New Uniper CEO not happy with US LNG contracts duration

Uniper new chief executive Michael Lewis has argued for more flexible liquefied natural gas terms with a warning of a stalemate being created between major LNG exporter US and premium buyers in Europe.

Shorter-duration contracts for LNG purchases will be important for Europe’s diversifying supply given uncertainty about long-term gas demand, the new chief executive of German utility Uniper, on Monday told the LNG2023 conference in Vancouver, Canada, reported Reuters.

Lewis, who entered office on 1 June, said LNG developers prefer 20 to 25-year contracts to help secure financing for multi-billion dollar projects, but customers in European nations committed to moving to renewable fuels within the next 20 years have been reluctant to sign such deals.

The role of LNG in Europe’s energy mix is reasonably secure until 2030 but, after that, it is “very, very, challenging” to predict gas demand as countries ramp up decarbonisation efforts, he said.

“We want to continue to diversify geographically but also in terms of the duration of contracts,” said Lewis, who took over as CEO last month.

“The key challenge will be getting the right pricing and the right flexibility so that you can move that gas around easily, as demand starts to fall in Europe,” Reuters quoted him as saying.

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Germany’s major energy utility Uniper currently is seeking to secure new energy supplies, while the company is battling with astronomic financial losses following Russia cutting pipeline gas shipments to the European continent, which sent wholesale natural gas prices through the roof.

Uniper posted a record loss of €19.1 billion ($20.3 billion) for 2022 as it strove to replace the imports of Russian natural gas that came to a halt after Moscow’s invasion of Ukraine.

Last year’s record loss was deeper than the €4.1 billion loss reported for 2021 and stemmed from the cost of replacing contracted Russian volumes with spot market purchases during a period of extreme price volatility.

As the German company’s financial position deteriorated through 2022, Uniper turned to the government for help and agreed a nationalisation deal last September.

This was followed by shareholders during an extraordinary general meeting in December 2022 approving capital measures to stabilise the company.

In the wake of Uniper’s financial woes, former chief executive Klaus-Dieter Maubach was dismissed on 1 June.

New CEO Lewis has almost 30 years’ experience in the energy sector with a special focus on renewable energy.

He started his career in 1993 at Powergen in the UK. Since 2007, he has held various positions at German energy firm E.ON, including chief executive for Climate & Renewables and, since 2017, he was boss of E.ON UK, said Uniper.