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Background | Oil | Natural Gas | Coal | Electricity | Environment | Profile | Links Germany is one of the world's largest energy consumers. Because it has limited indigenous energy resources (except for coal), Germany imports most of its energy. Although the country is a major coal producer, it is a net coal importer. The information contained in this report is the best available as of
March 2003 and is subject to change. Germany's real gross domestic product (GDP) grew by only 0.2% to $1.98 trillion in 2002, as the country struggled to recover from the global economic slowdown that began in 2001. Sluggish global demand has been particularly damaging to Germany, which depends heavily on exports for its economic growth. Unemployment reached about 10% in 2002, its highest level since 1998. Economic malaise has also weakened equity markets and consumer confidence, as the German stock exchange, the DAX, lost half of its value over the course of 2002, and consumer spending contracted throughout the year. The resulting declines in tax revenues caused Germany's public deficit to exceed 3% of its GDP in 2002, the maximum allowed under the European Union's 1997 Stability and Growth Pact, prompting an official warning from Brussels. The German government reportedly is considering a new economic stimulus plan for 2003. In September 2002, Gerhard Schroeder won his second term as German Chancellor, leading a coalition between Germany's Social Democrats (SPD), and the environmentalist Green Party. Gerhard Schroeder has served as the German Chancellor since 1998. President Johannes Rau has served as the German head of state since 1999. Energy in Germany Energy policy in Germany is influenced heavily by EU regulations. The EU requires privatization and competition in member countries' energy markets, and Germany has been considered one of Europe's leading market reformers. Following reunification of the country in 1990, the major task of German energy policy was to merge successfully the radically different energy sectors of the East and West. West Germany had a diversified and mainly privately-owned system of energy supply with a high standard of energy efficiency and a commitment to environmental protection. In contrast, East Germany's energy sector was highly centralized, predominantly state-owned, and mainly dependent upon lignite, or "brown coal" as its primary fuel. Lignite, because of its characteristic chemical impurities, results in higher emissions of toxins into the atmosphere than other fuels when burned. To date, a great deal of progress has been made in conforming the former East Germany's energy sector to the standards of the West in the areas of privatization and environmental regulation. OIL Germany produced around 69,000 bbl/d of crude oil in 2002, of which approximately 18,000 bbl/d came from the German North Sea. Germany's offshore oil production comes from the Mittelplate field, which produced approximately 17,000 bbl/d in 2001, making Mittelplate Germany's most productive field. Mittelplate's crude oil, which is extracted and processed on the Mittelplate production island, is then transported ashore by barge and routed via pipeline to refineries in Schleswig-Holstein. Another 16,000 bbl/d are extracted from the Mittelplate offshore hydrocarbon structure through onshore extended-reach horizontal wells located at the Dieksand Land Station on the western coast of Schleswig-Holstein. Combined, the Mittelplate offshore production island and the Dieksand Land Station produced roughly 33,000 bbl/d in 2001, representing half of Germany's domestic crude oil production. The Mittelplate project is a 50/50 joint venture between two German companies, RWE Dea Ag and Wintershall. Germany's other oil fields are located primarily in the north and northeast of the country. Oil has accounted for roughly 41% of German total energy consumption every year since 1991. Two different studies of German petroleum demand were released in the last year, one by the German firm PROGNOS, and another from the German oil industry group Mineralölwirtschaftsverband. Both organizations predicted a modest increase in petroleum demand in the short-run (through 2005), but their forecasts differed in the long-term. While PROGNOS predicted stable oil demand from 2005 to 2020, Mineralölwirtschaftsverband anticipated a 14% decline in oil demand during this period. EIA expects that German energy consumption could reach 3.1 million barrels per day by 2005, with modest growth through 2020. Factors contributing to the future of German oil consumption are: the declining role of coal and nuclear power; Germany's rapidly increasing energy efficiency; and the country's Eco-Tax, which was introduced in 1999 and levies a tax on fossil fuels in an effort to discourage the use of polluting fuels. Motor gasoline and diesel fuels are heavily taxed in Germany, with Germans paying about two times more for motor gasoline than Americans, despite having the most competitive retail gasoline market in Europe. The German downstream sector underwent two large mergers