LNG supply constraints brought about by a colder than expected winter and the resulting surge in LNG spot prices may have triggered a renewed interest in long-term contracts.

This is highlighted by Woodside Petroleum (ASX:WPL) signing an agreement to supply 0.84 million tonnes per annum (Mtpa) of LNG from its global portfolio to Germany’s RWE Supply & Trading for a seven-year period from 2025.

Australia’s largest LNG producer says the agreement is further evidence of strong market demand for LNG in the second half of this decade.

“Customers are increasingly seeking to secure new energy supplies in a timeframe which supports the development of our Scarborough offshore gas resource and the expansion of the Pluto facility with the addition of a second LNG production train,” Woodside executive VP development and marketing Meg O’Neill said.

It adds to a binding agreement made with Uniper in January for an initial 1Mtpa of LNG from this year that increases to 2Mtpa in 2026 and certainly adds weight to the company’s expected final investment decision in the second half of this year on developing Scarborough and Pluto Train 2.

The LNG supply deal is a further development of the relationship between the two companies.

In October 2020, Woodside and RWE signed a memorandum of understanding to discuss mutually beneficial hydrogen-related opportunities.

RWE is no stranger to the sector, progressing some 30 hydrogen projects, most of which are located in Europe.

Australian LNG

More broadly, Australian LNG shipments in January increased by 0.2Mt over December last year to 6.7Mt (96 cargoes).

This was due to increased production from Pluto and the restart of production at the Prelude project.

Japan remained Australia’s largest LNG customer, with 43 deliveries made. This is up from the 41 deliveries in December but down on 45 cargoes delivered in January 2020.

Additionally, the LNG spot price increased from $US15.10 per million British thermal units (MMbtu) on 31 December 2020 to a record high of $US32.50/MMbtu on 13 January before decreasing to $US8.48/MMbtu.