in German). In 2016, it amounted to around 8 billion cubic metres. Germany will therefore continue to be highly dependent on imports of natural gas in future. At present, just under 94% of overall demand is supplied by other countries exclusively via pipelines. According to provisional data from the Working Group on Energy Balances, the proportion of gas purchased from Norway stood at 31% in 2016, with 22% coming from the Netherlands and 41% from other sources. The Federal Office for Economic Affairs and Export Control publishes the price for German imports of gas.

The Federal Statistical Office undertakes monthly surveys of the gas industry.

The strong dependence on imports means that the instruments for ensuring security of gas supply are vital. You can find out more about the instruments to safeguard the security of the gas supply here.

Prices and costs

As is the case for other goods and services, natural gas prices are not regulated but are set according to supply and demand. Prices are based on different cost components.

Acquisition costs include the gas purchase price and transport costs. Distribution costs are all the costs involved in transmitting natural gas to the end customers. These costs also include all costs associated with the expansion and maintenance of the natural gas grid.

The natural gas tax is based on the Energy Tax Act under which the level of natural gas consumption in the various areas of application is taxed.

Where network operators use public land for laying and operating gas pipelines, they must pay the concession fee to the respective local authority.

You can find out more about the gas prices here.

In the United States in particular, a technique that has become known as hydraulic fracturing or "fracking" has been applied for a number of years now in extended reach drilling as a way of extracting natural gas from layers of rock deep within the earth. During this controlled process, the injection of a liquid (water mixed with additives) and the accompanying increase in pressure creates small cracks in the rock where the natural gas is contained. The process releases the gas so that it can then be carried to the surface via drill pipes. As far as fracking technology is concerned, a distinction can be made between applications in Germany which have been tried and tested over many years ("conventional fracking") and new applications ("unconventional fracking").

To increase the level of legal certainty involved in fracking for citizens, enterprises and authorities, the Federal Ministry for Economic Affairs and Energy (BMWi) and the Federal Environment Ministry (BMUB) submitted a regulatory package to the Bundestag in 2015. The Bundestag adopted the package with amendments in the 2nd and 3rd readings on 24 June 2016, followed by the Bundesrat on 8 July 2016. The regulatory package entered into force on 11 February 2017.

The measures taken by Germany's gas providers in order to secure supply are based on a broad package of measures. In addition to providing support for domestic producers, these measures include in particular:

• the diversification of supply sources and transmission routes
• stable relationships with supplier countries
• long-term gas supply contracts and
• a highly reliable supply infrastructure which includes underground storage facilities

Access to LNG (liquefied natural gas) terminals is also increasingly important.

Diversification of foreign supply sources and transmission routes

In relative terms, Germany's gas supply is broadly diversified. An extensive system of pipelines is used to both import natural gas into Germany and to distribute it around the country.

Natural gas is transported from a number of Norwegian gas fields to Emden/Dornum via three pipelines (Norpipe, Europipe I and II), with a total capacity of 54 billion cubic metres.

Russian gas is transported via the Yamal-Europe pipeline (capacity of around 33 billion cubic metres, crossing the border at Mallnow) and the Ukrainian gas transmission system (capacity of approximately 120 billion cubic metres, crossing the border at Waidhaus/Sayda) to Germany and Western Europe. This system also enables the two existing strands of the Nord Stream pipeline to bring Russian gas directly from Russia. Both strands, each of which is 1,224 km in length, run from Portovaya Bay near Vyborg, across the Baltic Sea to Lubmin, near Greifswald, on the German coast. Since the completion of the second strand in 2012, it has had a transport capacity of up to 55 billion cubic metres of natural gas per year, and is able to supply consumers in Germany, Denmark, the United Kingdom, the Netherlands, Belgium, France, the Czech Republic and other countries.

In addition to this, there are many pipeline connections with the Netherlands, including the Groningen gas field.

Future plans will focus on developing the Caspian region ("Southern Gas Corridor") as a new source of supply for Europe and, indirectly at least, for Germany too. From 2019 onwards, the Trans Adriatic Pipeline is set to carry gas with an initial capacity of 10 billion cubic metres from Azerbaijan to Europe.

Stable relationships with supplier countries/long-term gas supply contracts

Long-term contracts for importing gas give producers security as regards future sales volumes and are used as an instrument to finance the considerable investments required in exploration, production and infrastructure. For the countries importing gas, these contracts are a key component in securing supply in the long term. Some supply contracts have terms of 20 years and longer.

European Commission gas stress test

In order to analyse and draw conclusions from potential scenarios at European level involving a shortage in the natural gas supply, gas stress tests have been carried out in 38 European countries. The tests simulated two specific disruption scenarios: first, a complete halt of Russian gas imports to the EU; and second, a disruption of Russian gas imports through the Ukrainian transit route for a period of one or six months.

The European Commission published the results of the gas stress tests on its website in October 2014.

Storage capacities

Natural gas storage facilities play an important role in balancing out the seasonal fluctuations in production and consumption, and in guaranteeing security of supply.

Germany’s favourable geological conditions make it a good location for the construction of storage facilities. The existing gas storage facilities are large enough to guarantee security of supply in periods of intensive winter weather and in the event of supply disruptions. This was the finding of the study entitled “Possibilities to improve gas security and crisis prevention via regulation of storage” (in German), which was published by the Federal Ministry for Economic Affairs and Energy on 23 June 2015. For this to be the case, the storage facilities must be sufficiently full.

