Germany, US sign energy, climate partnership, reiterate 30% global methane cut goal 2030

Germany and the US have signed a new energy and climate partnership, Vice-Chancellor Robert Habeck and US climate envoy John Kerry said May 27 at the sidelines of the G7 energy minister conference in Berlin.

The agreement will allow the development of regulatory frameworks towards a level playing field for energy cooperation from LNG to hydrogen as Germany seeks to diversify gas supply away from Russia with focus on joint working groups on hydrogen, offshore wind, zero emissions vehicles and climate cooperation with third-party countries.

"This partnership will form the framework for many details," Habeck said in a joint press conference with Kerry noting for instance certification of hydrogen as one example.

Habeck also noted that long-term LNG contracts were "unlikely to be longer than 15 years" as Germany's climate law limits 2040 CO2 emissions to just 10% of 1990 levels with natural gas demand expected to fall from the end of this decade.

German utility RWE signed May 25 a preliminary agreement with the US' Sempra Infrastructure for the negotiation of a 15-year deal for the supply of 2.25 million mt/year of US LNG from the Port Arthur LNG project. RWE has leased two FSRUs for deployment in northern Germany as part of Berlin's plans to phase out Russian gas imports and has also taken a stake alongside the government in the German LNG Terminal project at Brunsbuettel.

European LNG spot prices have risen sharply over recent months with Platts DES Northwest Europe for July assessed at $22.117/MMBtu May 26, on par with Platts JKM, the spot-delivered price of LNG into Northeast Asia, S&P Global Commodity Insights data showed. The best netback for prompt US FOB Gulf Coast LNG cargoes however flipped to Asia from Europe for the first time in over two months, the data showed.

Kerry reiterated a joint US-EU pledge to cut global methane emissions by 30% in 2030 over 2020.

Long-term plans

The US has already pledged at least 15 Bcm additional LNG volumes for Europe in 2022, according to a March 25 joint statement with the European Commission.

For 2030, the EC has pledged EU demand for about 50 Bcm/year of additional US LNG with prices reflecting long-term market fundamentals, while the US seeks to reduce the greenhouse gas intensity of all new LNG infrastructure.

Berlin's fast turnaround on LNG since Russia's invasion of Ukraine alone will see some 30 Bcm/year LNG import infrastructure emerge in Germany by next summer via four FSRUs and fast-track plans for at least three permanent LNG terminals.

Concerns over Russian gas have seen European gas prices hit record levels in recent months, with the TTF month-ahead price hitting an all-time high of Eur212.15/MWh on March 8, according to Platts price assessments by S&P Global.

June contracts were last assessed at Eur85/MWh May 26, some 245% higher on the year with annual TTF contracts for 2023, 2024 and 2025 averaging above Eur60/MWh, triple from an August 2021 forecast by S&P Global for the same period.