Germany locks in more US natural gas as it shuns Russian supply

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Germany has signed another long-term deal to import more US liquefied natural gas, as Berlin moves to replace Russian energy in its economy amid Moscow’s war in Ukraine.

SEFE, or Securing Energy For Europe — the company born out of Berlin’s effective nationalisation of the German operations of Russia’s state-owned Gazprom — will purchase 2.25mn tonnes a year of the super-chilled gas from Venture Global LNG, an American developer of export terminals along the Gulf of Mexico.

The 20-year duration of the supply contract is an indication that Germany — which began importing LNG just seven months ago — expects gas consumption will endure in its economy despite a goal of cutting 95 per cent of net carbon emissions by 2045. SEFE is entirely owned by the German state.

Egbert Laege, SEFE’s chief executive, said the deal marked “another important step on our mission to secure energy for European customers” and would “contribute to the further diversification and sustainability” of the continent’s supplies.

Venture Global chief executive Mike Sabel hailed the “strategic partnership” with Germany, saying his company was “honoured to support a key US ally”.

The companies did not disclose the price at which the gas — equivalent to about 5 per cent of Germany’s demand — would be sold.

The deal is Germany’s second 20-year agreement with Venture Global, following one for 2mn t/y signed by utility EnBW, which is largely owned by the south-west state of Baden-Württemberg. The agreements will make Venture Global Germany’s largest LNG supplier.

Germany’s RWE last year agreed a deal to source Qatari LNG for 15 years — significantly shorter than the Gulf state sought, having signed deals with Chinese companies in recent months for as long as 27 years. Norway’s Equinor this week also signed a 15-year deal with US-based exporter Cheniere Energy.

US LNG exports to Europe soared last year as the energy crisis deepened and gas prices rose, with shipments of more than 40mn tonnes easing supply shortages. The extra flows have helped Europe build ample gas stocks as it prepares to enter the 2023 winter.

Germany, which spent decades building an industrial sector reliant on once cheap Russian gas, has been especially exposed to supply losses after Moscow’s full-scale invasion of Ukraine and mysterious explosions last year that demolished parts of the Nord Stream pipeline system from Russia.

Before the energy crisis Germany was the only big economy in Europe without LNG import capacity, such was its reliance on pipeline gas from Russia.

But in the past 18 months it has fast-tracked a number of floating LNG import facilities. The country has taken in a total of 2.4mn tonnes of LNG since December, according to Refinitiv, with more than 70 per cent coming from the US.

The lower forty-eight states of the US only began producing LNG in 2016, but Gulf coast projects under construction from companies including Cheniere, Venture Global and ExxonMobil will make the country the world’s largest exporter by far. US exporters have signed contracts for future supply amounting to more than 70mn t/y since the start of 2021, according to S&P Global.

Just weeks after Russia’s latest invasion of Ukraine last year, US President Joe Biden and European Commission president Ursula von der Leyen announced a strategic pact under which EU companies would seek to guarantee more demand for American LNG — a bid to spur construction of more export capacity.

Venture Global said the LNG would be exported from a new plant, CP2, at Calcasieu Pass on the Louisiana coast, that it hopes to begin building later this year. The company’s first plant began producing at Calcasieu Pass in January 2022 and in April Venture Global moved ahead with another project that will eventually ship 20mn t/y of LNG.