Equinor, Germany’s SEFE Enter Major Sales Agreement for Natural Gas, Hydrogen

Natural gas exploration and drilling in the ocean

(Credit: SEFE)

by | Dec 20, 2023

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Equinor has entered a long-term sales agreement with Germany’s state-owned energy company, Securing Energy for Europe (SEFE), for natural gas supplies and hydrogen that will reportedly meet a third of Germany’s overall industrial energy demand.

SEFE’s purchase, valued at about $55 billion, includes 111 terawatt hours of natural gas per year from 2024 to 2034, with the option for an additional 5 years, depending on the market price. Purchased natural gas will be distributed for use in Germany, the Netherlands, and the United Kingdom.

The companies also signed a non-binding letter of intent for SEFE to become a long-term off-taker of low-carbon hydrogen supplies from Equinor starting in 2029, extending to 2060. Equinor has been planning low-carbon hydrogen projects in Germany and Norway, including methods that may convert natural gas to clean hydrogen while capturing and storing carbon.

“This is a response to Europe’s need for long-term, reliable supply of energy and a viable route to decarbonization at scale”, said Equinor CEO Anders Opedal. “The total volumes we have agreed make this one of the largest agreements we have made as a company, and the supplies will contribute to energy security for Germany and Europe. I am also pleased to sign the letter of intent to explore opportunities to supply SEFE with low-carbon hydrogen at industrial scale for decades to come, enabling European industries and flexible gas power plants to accelerate decarbonization.”

Europe Works to Decrease Reliance on Russian Imports with Natural Gas

The sales agreement comes as Europe begins to shift away from dependence on natural gas supplies from Russia.

Russia reportedly cut and suspended natural gas deliveries to Germany in 2022. Further, Russian gas and oil imports have allowed the country to earn around $500 million to $1 billion each day, providing it with continued funding for the war in Ukraine. In response, Germany and the European Union at large have begun to seek gas and oil imports from other regions.

Natural gas is notably a fossil fuel-derived energy source, and the agreement seemingly goes against the EU’s commitment to decarbonize by 2050.

Equinor, however, emphasizes that natural gas has comparatively lower emissions than coal and oil. In a Financial Times report, the Equinor CEO said that natural gas will remain a necessary energy source as renewables will not come online quickly enough to meet demand in the near term. The hydrogen offtake agreement is meant to come into play once renewables and hydrogen supplies have been scaled up.

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