At the end of 2015, Germany had 51 natural gas storage facilities in operation (20 pore storage facilities and 31 caverns). The maximum volume of usable working gas is currently 24.6 billion cubic metres. Germany has the largest natural gas storage capacity in the EU and the fourth largest in the world, after the United States, Russia and Ukraine. Statistically, the total storage capacity could, at present, supply the whole country for 80 days on average. This storage volume is set to be increased further over the next few years.

The European Commission commissioned a study into the contribution of gas storage facilities to the internal energy market and to security of supply. The study was published in August 2015 and is available here (status: 2014).

Infrastructure for liquefied natural gas (LNG)

Access to LNG terminals is also becoming increasingly important for Germany. LNG ("liquefied natural gas") is natural gas that has been converted into liquid form by cooling. Its low volume makes it particularly advantageous for transportation and storage. Worldwide, liquefied natural gas is playing an ever greater role and, as a fuel for shipping and heavy freight haulage, is extremely important for reducing harmful emissions and for meeting climate targets.

A consortium called German LNG Terminal GmbH and consisting of Gasunie, Vopak and Oiltanking is planning to build and operate the first German LNG import terminal at Brunsbüttel. The German government is giving political backing to the project. Norbert Brackmann, the Federal Government Coordinator for the Maritime Industry, is in close contact with the stakeholders on the spot.

Access to LNG can theoretically be secured for the German market through its neighbours Belgium (Zeebrugge), the Netherlands (Rotterdam) or other European countries. German gas companies have acquired stakes in LNG terminals abroad and are planning to acquire further capacities (in Belgium, France and the Netherlands).

Monitoring security of supply

Pursuant to Section 51 subsection 1 of the Energy Industry Act (German version), the Federal Ministry for Economic Affairs and Energy will monitor (in German) the security of the grid-based supply of electricity and natural gas.

The natural gas supply in Germany is largely secure and reliable. This is especially true for supply to private residential customers, who are afforded special protection under EU and national law. However, as is the case in every other energy sector, the need for intervention by the competent authorities in the event of a serious deterioration in supply, in addition to market measures (i.e. measures for which businesses themselves are responsible), cannot be ruled out completely. Even though the likelihood of such a severe crisis in supply actually occurring is very small, precautionary measures have to be taken for such an event so as to ensure not only the necessary cooperation between all involved parties but also the availability of the relevant measures.

Against this background, Regulation (EU) No 994/2010 of the European Parliament and of the Council of 20 October 2010 concerning measures to safeguard security of gas supply and repealing Council Directive 2004/67/EC ("SoS Regulation") provides for an extensive range of instruments designed to strengthen the internal gas market and to take precautionary measures for the event of a supply crisis. On 16 February 2016, the European Commission presented a draft regulation to update this Regulation, and the draft has since been discussed in the relevant EU bodies. The legislative procedure entered the trilogue stage with the European Parliament and the Commission in early February 2017.

To this end, the national rules and the rights to establish or modify a legal relationship which apply to businesses and authorities are firmly established in the legal frameworks pertaining to Germany, most notably in the Energy Industry Act, the Energy Security of Supply Act (1975) and the Ordinance to Ensure the Supply of Gas in a Supply Crisis.

A collection of the relevant legal documents for carrying out emergency planning can be found here (only in German, PDF: 970 KB).

In order to maintain the high level of security of supply, it is necessary to ensure that the balancing energy market works. The Federal Ministry for Economic Affairs and Energy published a list of key principles (in German) (PDF, 36 KB) for measures to improve the security of the gas supply on 16 December 2015. Firstly, the Market Area Managers (MAMs) will be able to enter into contracts for a higher volume of existing supply products, should any abnormal regional bottlenecks occur. These supply products create a reserve which is then tapped when the amount of balancing energy required by the MAMs can no longer be covered by the regular short-term balancing energy market alone. Secondly, there is to be a new balancing energy product. This is to enable large numbers of industrial customers to voluntarily reduce their gas demand (demand-side management) in order to help safeguard security of supply.

In the European Union, security of gas supply is a shared responsibility of natural gas undertakings, Member States, notably through their competent authorities, and the European Commission within their respective areas of activities and competence. This shared responsibility requires a concerted exchange of information and cooperation between stakeholders.

Basically, the SoS Regulation distinguishes between three crisis levels (early warning level, alert level and emergency level). It provides for market-based measures by the gas undertakings at the first two levels and, additionally, the possibility for the state to intervene solely in the case of emergency. In this regard, it sets out the areas of competence and duties of undertakings, national authorities and the European Commission and calls on Member States to set out in advance, and within the framework of Preventive and Emergency Action Plans, how they envisage managing a crisis as well as the preventive measures they will take. The competent authority for ensuring the aforementioned measures is the Federal Ministry for Economic Affairs and Energy. Responsibility for regularly establishing and updating the risk assessment with regard to security of the natural gas supply in Germany has been transferred to the Federal Network Agency (BNetzA).

As provided in the SoS Regulation, the plans were updated in December 2016.

The national Emergency Plan for gas can be downloaded here (PDF, 1 MB).

The national Preventive Action Plan for gas can be downloaded here (PDF, 1 MB).