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German chemicals group BASF has signed a long-term contract to import U.S. liquefied natural gas, the latest in a series of deals by German companies after Germany was forced to abandon Russian gas.

Under a deal announced on Tuesday, BASF will buy 800,000 tonnes a year of liquefied natural gas from Cheniere Energy, the largest U.S. producer of the ultra-cooled fuel, from mid-2026 to 2043.

Dirk Elvermann, BASF’s chief financial officer, said in a statement: “By establishing our own dedicated LNG supply chain with Cheniere, we are realizing energy at a time of major change in the European gas market. and diversification of raw material mix.”

“While we are reducing our dependence on fossil fuels . . . this agreement will ensure a reliable supply of gas on competitive terms,” ​​he added.

The deal comes as the German company closed several factories in the country earlier this year due to high energy costs and vowed to invest outside Europe, raising concerns about deindustrialization of the bloc.

Still, analysts said the deal appeared to suggest that fears that high gas and energy prices would drive investment away from Europe were overblown. Henning Groistan, director of energy, climate and resources at Eurasia Group, said BASF had not moved its operations out of Europe. “There is a reshuffling (within Europe), but there is no deindustrialisation,” he said.

Europe’s largest economy has spent decades building an industrial sector that relies on cheap Russian pipeline gas, reeling notably from supply cuts by Moscow following its full-scale invasion of Ukraine and last year’s explosion that knocked out part of the Nord Stream pipeline system. Russia.

Seeking an alternative to Russian natural gas, Germany used to buy more than half of its fuel supply from Moscow and began importing liquefied natural gas late last year. The first in a series of LNG procurement infrastructure, including a rapidly-built floating storage and regasification unit, began operations in December.

Since then, German companies have struck deals with U.S. exporters. In June, SEFE (Security Energy Europe) — the company born out of Berlin’s effective nationalization of the German operations of Russia’s state-owned Gazprom — announced a deal to buy LNG from another U.S. exporter, Venture Global LNG, annually. Purchase 2.25 million tons of liquefied natural gas. Venture Global also has a separate deal with German utility EnBW for 2 million tonnes per annum.

Berlin shut down the last batch of nuclear power plants in April, aiming to achieve carbon neutrality by 2045, and regards natural gas as an important “transition fuel” to vigorously develop renewable energy.

The number of companies signing long-term LNG contracts “tells you that Germany will continue to use gas and that there is demand for this fuel,” Greustein said.

The United States was the third-largest LNG exporter last year, with most shipments destined for Europe. A buyer and a seller are arguing over the length of the contract. U.S. LNG contracts are generally more flexible than those in other countries, making it easy for buyers to resell cargoes if they don’t need them.

Chenier and BASF did not disclose the sale price of the gas, but said it was linked to the U.S. natural gas benchmark Henry Center Index, which tends to be cheaper than European gas prices due to the country’s abundant supply of shale gas.

The US natural gas benchmark is currently trading at around $2.5 per mmBtu, while the European benchmark TTF is currently trading at around $13 per mmBtu.

Chenier pioneered the country’s natural gas export business at the height of the U.S. shale boom. Gas supplied to BASF will come from the company’s Sabine Pass plant, which plans to significantly increase its capacity to 50 million tons per year from the current 30 million tons. Federal regulators are reviewing the expansion proposal.

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