CAPITAL: Bonn

MONETARY UNIT: Deutsche Mark

REFINING CAPACITY: 2,246,000 b/cd

OIL PRODUCTION: 57,600 b/d

OIL RESERVES: 388 million bbl

GAS RESERVES: 12 tcf

Chancellor Gerhard Schroeder`s government was under criticism for a controversial plan to impose "ecology taxes" on energy use.

Schroeder`s government of Social Democrats and ecologist Greens, known as the "Red-Green Coalition," would use the proceeds to reduce Germany`s high taxes on labor.

Goal was to reduce total tax and welfare charges on German workers over 4 years, cutting them to an average 40% of gross wages.

As part of the proposal, the gasoline tax would be increased 6 pfennigs/l. A liter of gasoline cost about 1.5 marks in late 1998.

The bill would exempt large industrial users of energy from the highest taxes. Manufacturers would be fully exempt from the taxes if their energy costs were at least 6.4% of total production costs.

Meanwhile, the European Commission warned Germany it must notify the EC of its plans to raise taxes on energy products. The EC opposed the wide tax exemptions to energy-intensive industries under the German law. It said European Union guidelines allowed exemptions only if taxes were temporary and could be justified on environmental protection grounds.

As a policy, the EC said it opposed nations` favoring certain industries or sectors with tax breaks to the detriment of other industries. It favored using energy taxes to help unemployment or environmental protection.

Meanwhile, the German Federal Association of Energy Consumers criticized the country`s high energy prices, which it said were among the highest in the EU.

It said Germany`s energy prices exceeded those of the other 15 EU countries by an average 23% and rank behind only Italy and Austria. Sweden, Finland, and Denmark had the lowest prices.

A German law went into effect which decontroled the power and gas industries. It ended the ability of about 1,000 public and private energy suppliers to create exclusive marketing regions.

Germany suspended sales of oil from its special crude reserve due to low prices. Between late 1997 and early 1998, it sold 2.65 million tons of oil from the 7.3-million-ton reserve. The reserve was in addition to the nation`s 90-day emergency stockpile.

Other developments

DSM Polyolefins GmbH let contract for construction of a $180 million polypropylene plant at Gelsenkirchen. The plant would use Amoco Corp. gas-phase polypropylene technology.

It would have capacity to produce 250,000 metric tons/year of polypropylene and was expected on stream early in 2000.

Elf Aquitaine`s Mider refinery went into full operation in mid-1998. The $2.7 billion plant, with a capacity of 214,000 b/d, started up in late 1997.

GdF bought a 38.16% interest in Berlin gas distributor Gasag. It won approval from the German Cartel Office after agreeing to cut its nearly 50% share of gas distributor Erdgas Mark Brandenburg GmbH to 20%.

Erdgas operated lines in the Brandenburg region near Berlin. Electricity company Bewag, which already held an 11.95% stake, boosted its share to 24.99%.

Wingas GmbH, Kassel, Germany, began construction on a 220-km pipeline section from Soest to Aachen.

The line was an extension of the existing Wedal pipeline built by Wingas to transport gas from Russia to northern Germany beginning early in 1997.

Ruhrgas AG awarded gas supply contracts to Russia`s Gazprom through 2020.

The contracts extended several existing contracts with Gazprom and ensured the Russian firm would supply 13 billion cu m/year of gas to Ruhrgas`s system beginning in 2008. Ruhrgas was to transport Gazprom`s gas to other west European countries.

Wingas began an $83 million expansion of its Rehden gas storage site in northwestern Germany. The site was to be expanded from 2.56 billion cu m of capacity to 4.2 billion by mid-1999.