Germany's SEFE strikes gas deal with Azerbaijan's SOCAR

Germany’s state-owned energy trader SEFE has signed a 10-year contract to purchase natural gas from Azerbaijan’s SOCAR, further diversifying Europe’s supplies amid a tightening market.

The agreement, which begins this year, will see SEFE buy up to 15 TWh of gas annually, equal to around 1.5bn cubic meters (bcm) per year – about 0.5% of the EU’s 2024 consumption, according to a company statement confirming an earlier Bloomberg report on June 10.

Two people familiar with the arrangement told Bloomberg that the gas will likely be delivered via the Trans Adriatic Pipeline (TAP), which crosses northern Greece and Albania before reaching southern Italy. SEFE’s deal with SOCAR will support investments in production and infrastructure, boosting pipeline gas volumes to Europe, the statement said.

SEFE, or Securing Energy for Europe, has been at the forefront of efforts to lock in new supply contracts as the region seeks to offset the loss of Russian pipeline gas since 2022. With Norway’s production largely maxed out, Europe is still dependent on sourcing additional supplies while waiting for new LNG export facilities in the US to come online.

SOCAR played a key role in talks with European countries and Ukraine over possible continued gas transit after a deal expired at the end of last year. Although no agreement was reached, Azerbaijan was keen to secure longer-term commitments from Europe, along with investments in new infrastructure.

SEFE, which was nationalised in 2022 under a €6.3bn ($7.2bn) bailout after formerly operating as Gazprom’s European trading unit, has built a portfolio of supply agreements with global producers, particularly for LNG. The German government aims to privatise SEFE by the end of 2028.

Frédéric Barnaud, SEFE’s chief commercial officer, told a Wood Mackenzie conference in London on June 10 that the company also sees India as a “strong part” of its trading book and intends to expand further. “After stabilising Europe’s security of supply, we’ll start building an Asian footprint,” he said.

Azerbaijan currently exports gas to Italy, Greece, Bulgaria, Romania, Hungary, Croatia, Serbia, Slovenia, Slovakia and North Macedonia, as well as Turkey and Georgia. In 2022, the country agreed with the European Commission to double its gas exports to Europe to 20 bcm per year by 2027.