According to OGJ, Germany had 9.1 trillion cubic feet (Tcf) of proven natural gas reserves in January 2006, the third largest in the European Union (EU), after the Netherlands and the United Kingdom. Almost all of Germany’s natural gas reserves and production occur in the northwestern state of Niedersachsen, between the Wesser and Elbe rivers. Germany’s sector of the North Sea also contains sizable natural gas reserves, currently supporting the A6-B4 production project (see below). However, environmental regulations have curtailed the complete exploration and development of the area. Despite the lack of domestic production, Germany is the third-largest consumer of natural gas in the world, behind the United States and Russia, with 2004 consumption reaching 3.6 Tcf.

Germany began to liberalize its natural gas sector in the late 1990s in order to comply with EU directives. Unlike other EU countries, though, Germany did not establish a national regulator for the liberalized natural gas sector. Rather, it relied upon negotiated access between suppliers, distributors, and transmission companies. Without transparent open access to the system, several large companies came to dominate the sector. In July 2005, Germany approved a new energy bill that vested regulatory oversight of the natural gas sector with the Bundesnetzagentur (BNA), an existing agency that also regulated the telecommunications and the postal system.

Private operators control Germany’s natural gas production. BEB, jointly owned by Royal Dutch Shell and Esso (a subsidiary of ExxonMobil), controls about half of domestic natural gas production. Other important players include Mobil Erdgas-Erdoel (also a subsidiary of ExxonMobil), RWE, and Wintershall. The largest wholesale distribution company in Germany is E.ON Ruhrgas, controlling about one-half of that market. Germany’s wholesale distributors also control most of the national natural gas transport network. Finally, there are thousands of small, independent companies active in the retail distribution sector, many wholly- or partly-owned by municipal governments.

In 2004, Germany produced 730 billion cubic feet (Bcf) of natural gas. The country is the third largest producer in the EU, behind the United Kingdom and the Netherlands. Production has risen slightly since 1991, but the lack of new discoveries in the country could hinder future production growth. Over 90 percent of Germany’s natural gas production occurs in Niedersachsen. Germany also operates a single offshore natural gas field, A6-B4, located in the North Sea. Operated by Wintershall, A6-B4 came onstream in September 2000, and the project currently produces about 50 Bcf of natural gas per year.

According to Eurostat, Germany imported 3.0 trillion cubic feet (Tcf) of natural gas in 2004. The largest source of natural gas imports was Russia (46 percent), followed by Norway (33 percent) and the Netherlands (23 percent).

Germany’s domestic natural gas transmission network facilitates the movement of natural gas from import terminals to its interior consumption centers. Wingas operates the 440-mile Mitte-Deutschland-Anbindungs-Leitung (MIDAL) system, which runs the length of the entire country and connects the North Sea coast with Kahrlsruhe. With a capacity of 1.2 Bcf per day (Bcf/d), MIDAL allows Germany to import natural gas from Norway through receiving terminals in Emden and Dornum (see the Norway Country Analysis Brief for more information). Also linking the North Sea coast with the interior is the Norddeutsche Erdgas Transversale (NETRA), a 210-mile, 2.1 Bcf/d system operated by a consortium led by E.ON Ruhrgas. NETRA links the Emden and Dornum receiving terminals with eastern Germany.

There are two important spur lines off MIDAL. Wingas and E.ON jointly operate the 80-mile Rehden-Hamburg Gas pipeline (RHG), which connects Hamburg to the MIDAL system. Second, Wingas operates the 200-mile WEDAL system that links the MIDAL pipeline with the Belgian border near Aachen. Wingas plans to complete an expansion of the WEDAL system by the end of 2007 that should increase the capacity of the pipeline by 30 percent.

Wingas operates the Jamal-Gas-Anbindungs-Leitung (JAGAL) pipeline system, which brings Russian natural gas into eastern Germany via Poland. The 70-mile JAGAL I connects Mallnow, on the Polish border, to Baruth, south of Berlin. JAGAL II extends 140 miles from Baruth to Rueckersdorf, in the state of Thueringen. Overall system capacity of JAGAL is 2.3 Bcf/d.

