Commission approves €40 million in German support for LNG terminal construction

The European Commission has approved German state aid for the Brunsbüttel LNG terminal. The support, amounting to 40 million euros, will be used to build and operate the new terminal. It is intended to help increase the security and diversification of natural gas supplies to Germany and support the end of dependence on Russian natural gas, in line with the REPowerEU plan. The terminal is to be converted to import renewable energy by 2043 at the latest.

The project will be completed in 2026

The project had been planned as early as 2017, but Russia's invasion of Ukraine gave it fresh momentum. In early March 2022, around two weeks after the Russian invasion of Ukraine, a memorandum of understanding was signed to first build a floating (FSRU) LNG terminal at Brunsbüttel. The concept for the entire LNG project at the site changed during 2022, and it was ultimately decided to build a conventional onshore LNG terminal as well.

An FSRU terminal owned by RWE has been in operation in Brunsbüttel since February 2023. It has a capacity of around 3.5 billion m3 per year, with the potential to increase this to 7.5 billion m3. The long-term plan is to operate both facilities: the FSRU unit and the onshore LNG terminal. The latter is due to enter operation by the end of 2026 and will have a capacity of 10 billion m3 per year.

Conversion of the terminal after 15 years of operation is a condition of support

In line with EU state aid rules, Germany notified the European Commission of its plans to support the construction of the Brunsbüttel onshore terminal. The project is owned by Germany LNG Terminal GmbH (GLNG). The company's shareholders are the German government, through the KfW development bank, with a 50 % stake; Dutch gas infrastructure operator Gasunie, with a 40 % stake; and RWE, with a 10 % stake.

The state financial support will take the form of KfW distributing dividends to the other investors. These will be paid only if the annual return is below a predetermined percentage of the total invested capital. The total support is expected to amount to 40 million euros. KfW plans to exit the project after 15 years, when dividend payments under the support mechanism are also expected to end.

After 15 years of operation, and no later than 2043, the terminal will be converted to import renewable energy carriers. Avoiding the so-called lock-in effect of gas infrastructure tied to fossil gas was a key consideration for the Commission in assessing the project and state aid.