November 14, 2022 [S&PGlobal] – Germany’s Uniper — formerly one of Europe’s biggest buyers of Russian gas — is increasing its focus on LNG as it looks to replace lost volumes from Russia, the company said Nov. 3.
Uniper was particularly hard hit by the suspension of Russian gas flows via the Nord Stream pipeline and has had to buy replacement gas volumes on the market at much higher cost to meet customer demand, leading to significant financial losses.
Uniper CFO Tiina Tuomela, speaking on a third-quarter earnings call, said reshaping the company’s gas midstream business and contributing to German supply security were among the management’s key near-term objectives.
“This includes initially expanding LNG infrastructure and supply relationships,” Tuomela said, a reference to the deployment of new German LNG import infrastructure and efforts to secure the necessary LNG supply.
Tuomela also said Germany had built gas storage stocks to a healthy level over the summer, bringing “some comfort” for the current winter. “However, it is all about the weather — that will play a key role,” she said.
“When it comes to next winter 2023/24, the storages will be quite empty after this winter, so the question is how do we refill the storages with no gas anticipated from Russia,” she said.
Prompt European gas prices have weakened in recent weeks due to mild weather, healthy storage stocks, and demand reductions, but concerns remain over next winter.
Platts, part of S&P Global Commodity Insights, assessed the benchmark Dutch TTF day-ahead price at Eur61/MWh on Nov. 2 compared with a Winter 23 assessment of Eur131.10/MWh ($127.87/MWh).
Uniper already imports LNG thanks to its long-term capacity bookings at the Gate terminal in the Netherlands and the Grain terminal in the UK.
It is also working to deploy a new floating LNG import terminal at the German port of Wilhelmshaven, which is set to begin operations at the turn of the year, and to secure LNG supplies for the terminal.
“Some of the curtailed gas volumes from Russia will need to be replaced by LNG deliveries,” Uniper said in its Q3 earnings report.
“Due to this, Uniper foresees a higher utilization of its existing long-term bookings of the Gate and Grain LNG regasification plants,” it said.
In March, Uniper said it would increase its capacity rights at Gate by 1 Bcm/year for three years starting from Oct. 1. It had already committed to a capacity increase of 1 Bcm/year starting in October 2024.
Both transactions supplement the existing capacity of 3 Bcm/year that Uniper holds since the start of Gate terminal in 2011.
Uniper said Nov. 3 that its experience at Gate — where it has increased booked capacity over the years — stood it in good stead for importing more LNG into Europe.
“This forms a good foundation to establish LNG as an important part of the German supply portfolio,” it said.
As well as Wilhelmshaven, Germany also plans a state-backed terminal at Brunsbuttel that is expected to start up at the turn of the year.
The two floating storage regasification units are among five state-backed terminals set to be installed in northern Germany along with another FSRU at Wilhelmshaven, and terminals at Stade and Lubmin.
A sixth privately-owned FSRU is also to be deployed at Lubmin from December this year.
Germany has no LNG import infrastructure at present, but efforts to develop a number of terminals intensified after Russia’s invasion of Ukraine in February and the curtailment of Russian gas supplies to Germany.
Uniper has agreed to supply LNG to the two state-backed FSRUs at Wilhelmshaven and Brunsbuttel from their startup to ensure full capacity utilization.
“Uniper continues to implement its strategy, which includes making the energy supply more diversified and secure,” it said in its Q3 report.
It highlighted the procurement of additional volumes of LNG for Germany “in cooperation with the German government.”
“Uniper is well positioned for this with its global LNG business and its contractually secured LNG volumes,” it said. In 2021, Uniper traded more than 360 cargoes worldwide.
In its Q3 report, Uniper also said it was working jointly with Japan’s JERA to optimize their LNG portfolios. “As a result, Uniper will be able to supply additional LNG to Germany and JERA to Japan,” it said.
Uniper was also impacted by the fire at the US Freeport LNG export terminal in June, which led to a shortfall in offtake for Uniper and the need to replace volumes in Q3.
“In our case, this meant that we missed three LNG cargoes. As those were previously hedged, we needed to buy the volumes back with significant losses,” Tuomela said.
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