Germany has inked another extended agreement to import a larger quantity of US liquefied natural gas (LNG), shifting away from Russian energy amidst the ongoing Ukrainian conflict.
SEFE, or Securing Energy For Europe, originating from Berlin’s de facto nationalisation of the German operations of Gazprom, Russia’s state-owned company, will procure 2.25 million tonnes annually of the ultra-cooled gas from Venture Global LNG, a US firm specializing in export terminals along the Gulf of Mexico.
The two-decade supply contract demonstrates Germany’s anticipation of enduring gas consumption in its economy, despite its ambitious target of reducing 95% of net carbon emissions by 2045. SEFE is entirely state-owned by Germany.
SEFE’s CEO, Egbert Laege, recognized the agreement as “another significant stride in our quest to secure energy for European consumers”, contributing to the further diversification and sustainability of the continent’s supplies.
Venture Global’s CEO, Mike Sabel, praised the strategic alliance with Germany, expressing his company’s honour to aid a crucial US ally.
The specific price for the gas, meeting approximately 5% of Germany’s demand, was not revealed by the firms.
This agreement is Germany’s second 20-year contract with Venture Global, following a 2mn t/y agreement inked by utility EnBW, majorly owned by the Baden-Württemberg state in the southwest. These contracts will establish Venture Global as Germany’s primary LNG supplier.
Last year, Germany’s RWE negotiated a 15-year Qatari LNG sourcing deal, significantly shorter than the contracts Qatar sought, recently signing 27-year contracts with Chinese companies. This week, Norway’s Equinor also penned a 15-year agreement with US exporter Cheniere Energy.
US LNG exports to Europe surged last year as the energy crunch intensified and gas prices escalated, with more than 40mn tonnes shipped, mitigating supply shortages. This additional supply has allowed Europe to amass substantial gas reserves as it braces for the winter of 2023.
Germany, having developed an industrial sector heavily dependent on previously inexpensive Russian gas over several decades, has been particularly vulnerable to supply losses following Russia’s full-scale invasion of Ukraine and unexplained explosions last year that destroyed sections of the Nord Stream pipeline system from Russia.
Prior to the energy crisis, Germany was the only large economy in Europe without LNG import capability, reflecting its heavy reliance on pipeline gas from Russia.
In the last year and a half, Germany has expedited several floating LNG import facilities. Since December, the nation has absorbed a total of 2.4 million tonnes of LNG, as per data from Refinitiv, with the US contributing more than 70% of the total.
The US, excluding Alaska and Hawaii, only started producing LNG in 2016. However, ongoing projects on the Gulf coast by firms like Cheniere, Venture Global, and ExxonMobil are projected to elevate the US to the top of the global exporter list. Since the beginning of 2021, US exporters have committed to future supply contracts exceeding 70 million tonnes per year, as reported by S&P Global.
Following Russia’s most recent invasion of Ukraine last year, US President Joe Biden and European Commission President Ursula von der Leyen unveiled a strategic agreement in which EU firms would aim to secure a higher demand for American LNG. This was intended to stimulate the construction of additional export capacity.
Venture Global disclosed that the LNG would be shipped from a newly planned facility, CP2, located at Calcasieu Pass on the Louisiana coastline. The company anticipates initiating the construction of this facility later this year. Venture Global’s inaugural plant started operations at Calcasieu Pass in January 2022, and in April, the company proceeded with another project set to eventually ship 20 million tonnes per year of LNG.
