The head of the Greek company Atlantic SEE LNG Trade stated that it is becoming increasingly difficult to secure long-term agreements for liquefied natural gas with U.S. suppliers, following the turmoil caused by the war in Iran in the global market.
As Bloomberg notes, competition between European and Asian buyers for U.S. LNG has intensified, as the conflict in the Middle East led to the closure of the Strait of Hormuz, restricting one-fifth of global supplies and causing spot prices to rise.
This makes U.S. companies reluctant to sign the 20-year contracts sought by Atlantic SEE, as the company pushes to expand Greece’s role as an LNG hub for the wider region.
“American suppliers have become hesitant to commit to a price for a long period of time,” CEO Alexandros Exarchou said in an interview. “This is a different situation from six months ago, when they were seeking such long-term agreements.”
Uncertainty about prices
Uncertainty regarding price trends—following the damage to the largest LNG export terminal in Qatar —means that some U.S. suppliers are even offering incentives to reduce the volume of existing contracts, the CEO noted.
Due to the capital commitments required to build and finance LNG projects in the U.S., smaller buyers may find it difficult to sign long-term contracts with American sellers. A large portion of U.S. production is already committed to long-term contracts with Europe and Asia.
Atlantic SEE—a joint venture between the Aktor Group and the Greek state-owned natural gas supplier DEPA Trading —signed a 20-year agreement with Venture Global in November to import 4 billion cubic meters of LNG annually starting in 2030.
Most of this volume will be supplied to neighboring countries in the region, including 1 billion cubic meters for Albania and 0.5 billion cubic meters for Bosnia and Herzegovina.
The company aims to finalize negotiations with Romania by the end of the summer, which would bring the total volume of supply agreements to 3.7 billion cubic meters per year, said Mr. Exarchou, who is also chairman and CEO of Aktor.
Greece’s pursuit of agreements for LNG from the U.S. comes at a time when the European Union is moving to phase out imports of the fuel from Russia by the end of this year.
If agreements are reached with Bulgaria and Ukraine later this year, Atlantic SEE will seek further LNG contracts from the U.S.—increasing total supplies to up to 8 billion cubic meters. The company is also willing to explore potential supply agreements with countries such as Serbia, Croatia, and North Macedonia, the CEO said.
While the agreement with Venture Global protects Atlantic SEE from market fluctuations, the price of 20-year contracts has risen dramatically, according to Mr. Exarchou.
“We are discussing additional volumes from various suppliers in the U.S.,” said the CEO, who expects spot prices to rise significantly starting in September.
Mr. Exarchou also warned that the EU has not yet adopted targeted measures to mitigate potential supply risks during the winter season, as the region seeks to replenish its depleted natural gas reserves over the summer.
The Vertical Corridor will contribute to energy balance
Mr. Exarchou also emphasized the importance of balance in Europe’s energy mix and highlighted that the Vertical Corridor will play this role, supplementing it with U.S. LNG once the war in Ukraine ends in the future, Euro-Russian relations are restored, and Russian gas supplies resume, so that the EU does not find itself under energy blackmail again.
He noted that the EU should consider subsidizing end-users of natural gas to mitigate the impact of increased costs, while adding that only long-term contracts with multiple suppliers can bring balance to Europe’s energy mix.