Oxford – German Industrial Gas, Nov 2023

Germany, as the largest industrial economy in Europe, was greatly affected by the Russian gas shut-off in 2022. However, it managed to overcome this crisis without any supply shortages since the beginning of the Ukraine crisis. Despite a contraction in GDP since Q4/2022, the German gas market outlook for winter 2023/24 is more certain. This is due to the availability of imported liquefied natural gas (LNG) through three new terminals, high autumn storage levels, and the expectation of lower industrial gas demand compared to the previous winter. While the immediate price risk is a long, colder-than-normal winter, Russian supply is no longer in doubt as it was last year. The crisis in 2022 highlighted the importance of moderately priced Russian imported gas in sustaining the German industry, despite challenges such as less competitive labor, heavy environmental regulations, and bureaucratic red tape. This crisis also led to some German industries shifting their operations outside of the country. This paper examines Germany's unique position as the largest gas consumer in Europe and its role as an import and transportation hub. It specifically focuses on the impact of the gas price rally on German industries, particularly in the chemicals sector. BASF, the largest chemical company in Europe, is highlighted as a case study due to its heavy investment in Russian joint ventures and its international portfolio in the USA and Asia.