The European Commission has approved, under EU State aid rules, an estimated €4.06 billion German measure to support the operation of four FSRUs for the import of LNG by Deutsche Energy Terminal (DET). The measure contributes to the achievement of the objectives of the REPowerEU Plan, by enabling the diversification of energy supplies and ensuring security of gas supply.
In December 2022, Germany had chartered four FSRUs and created the state-owned company DET, tasked with operating the terminals. The FSRUs are located in Brunsbüttel, Wilhelmshaven (two locations), and Stade.
The measure aims to address energy market disruptions caused by Russia's invasion of Ukraine and the halt of pipeline gas supplies from Russia to Germany. The FSRUs, two of which started operating quickly, provide an additional import route to replace part of the lost Russian gas. The FSRUs are a temporary solution until permanent onshore LNG terminals are completed in Germany to ensure long-term gas supply.
The aid, in form of a direct grant, covers the losses incurred by DET for operating the FSRUs until the end of their charter period. As they were chartered at the peak of the energy crisis when demand and costs were very high and their limited operating time frame does not allow for full cost recovery, these terminals were expected to operate at a loss from the outset. The total net contribution between 2023 – 2033 is expected to amount to €4.06 billion. In case of higher losses than expected, the total net contribution could amount to €4.96 billion.
Germany has committed to stop operating the Brunsbüttel and Stade terminals once the planned onshore LNG terminal at those locations become operational, preventing market overlap. Once the onshore LNG terminals are active, the FSRUs will be sub-let at market rates, following worldwide calls for interest open to all bidders and locations, until the lease contracts expire.
Going forward, the capacity of the terminals will be auctioned in three different products: (i) a minimum technical capacity, subject to a delivery obligation, needed to ensure that the terminals remain operational in steady regime, therefore available at all times to ensure gas security of supply; (ii) medium term (3 – 4 years); and (iii) short term (one year). Germany has also introduced safeguards to address possible undue distortions to competition.
The Commission assessed the scheme under EU State aid rules, in particular Article 107 (3)(b) of the Treaty on the Functioning of the EU (TFEU), which enables Member States remedy a serious disturbance in the economy.
In particular, the Commission concluded that:
- The measure is necessary and appropriate to remedy a serious disturbance in the economy of the Member State. It aims at ensuring security of gas supply in the exceptional situation caused by Russia's aggression against Ukraine and the subsequent disruption of gas deliveries.
- The aid is proportionate since it is limited to the minimum needed for DET to operate in view of the objective of the measure.
- To limit distortions to competition, Germany has committed to (i) stop operating the FSRUs once the corresponding onshore LNG terminals become operational, and (ii) to market capacity subject to restrictions.
On this basis, the Commission approved the German measure under EU State aid rules.