While a stream of LNG cargoes is largely helping Europe maintain its tight natural gas supply balance, the region’s largest gas user, Germany, is increasing its reliance on Norwegian pipeline flows to fuel its industry until an alternative fuel market emerges.
Norway’s Equinor ASA has signed a letter of intent to supply German industrial gas users with 10 Bcm/year, or roughly one-third of the country’s industrial gas demand, through 2034 with an option for an additional five years. Equinor would deliver gas supply to Securing Energy for Europe GmbH (Sefe), a former German unit of Russia’s Gazprom that was placed under the control of Germany’s energy regulator last year.
Along with being the largest gas deal Equinor has signed since it commercialized volumes from Norway’s Troll field in 1986, Sefe also has agreed to become a long-term offtaker of Norwegian hydrogen from 2029 to at least 2060.
“This is a response to Europe’s need for long-term, reliable supply of energy and a viable route to decarbonization at scale,” Equinor CEO Anders Opedal said.
Norway To The Rescue
Norway is Europe’s largest natural gas exporter and has been a supplier to Germany for almost 50 years. However, Norway was Germany’s third-largest gas supplier behind Russia and the Netherlands before last year.
Now, as production in the Dutch Groningen field continues to decline and geopolitical tensions with Russia severely limit pipeline flows from the country, Norway’s role as a reliable natural gas source has grown exponentially.
Norwegian pipeline flows grew to make up around 33% of Germany’s gas imports last year, while Russian supply dropped to 22% from 52% in 2021, according to the country’s energy regulator.
In turn, Equinor has moved to shore up its production volumes over the decade, launching new development plans for tie-backs with existing platforms on the Norwegian continental shelf. Earlier in the month, the company agreed to acquire Shell plc’s 30% interest and operatorship of the Linnorm discovery, the region’s largest undevelopment natural gas discovery.
What About LNG?
In less than a year, Germany went from importing liquefied natural gas for the first time in late 2022 to being on track to receive more than 5 million metric tons (Mt) by the end of this year, according to data from Kpler. More than 3.6 Mt of that supply came from the United States.
German policymakers have been continuing to progress plans for flexible and onshore LNG import terminals that could keep those import volumes growing in the near future.
However, the country’s plans to aggressively transition away from most fossil fuels by 2030 has meant German importers largely have relied on short-term deals with trading houses and major portfolio players instead of new long-term deals with U.S. LNG producers.
That said, German utilities EnBW Energie Baden-Württemberg AG and RWE AG signed deals last year with U.S. project developers. Sefe also has signed a 20-year, 2 million metric ton/year deal for offtake from Venture Global LNG Inc.’s CP2 LNG project and recently asked U.S. regulators to make an authorization decision for the facility.
Meanwhile, German LNG terminal developers and gas marketers also have been preparing future agreements to try to repurpose infrastructure for a potential hydrogen economy.
Earlier in the year, Equinor disclosed plans with RWE AG to repurpose major natural gas pipelines to transport hydrogen for power generation by 2030.
Sefe CEO Egbert Laege said the company’s hydrogen collaborations with Equinor are aimed at creating a “future-proof” energy supply for Germany by tapping its storage company, Astora, to develop hydrogen storage capacity and transportation solutions.
“By signing the agreements for gas and hydrogen supply, we have teamed up with a strong European supplier that brings us a big step closer to our common goal of decarbonizing the energy sector while at the same time providing energy security,” Laege said.
