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Recently nationalized German utility Uniper will continue to look for LNG cargoes on the spot market due to a perceived uncertainty of long-term gas demand.
This is what the company’s new chief executive Michael Lewis has said, as quoted by Reuters. Lewis praised the flexibility of spot market deals in the LNG space.
Speaking at a conference in Canada, Lewis said that "We want to continue to diversify geographically but also in terms of the duration of contracts."
"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."
The European Union is keen to reduce its gas consumption in order to cut its dependence on outside energy suppliers.
According to Lewis, demand for liquefied natural gas is guaranteed until about 2030 but after that year, as the EU ramps up its alternative energy source capacity, this demand will become questionable.
Of course, all hinges on the EU’s success in this alternative energy source ramp-up. For now, that success is doubtful due to the price tag of the transition and supply challenges.
Germany had to nationalize Uniper last year to avoid its collapse amid soaring gas prices and lack of Russian supply in the wake of the Ukraine invasion and the EU sanction barrage. The total bill for the nationalization came in at $53 billion.
To replace lost Russian gas volumes, European buyers switched to U.S. LNG, with exports of the commodity from the U.S. Gulf Coast soaring to record highs last year.
Because of the expected decline in gas demand after 2030, most buyers have remained unwilling to commit to long-term contracts. This, however, has jeopardized the future of new LNG capacity due to come on stream later this decade.
By Irina Slav for Oilprice.com
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.