in late 2001 and 2002. In April 2001, Royal Dutch Shell and one of Germany's largest energy companies, RWE, agreed to form a new 50:50 venture called Shell & Dea Oil. The new company is managed by Shell, and in 2004 Shell's share will increase to 51%, and Shell will have the option to buy the remaining 49%. The new company will have a 23% market share for gasoline stations and is poised to become Germany's largest refinery operation with capacity of about 460,000 bbl/d. In February 2002, German oil company E.On sold 51% of its subsidiary Veba Oel to British Petroleum (BP). Veba Oel held significant upstream assets around the world, as well as a significant portion of the German retail fuel market through its stake in the German downstream retailing company, Aral. Upon taking control of 51% of Veba in February 2002, BP sold Veba's upstream assets to PetroCanada. BP also sold stakes in some retail stations, as well as Veba's share in Germany's Bayernoil refinery in order to comply with Germany's market competition laws. Shares in the Bayernoil refinery have reportedly been sold to Austria's OMV, while portions of Veba's retail market have gone to Russia's LUKOil, Germany's Beckmann Mineraloel GmbH, and Poland's PKN Orlen. NATURAL GAS Natural gas production in Germany has remained roughly stable in recent years, while consumption has grown markedly. Most of Germany's natural gas resources are located onshore, in the North of the country, between the Wesser and Elbe rivers. Germany's only offshore natural gas field is located in the German North Sea, about 190 miles offshore and began production in September 2000. Known as the Deutsches Nordseekonsortium (German North Sea Consortium), the field is operated by a consortium of Wintershall (operator), BEB Erdgas und Erdoel, BASF, and RWE-DEA. New pipelines will transmit the anticipated 3.3 million cubic meters (116.5 million cubic feet) per day of production. The field is expected to produce for 16 years. Energy legislation passed in 1998 marked full legal liberalization of the German natural gas sector in accordance with European Union directives. Successive amendments in 1999 served to further open the market, but some German industry players have petitioned the government for even more reform. Although more than 750 companies currently operate in the German natural gas sector, smaller firms have suggested that the country's lack of an official regulator stifles market development, and that recent mergers and acquisitions have made the sector less competitive. In Germany, the terms of access to the country's natural gas network are negotiated between companies within the parameters laid out in a framework agreement known as the Verbändevereinbarung, which was originally signed in July 2000. Germany and Austria are the only EU countries that have not established a sectoral regulator for natural gas. Germany's smaller natural gas concerns have also petitioned the government's approval of German energy firm E.ON's takeover of the distributing giant, Ruhrgas. The merger was originally rejected by the German Cartel Office in January of 2002, but later that year the federal government exempted the firms from the ruling, citing national interest in creating what the government believed could be a "national champion". This decision prompted responses from 9 smaller German natural gas firms, as well as the Energy Ministry of the United Kingdom, and the European Union. In July 2002, German energy firms took their grievances to the Dusseldorf Supreme Court, which claimed jurisdiction to rule over the government's exemption. The dispute was solved in a pre-trial settlement, when more onerous conditions were set upon E.ON to ensure a more competitive market after the merger. After being stalled for 6 months in the Dusseldorf Supreme Court, the deal was approved in February 2003 and is now being considered by the European Commission. Pipelines The pipelines that bring Norwegian natural gas ashore are Norpipe, which lands at Emden, and Europipe I & II, which land at Dornum. From the Dornum receiving station, the natural gas is linked either to the NETRA pipeline or to the metering station at Emden, where the MIDAL pipeline begins. The TENP pipeline can also bring in UK gas by way of the Netherlands. Wingas, which already owns the MIDAL and STEGAL pipelines, is planning to construct a pipeline with a capacity of 353-424 Bcf per year from Heppenheim in Southwest Germany to the states of Badem-Wurttemburg and Bavaria in Southeastern Germany. Ruhrgas is the largest shareholder in the MEGAL, TENP, and NETRA pipelines, though it has a majority stake only in the TENP pipeline. In April 2001, Ruhrgas, Fortum of Finland, and Wingas agreed to jointly develop plans to build a new natural gas pipeline from Russia to Germany via the Baltic Sea. Discussions in 2002 resulted in preliminary plans which call for the pipeline to begin functioning in 2007, and to reach full capacity by 2009. The large volumes of natural gas entering Germany, particularly on the Northwest coast around Emden, have given rise to efforts to establish Europe's third major