UAE agrees LNG deal with Germany as Berlin looks to replace Russian gas

The United Arab Emirates has agreed a deal to supply liquefied natural gas to Germany as chancellor Olaf Scholz visited the Gulf state as part of a regional tour seeking to drum up alternatives to Russian energy.

Abu Dhabi National Oil Company will supply Germany utility RWE with 137,000 cubic metres of LNG later this year, which will be the first delivery to the under-construction import terminal on the north-west coast at Brunsbüttel, RWE and the UAE state media said.

Adnoc was expected to reserve another five LNG cargoes for German customers in 2023, a person briefed on the matter said on Sunday.

Germany has been seeking to secure energy imports from sources outside Russia since the invasion of Ukraine began in February. The oil-rich UAE, while a relatively modest gas exporter, has plans to double its LNG production to 12mn tonnes a year by 2026.

“We need to make sure that the production of LNG in the world is advanced to the point where the high demand that exists can be met without having to resort to the production capacity that exists in Russia,” Scholz said before the deal was announced, according to Reuters.

RWE said the deal marked “an important milestone” in creating LNG supply infrastructure.

But the amount of LNG so far secured by Scholz during his visit to the Gulf — starting with just one tanker in December — is tiny compared with the quantities Germany needs in order to replace the natural gas Russia has stopped supplying. Before Moscow’s invasion of Ukraine, Russian natural gas accounted for more than half of Germany’s total supplies.

Scholz, who met the Saudi crown prince, Mohammed bin Salman, in Jeddah on Saturday, headed to Qatar on Sunday for meetings that could yet unlock larger gas supplies for Europe’s largest economy.

Qatar, the world’s largest exporter of LNG, has already signed a provisional LNG supply agreement with Germany, but talks over the contracts have run into difficulties over issues such as pricing and the length of contracts.

In Doha, the German chancellor met Qatari Emir Sheikh Tamim bin Hamad Al Thani, and said he wanted to “achieve further progress” in LNG deliveries to Germany, Reuters reported.

The bilateral deal with the UAE, signed with UAE president Mohammed bin Zayed al-Nahyan, also covered other energy agreements, including a deal with Germany’s Steag and Aurubis for the supply of low-carbon ammonia to fuel hydrogen, with the aim of decarbonising industrial sectors. The first cargo arrived in Hamburg this month.

Masdar, the UAE’s renewables vehicle, will explore offshore wind projects in the North Sea and the Baltic Sea off the German coast in an effort to generate 10GW of renewable energy output by 2030.

Adnoc also delivered its first diesel delivery to Germany this month as part of an agreement to supply 250,000 tons of diesel a month next year to a German company.

“This landmark new agreement reinforces the rapidly growing energy partnership between the UAE and Germany,” said Sultan Al Jaber, chief executive of Adnoc.

The deal comes after some difficult years in the bilateral relationship since Germany halted arms exports to the UAE’s regional ally Saudi Arabia in the wake of the murder of Saudi journalist Jamal Khashoggi.

The UAE’s involvement in the war in Yemen also exacerbated tensions with Berlin, where many have criticised moves to overlook human rights issues for the sake of facilitating energy supplies.

In a statement on Sunday, Robert Habeck, the German economy and climate minister, said companies and citizens urgently needed help to “survive the crisis caused by the Russian war of aggression”.

“Gas prices must be reduced, the costs for the economy and households must be limited,” he said. “Overall, in this complex crisis, these are hard times.”

Additional reporting by Martin Arnold in Frankfurt