Equinor, Germany's Sefe Strike $55 Billion Gas Supply Deal

(Reuters) — German energy firm Sefe secured a 50 billion euro ($55 billion) gas deal with Norway's Equinor on Tuesday, covering one-third of the industrial gas needs of Europe's largest economy.

The deal marks a milestone in Berlin's efforts to replace former long-term supplier Russia, which first cut and later suspended deliveries via the Nord Stream pipeline in 2022, stoking fears of cold German homes during the last winter season.

Norway has been Germany's top supplier of natural gas since Russia suspended direct deliveries in August 2022. It currently accounts for roughly 40%-50% of Germany's gas imports.

"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.

The supply deal covers around 10 billion cubic meters (Bcm) of natural gas per year from Jan. 1, 2024, until 2034 and carries an option for another five years covering 29 Bcm, the two companies said in a joint statement.

At current market prices, this translates into a contract volume of around 50 billion euros, Equinor said, adding that the 10 Bcm annually would make up 12.5% of the 80 Bcm gas volume the company controls and markets, half of which comes from the Norwegian state's gas.

Around 90% of the gas volume SEFE will get through existing pipelines are indexed on TTF and THE gas trading hubs to be available for the German and Dutch markets, Sefe CEO Egbert Laege said.

Irene Rummelhoff, Equinor executive vice president of marketing, midstream and processing, said the company has signed other contracts that it hasn't announced but not as big as the one with SEFE.

"This is probably one of the really, really largest contracts that we have ever signed as a company, so it's a major deal," Rummelhoff added.

The agreement also covers a non-binding letter of intent that would make Sefe, formerly known as Gazprom Germania, an offtaker of low-carbon hydrogen from Equinor starting in 2029 and continuing towards 2060, the firms said.

Sefe - short for Securing Energy for Europe - was nationalized by Berlin during the continent's energy crisis and, along with Uniper, has been put in charge of securing the country's gas supply.

"The procurement of natural gas from the Norwegian continental shelf ensures the sustainable and future-proof supply for European and, in particular, German customers in the household and industrial sectors," Laege added.

($1 = 0.9143 euros)

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