INTERVIEW: Former Gazprom unit SEFE back as key gas market player

Securing Energy For Europe has re-established itself as a European gas market player after Germany took the former Gazprom unit under trusteeship and provided a Eur9.8 billion ($10 billion) loan to support procurement, managing director Egbert Laege told S&P Global Commodity Insights.

SEFE, the former Gazprom Germania unit with a customer portfolio of 170 TWh/year, needed to be stabilized after it was hit by Russian sanctions on its gas and LNG supply contracts, Laege said July 14 in an interview on the sidelines of Aurora Energy's spring summit in Oxford, England.

"We have new financing, we are under new ownership, we have no Russian exposure anymore, that is the starting point where we can leverage our competencies, which is securing and operating LNG portfolios, managing cross-commodity portfolios, procuring clients across Europe and operating the infrastructure," Laege said.

SEFE secured an OFAC (Office of Foreign Assets Control) sanctions waiver "within 48 hours in early May", Laege said, allowing it to focus on procurement and supply.

The license from the US government allowed SEFE to continue operating with banks and was a "strong symbol" that partners in the US understood the aim of the German government to stabilize the company under its administration, Laege said.

Long-term perspective

The company had one remaining long-term LNG supply contract not under Russian sanctions, and was procuring more in the spot market.

"We are prepared to sign long-term contracts," Laege said. "We have political backing for a long-term perspective in the market."

The energy industry veteran noted a "massive discrepancy between the short term prices we see now and the longer term price expectations which makes it challenging to find a commercial agreement."

Europe's gas price benchmark TTF month-ahead was assessed at Eur174.73/MWh ($179/MWh) on July 14, S&P Global Commodity Insights data showed.

Platts Analytics has forecast TTF prices averaging Eur60.40/MWh in 2023, falling to Eur35.40/MWh in 2027, according to its Five-Year Forecast published July 8.

Aurora Energy Research analyst Hanns Koenig said July 14 the market was pricing in a stop of Russian flows in the near term, while longer-term prices even without Russian gas are closer to Eur30/MWh from around 2025.

"Prices in winter 2022 are likely to be set by demand destruction close to Eur200/MWh," Koenig said at the event.

Laege said SEFE could conclude long-term contracts if its new trustees (network regulator BNetzA) considered the specific deal proposal as "profitable business".

"So far, we have not looked at 15-year contracts as we are currently focused on near-term supply," Laege said.

"The objective of the trusteeship is to preserve and to increase the assets of the company," he said, referencing demand risks posed by Germany's 2045 net zero target.

Profitable

SEFE's goal was to achieve profitability by 2023, even if "we can no longer procure [gas] at our old [Russian contract] prices", and some of its client contracts still reflected that price, Laege said.

SEFE's Wingas subsidiary has a 20% share of the German gas supply market with significant gas storage operations under the Astora brand at Etzel, Jemgum and Rehden as well as a 50% stake in gas grid operator Gascade.

Assets include the former Gazprom trading unit in London, renamed SEFE Marketing and Trading, as well as other subsidiaries across Europe.

"We would like to play a part in facilitating the transition to net zero and will prepare an offer to politics to play a role in developing the hydrogen economy," Laege said.

Gazprom Germania was a 100%-owned subsidiary of Gazprom Export. Germany took the company into trusteeship in April.

In June, the structure was changed with the trusteeship extended beyond September with the KfW loan obtained to to secure liquidity and cover replacement purchase costs for the gas.

TTF year-ahead gas hit a record Eur145.80/MWh July 13, up almost sixfold from a year ago, S&P Global data showed.