Germany's recent move to nationalize Uniper SE may foreshadow more aggressive actions by European governments to support buyers contracting for liquefied natural gas supplies, according to Dan Brouillette, president of U.S. exporter Sempra's infrastructure unit and a former U.S. energy secretary.

"You are going to see that in the near term," Brouillette said on the sidelines of the LDC Gas Forums' Gulf Coast Energy Forum in New Orleans. "Right now, in order to fix the deficit that they have in the marketplace, it is going to take that kind of very aggressive action on the part of the governments."

Europe's scramble to secure alternatives to Russian natural gas after Russia invaded Ukraine could support the next supercycle of U.S. LNG export capacity buildout. Brouillette described the situation to conference attendees as a "tectonic shift in the global energy landscape."

There has been significant uncertainty about whether the political push to bring in more LNG would lead European buyers to commit to long-term contracts, which have traditionally been critical to underpinning financing for new multibillion-dollar U.S. LNG projects. Most of the deal announcements by U.S. LNG developers in 2022 have named buyers in Asia or portfolio players as counterparties. European countries have also considered expanding their alternative energy sources.

But Brouillette, who declined to discuss specific conversations with representatives of European governments, expected to see more European gas buyers sign up for LNG off-take deals that span 15 or 20 years.

"We are starting to see a reversion back to those longer contracts," Brouillette said. "And I think as Europe comes to grips with its divorce from Russia, they are going to start to change some of their posture on this."

Sempra lines up early deals

Sempra has worked aggressively to commercialize projects supporting its LNG growth ambitions, which include a single-train expansion of its Cameron LNG terminal in Louisiana that could produce 6.75 million tonnes per year and its Port Arthur LNG export project in Texas, with a capacity up to 13.5 Mt/y.

In 2022, Sempra signed a series of preliminary deals for long-term contracts covering nearly 16 Mt/y of supplies, a different approach compared to rival developers that have secured more binding long-term commitments covering over 40 Mt/y of U.S. LNG supplies.

Sempra has signed more deals that would directly supply European end users than other U.S. developers, even if the agreements still need to be finalized. Sempra has been building this commercial momentum at a time when market observers are watching to see how far European governments will go to encourage European companies to sign long-term contracts, such as providing subsidies or committing to make up the difference if supplies are later rendered uneconomic.

European gas buyers could sign additional long-term contracts for U.S. LNG without their governments stepping in to backstop deals, but the increased European government intervention that appears likely could facilitate more and faster deals to support the buildout of new U.S. LNG capacity, Brouillette said.

LNG sale and purchase agreements can also be complex deals, and newly interested European buyers could be at a disadvantage compared with Asian buyers that have been engaged in negotiations for months, according to industry experts.

'Really big' final investment decision

Sempra's preliminary deals inked with European counterparties in 2022 include a 20-year agreement with Switzerland's INEOS AG for 1.4 Mt/y from Port Arthur or from the second phase of its Cameron project; another 20-year deal that would see Poland's state-controlled PGNiG take 2 Mt/y of LNG from the Cameron expansion project and 1 Mt/y from Port Arthur; and a 15-year deal for German company RWE AG to take 2.25 Mt/y from Port Arthur.

Germany has no LNG import infrastructure at present but plans to deploy five state-backed floating LNG receiving terminals along its northern coast, with two set to begin operations at Wilhelmshaven and Brunsbüttel at the turn of the year.

Sempra has also lined up early deals with portfolio players tied to more than 9 Mt/y, including a July agreement with ConocoPhillips to jointly develop Port Arthur and to negotiate a 5-Mt/y off-take deal.

Sempra's top priority among its LNG projects is to build its $2 billion Energía Costa Azul terminal on the west coast of Mexico on time and on budget. The company plans for the 2.5-Mt/y facility to start producing LNG in 2024.

"We hope to get some really big [final investment decisions] about the middle of next year," Brouillette said.

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