(Bloomberg) — Germany’s state-owned SEFE is expected to announce a 10-year deal to buy gas from Azerbaijan’s state-owned Socar, according to people familiar with the matter.
The agreement, which begins immediately, allows the German trading company to buy as much as 15 terawatt-hours of gas per year, the people said, speaking on condition of anonymity. That’s equivalent to about 1.5 billion cubic meters per year. The gas is likely to reach Europe via the Trans Adriatic Pipeline, two of the people said. TAP, crosses Northern Greece, Albania and the Adriatic Sea before coming ashore in southern Italy.
SEFE, which stands for Securing Energy for Europe, has been among the most active companies in negotiating new supply deals. The region increasingly depends on global flows after losing most of its Russian pipeline gas in 2022. With Norwegian production operating pretty much at full capacity, Europe still needs to secure supplies as it awaits the start up of additional liquefied natural gas export facilities in the US.
Socar was a key player in negotiations between European countries and Ukraine about potentially continuing to transit gas after a deal ended at the end of last year. An agreement wasn’t reached at the time and Azerbaijan was keen to secure commitment from Europe on building new infrastructure and longer-term contracts to buy gas.
Spokespeople for SEFE and for Socar weren’t available for comment when contacted by Bloomberg outside of working hours.
SEFE, formerly the European trading and supply unit of Gazprom PJSC, was nationalized in 2022 as part of a €6.3 billion ($7.2 billion) rescue package. The company has lined up numerous supply deals with global producers, mainly for LNG, building a portfolio that’s seen as part of preparations for privatization, which Berlin is seeking to complete by the end of 2028.
Azerbaijan currently exports gas to Italy, Greece, Bulgaria, Romania, Hungary, Croatia, Serbia, Slovenia, Slovakia and North Macedonia, and also to neighboring Turkey and Georgia. The country agreed with the European Commission in 2022 to double gas supplies to Europe to 20 billion cubic meters a year by 2027.
–With assistance from Petra Sorge.
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