natural gas hub at Bunde near the Dutch border. This is the point where the pipeline system of Gasunie of the Netherlands links up to the German networks of Ruhrgas, Wingas, and BEB. Spot trading by about a dozen companies is already occurring in this area, although volumes are small so far. Its location is in close proximity to where very large volumes of natural gas come into Germany, combined with European Commission proposals to unbundle integrated gas companies in the EU make the formation of an important hub likely. A conference was held in May 2001, on the subject of fostering natural gas trade at Bunde, which was attended by 40 companies, including all of Germany's major players. Two firms, EuroHub and HubCo, emerged in 2002 as the front-runners in the race to develop the new trading hub. COAL Germany produces two grades of coal: anthracite, also known as "hard coal", and lignite, or "brown coal." Hard coal production, which is located primarily in the Ruhr and Saar regions, is expensive in Germany relative to other major coal producers because German coal is located deep underground and therefore more expensive to extract. Hard coal production has remained a viable industry only through heavy subsidization, which is being reduced, but not ended (see below). Lignite, or "brown coal," production, however, is inexpensive in Germany. Germany is the world's largest lignite producer, with about one-fifth of global output. Lignite was the most important fuel in the former East Germany, with East Germany producing about three times as much lignite as West Germany in the years prior to reunification. Since reunification, wasteful and environmentally damaging mining methods practiced during Communist rule in the former East Germany have been reformed and lignite output has fallen by about 40%. As domestic production declines, Germany is emerging as a significant coal importer. Gross imports of hard coal, coke, and briquettes have more than doubled since unification, and in 2001, for the first time ever, the consumption of imported coal exceeded the consumption of domestic coal. Germany's largest suppliers are Australia, Canada, Poland, South Africa, and Colombia, among others. The Federation of German Coal Importers expects German hard coal imports to increase over the next 20 years, as nuclear power is phased out and domestic production declines. Coal is Germany's only major domestic fuel source and the government considers maintaining hard coal production capacity critical to the country's energy security. For this reason, Germany subsidizes the production of hard coal in order to maintain a cadre of working coal professionals. The coal industry is also a major employer in Germany. Germany's state assistance to coal producers was addressed by the European Union in 2000 and 2001, resulting in temporary agreements authorizing coal subsidies in EU member countries. In July 2002, upon expiry of the 1952 European Coal and Steel Community Treaty, the Energy Ministers of the European Union states agreed to phase out subsidies to domestic coal producers by 2010, and stipulated that beginning in 2003, subsidies will be reduced to below their 2001 levels. The member states have agreed to review this decision in 2007. Other EU member states which provide assistance to their coal industries are France, Spain, and the United Kingdom, but Germany's assistance is by far the largest. ELECTRICITY Germany has an installed electric capacity of 114 million kilowatts, which includes considerable excess generation capacity. Recent German estimates predict 14% growth in electricity consumption between 1999 and 2020. Concurrently, Germany has agreed to phase out nuclear power over the next two decades. Nuclear power, which currently accounts for almost one-third of the county's electricity generation, is likely to be replaced by a combination of gas-fired and coal-fired electricity as well as renewable energy. The consumption of renewable energy (including geothermal, solar, wind, wood and waste electric power), has increased dramatically since 1991. The consumption of renewable electricity, particularly wind power, has more than quadrupled since 1991, to 22.6 billion kilowatt hours in 2001, representing approximately 4% of the country's total electricity consumption. Electricity imports, which also could rise in coming years, come primarily from France, the Czech Republic, Norway, and Austria. Germany also exports small amounts of electricity to the Netherlands, Switzerland, and Austria, and in 2000 imports and exports almost completely offset each other. Sector Organization Complete liberalization of the German electricity sector was completed in 1998 with the adoption of the Energy Industry Act of April 1998. Electricity market reform has progressed via agreements among major participants in the market but is not overseen by any regulatory body (similar to the natural gas sector). Some German market groups and the European Commission (EC) have called for an energy regulator, but so far the government has only created a division of the cartel office dedicated to handling complaints