After the end of Russian gas, companies are desperately looking for new suppliers. One problem: The demand is increasing, but new sources will only open up in a few years. Another problem is the duration of the supply contracts and the climate targets of individual countries.
German companies, including the chemicals group BASF and the nationalized energy supplier Uniper, have been in talks with LNG exporters in the US and other countries about potential gas supplies in recent weeks. Deliveries could begin after the middle of the decade, insiders say.
It is widely expected that European countries will find it more difficult to obtain gas for the coming winters as they are largely cut off from Russian supplies and global competition for limited resources of liquefied natural gas increases. Little additional LNG will come to market until around 2026, when proposed projects in the US and Qatar come online, and Europe will likely compete for scarce supplies for the next few years.
After Russia invaded Ukraine, some European companies signed contracts for US LNG. But the continent will need more of these in the coming years. The negotiations are a sign of growing concerns about energy security, insiders said. The talks are complicated because while many Europeans need gas for five to 10 years, some business and government officials are reluctant to sign longer-term supply deals.
Germany and other European countries have set themselves ambitious targets to drastically reduce the consumption of fossil fuels. Companies are now concerned they may be left on the hook for gas they no longer need, insiders say. German officials followed discussions on gas supplies, including separate talks with Norwegian oil and gas company Equinor. Sometimes they also suggested companies to contact, say some of those informed.
A spokeswoman for the Ministry of Economic Affairs said gas purchasing is the responsibility of the companies. Equinor CEO Anders Opedal recently stated: “We are working closely with German industry to find common ground for potential future investments” in both oil and gas and low-carbon energy.
EU officials had proposed forming a collective of European companies to coordinate talks on gas deals and buy the fuel together. This is to avoid companies bidding against each other for the same gas. Federal Finance Minister Christian Lindner announced his support for this idea in October.
However, some company executives and government officials doubt that such a program worked due to the complexity of the gas market and the different needs of each country – and some companies are negotiating unilaterally. “We are not entirely convinced of the benefits that can be achieved by bundling gas procurement at European level,” said an RWE spokeswoman. The Essen-based company signed a non-binding 15-year contract with the US LNG exporter Sempra Infrastructure in May. She said RWE is urging government officials to support long-term gas deals.