Wingas and E.ON-Ruhrgas have proposed the joint construction of a new pipeline in southern Germany. The Sueddeutsche Erdgasleitung (SEL) will consist of two parts, running from southwest Germany to the German-Austrian border. SEL-I will extend 160 miles from Lampertheim to Amerdingen, while SEL-II will extend 150 miles from Amerdingen to Burghausen. According to the two companies, they have completed a survey of the pipeline’s proposed route and are waiting on government approval before moving forward with the project.

Due to its central location in Europe, Germany is an important transit center for natural gas imports from Russia and the North Sea. The 200-mile Sachsen-Thueringen-Erdgasleitung (STEGAL) extends from St. Katharinen, Czech Republic to Reckrod, where it connects to the MIDAL system. STEGAL allows Germany to import natural gas from Russia via the Czech and Slovak natural gas transmission systems. It is also possible for STEGAL to operate in reverse flow mode, facilitating the transmission of North Sea natural gas to the Czech Republic and Slovakia instead. In May 2006, Wingas completed an expansion of the STEGAL system that increased capacity to 0.5 Bcf/d.

E.ON Ruhrgas owns a majority stake in the 2.1-Bcf/d Mittel-Europaeische-Gasleitung (MEGAL) system, which has two parts. MEGAL-Nord is a 290-mile pipeline linking the Czech Republic and via Waidhaus, on the Czech-German border, and Medelsheim, on the French-German border. MEGAL-Sud extends 100 miles from Oberkappel, on the German-Austrian border, to Schwandorf, where it connects to MEGAL-Nord. Besides facilitating the transportation of natural gas from Russia to France, the MEGAL system also has several interconnections with Germany’s domestic gas transport network.

The Trans-European Natural Gas Pipeline (TENP), a joint venture of E.ON Ruhrgas and Italy’s Sname Rete, runs 600 miles from the German-Dutch border to Italy. This system also supports a reverse flow operation, so it would be possible to also use the TENP to transport Algerian or Libyan natural gas from Italy to Germany.

Russia has long sought an alternative export route to Western Europe for its natural gas. In September 2005, Germany and Russia signed an agreement to begin construction of the $5 billion Northern Europe Gas Pipeline (NEGP), a 750-mile system running beneath the Baltic Sea. The NEGP will have an initial capacity of 5.3 Bcf/d utilizing two, parallel pipelines. According to the plan, Russia’s Gazprom will take a majority stake in the project, with Germany’s Wintershall and E.ON each taking minority shares. The consortium officially began construction on the system in December 2005, with first flows through the system scheduled by 2010 (see the Russia Country Analysis Brief for additional information). Gazprom has also floated the idea of eventually extending the NEGP to the United Kingdom.

A consortium of natural gas companies, led by E.ON, has proposed the construction of the 130-mile Baltic Gas Interconnector (BGI). The BGI would extend from Rostock, Germany to a point in the Baltic Sea, where it would branch towards Copenhagen, Denmark and Trelleborg, Sweden. The project has won approval from Germany, Sweden, and the EU, but Denmark has yet to decide. Danish approval is crucial, because the planned route of the BGI passes through Danish territorial waters.

Poland has proposed the construction of additional pipeline connects with Germany that would facilitate imports of natural gas from the North Sea. E.ON Ruhrgas and Poland’s Bartimpex have proposed the construction of a pipeline from Bernau to Szczecin, Poland. Poland’s national oil and gas company, Polskie Gornictwo Naftower I Gazownictwo (PGNiG), announced in August 2005 that it also would like to build a new pipeline between the two countries to facilitate imports from Norway.

According to CEDIGAZ, Germany has an estimated 713 Bcf of working natural gas storage capacity, the largest amount in the EU and the fourth-largest in the world. The capacity is spread among 43 facilities. Wingas operates Western Europe’s largest underground natural gas storage site, the 150-Bcf Rehden facility in Niedersachsen.

In September 2002, BEB, E.ON, Wingas, and Norway’s Statoil established the North West European Hub Company (NWE-HubCo), an international natural gas trading hub located near the import terminal in Emden. In April 2004, NEW-HubCo merged with EuroHub, a competing trading hub in the Netherlands.