about the electricity sector. The EC estimates that about 10%-20% of large electricity customers and under 5% of smaller customers have switched to competitive suppliers since 1998. Despite the overall success of liberalization, third party access to transmission networks remains a contentious issue. The Verbändervereinbarung that determines access to the grid system was first agreed to in May 1998 and left transmission control mostly in the hands of the supra-regional companies. After much criticism, a new Verbändervereinbarung was agreed to in December 1999. This agreement has encountered even more criticism than its predecessor, and EU competition authorities have expressed concern. The most criticized aspects of the agreement include a lack of price transparency and the division of the German market into two distinct trading zones. According to the 1998 Energy Industry Act, the rules for network access must be reviewed in 2003. Nuclear Power Nuclear power has become controversial since the September 1998 elections. The Greens, the environmental party that is part of the ruling alliance, are staunchly opposed to the continued use of nuclear power. Chancellor Schroeder had decided to close all 19 nuclear reactors in 2005, but he has since amended his position. The government formally signed an agreement with utility companies in June 2001 to gradually phase out nuclear power, and in April 2002, the German Parliament amended the country's atomic energy legislation to reflect this agreement. Each nuclear plant is allowed to produce a finite amount of electricity, and plants will have a life span of about 32 years. The deal could see the total elimination of nuclear power by 2021, as the newest nuclear plant opened in 1989. Generation volumes are transferable; if an older plant closes before reaching its production ceiling, its remaining allowable production can be transferred to a new plant. Some observers suggest that there are few economically viable alternatives to quickly replace such a significant portion of the fuel mix, especially in the wake of power-sector liberalization. As European markets become more liberalized and more price-sensitive, replacing the mostly amortized plants will prove difficult. Over the longer term, however, high costs (high fixed costs, long depreciation periods and long annual operating times) associated with nuclear generation could work to decrease nuclear generation's role in Germany's power sector. Nuclear installations currently are initiating programs to reduce production costs and waste disposal costs in order to become more price-competitive. Some executives in Germany's nuclear industry have claimed that the June 2001 agreement is not irreversible, and that an electricity shortage and a change in the political climate might lead to a renewal of nuclear energy. ENVIRONMENT In 2001, Germany emitted 223.2 million metric tons of carbon from the consumption of fossil fuels. Germany ranks third in total carbon emissions within the G-7, after the United States and Japan. Germany signed the Framework Convention on Climate Change in Rio de Janeiro in June 1992 and ratified it on December 9, 1993. Signers of the agreement pledged to stabilize per capita CO2 emissions in the year 2000 and beyond at 1990 levels. Under the Kyoto Protocol of December, 1997, Germany would have to go even further by reducing carbon emissions 8% by 2008-2012. This will be made more achievable given the sharp drop in total German carbon emissions since 1990, due mainly to decreased consumption of energy overall (and in particular lignite) in the former East Germany. Sources for this report include: CIA World Factbook; Dow Jones; Economist Intelligence Unit ViewsWire; Energy Intelligence Group; Financial Times; Global Insight; Global Power Report; Mining Journal Ltd; Oil and Gas Journal; Petroleum Intelligence Weekly; Petroleum Economist; Platt's International Coal Report; Platt's Oilgram News; U.S. Energy Information Administration; World Gas Intelligence; WEFA World Economic Outlook. COUNTRY OVERVIEW ECONOMIC OVERVIEW ENERGY OVERVIEW ENVIRONMENTAL OVERVIEW * The total energy consumption statistic includes petroleum, dry
natural gas, coal, net hydro, nuclear, geothermal, solar, wind, wood and
waste electric power. The renewable energy consumption statistic is based
on International Energy Agency (IEA) data and includes hydropower, solar,
wind, tide, geothermal, solid biomass and animal products, biomass gas and
liquids, industrial and municipal wastes. Sectoral shares of energy
consumption and carbon emissions are also based on IEA data. ENERGY INDUSTRIES LINKS For more information from EIA on Germany, please see: Links to other U.S. Government sites: The following links are provided solely as a service to our customers, and therefore should not be construed as advocating or reflecting any position of the Energy Information Administration (EIA) or the United States Government. In addition, EIA does not guarantee the content or accuracy of any information presented in linked sites. German Embassy in
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