Woodside inks LNG supply deal with Uniper as Germany scrambles for gas

Tue 06 Sep 22, 10:42am (AEST)
An offshore oil and gas rig is backlit by a horizonal sun with a loading tanker nearby
Source: iStock

Key Points

  • Germany's Uniper signs a major agreement with Woodside as it hopes to top up gas supplies before winter
  • Russia indefinitely suspended natural gas flows to Europe on Saturday

Woodside (ASX: WDS) has signed a major LNG supply agreement with Germany's Uniper to help the region cut its reliance on Russian supplies.

The deal is set to commence in January 2023 for the supply of up to 12 cargoes a year, equivalent to approximately 1bn cubic metres of natural gas and expected to run until 2039.

On Saturday, Russia declared the indefinite suspension of natural gas flows through the Nord Stream 1 pipeline, further squeezing energy prices and recession risks for the Eurozone.

European natural gas prices briefly jumped more than 20% to 264 euros after Nord Stream flows were halted. Prices have since pulled back to 222 euros but still up more than 600% in the last 12 months.

"We are expecting record gas prices across UK/Europe next week as the impact of long-term restrictions of Russia gas supply is absorbed by the market following the indefinite shutdown of the Nord Stream 1 pipeline," said Nathan Piper, an oil and gas analyst at Investec.

'However, the key and worrying point is that this is in the middle of summer - prices could move higher as demand increases for heating into winter," he warned.

Woodside bulks up LNG supply

The Uniper deal comes just one day after Woodside signed a binding sales and purchase agreement with Commonwealth LNG's grassroots export project in Louisiana.

Commonwealth LNG is forecast to product 8.4m tonnes per annum of LNG, scheduled to enter production in the first-half of 2026.

Woodside has dibs on up to 2.5m tonnes a year of LNG from Commonwealth LNG from 2026.

Europe could run out of gas

Europe is aggressively filling up its gas storage as it braces for a supply tight winter.

"Current storage levels have risen to 144bcm or nearly 80% of capacity, which is within the five-year range. Some countries have managed to boost inventories higher. Storage facilities in Poland and the UK are nearly full, and France's are over 90%," ANZ Research said last Thursday.

"Nevertheless, the situation in Germany is perilous. It's gas inventories can cover two months of peak demand. As temperatures fall through Autumn, demand for heating fuels will rise significantly above current supply," the note warned.

"As it stands, the country could run out of gas in early 2023."

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Kerry Sun

Content Strategist

Kerry holds a Bachelor of Commerce from Monash University. He is an avid swing trader, focused on technical set ups and breakouts. Outside of writing and trading, Kerry is a big UFC fan, loves poker and training Muay Thai. Connect via LinkedIn or email.

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