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Uniper chief says flexible duration LNG contracts key for Europe
Global Banking & Finance Review®
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By Nia Williams
VANCOUVER (Reuters) – Shorter-duration contracts for LNG purchases will be important for Europe’s diversifying supply given uncertainty about long-term gas demand, the new chief executive of German utility Uniper said on Monday.
LNG developers prefer 20- to 25-year contracts to help secure financing for the multi-billion-dollar projects. But European nations committed to moving to renewable fuels within the next 20 years have been reluctant to sign deals, creating a stalemate.
Uniper CEO Michael Lewis argued for more flexible terms at the LNG 2023 conference in Vancouver. The role of liquefied natural gas in Europe’s energy mix is reasonably secure until 2030, but after that it is “very, very, challenging” to predict gas demand as countries ramp up decarbonization efforts, he said.
“We want to continue to diversify geographically but also in terms of the duration of contracts,” said Lewis, who took over as CEO last month. “The key challenge will be getting the right pricing and the right flexibility so that you can move that gas around easily, as demand starts to fall in Europe.”
European countries including Germany are seeking to secure new energy supplies after Russia cut pipeline gas shipments to the continent. Germany’s response to the cuts included conservation and launching several LNG import terminals.
If European LNG demand is uncertain, Asia’s emerging markets continue to grow as they move away from coal, said Sarah Bairstow, president of Mexico Pacific Ltd, speaking on the same panel.
Trading houses that can aggregate demand from a number of established and emerging markets will become more important to advancing LNG export terminal projects.
“Those markets are a little more difficult for project developers,” Bairstow said. “It’s really caused an emergence again of the role of aggregators and traders as we see emerging markets coming back into play.”
(Reporting by Nia Williams; editing by Gary McWilliams and Leslie Adler)
LNG, or liquefied natural gas, is natural gas that has been cooled to a liquid state for ease of storage and transport. It is used as a cleaner alternative to other fossil fuels.
Flexible contracts allow for adjustments in terms such as duration and pricing, providing parties with the ability to adapt to changing market conditions and demand.
Decarbonization refers to the process of reducing carbon dioxide emissions associated with energy production and consumption, often through the use of renewable energy sources.
Energy diversification involves using a variety of energy sources to reduce dependence on any single source, enhancing energy security and sustainability.
Emerging markets are nations with social or business activity in the process of rapid growth and industrialization, often characterized by increasing economic development and investment opportunities.
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