BASF Enters Long-Term LNG Partnership with US-based Cheniere

German chemical conglomerate BASF has entered into a long-term agreement to import liquefied natural gas (LNG) from the United States, as part of a series of deals by German companies following the country's shift away from Russian gas.

In the recently announced deal, BASF has committed to purchasing 800,000 tonnes of LNG annually from Cheniere Energy, a major US producer of super-chilled fuel. This agreement is set to be in effect from mid-2026 to 2043.

Elvermann further emphasized the importance of securing a reliable natural gas supply at competitive terms, which aids in maintaining a consistent energy source while the company reduces its dependence on fossil fuels.

This development arises against the backdrop of BASF having temporarily shut down several plants in Germany earlier this year due to elevated energy costs. The company had also pledged to expand its investments beyond Europe, raising concerns about deindustrialization within the EU. However, this new deal suggests that fears of significant investment outflows from Europe might be overstated. Henning Gloystein, the director of energy, climate, and resources at Eurasia Group, pointed out that although there is a reshuffling of operations within Europe, there is no evidence of widespread deindustrialization.

Germany's heavy reliance on Russian pipeline gas left it exposed when Moscow cut supplies after its invasion of Ukraine and subsequent disruptions to the Nord Stream pipeline system. To compensate for this loss, Germany turned to importing LNG, with the first infrastructure for LNG purchases becoming operational last year.

German companies have been striking deals with US exporters to ensure a stable supply of natural gas. BASF's agreement with Cheniere is a continuation of this trend, with other entities like SEFE (Securing Energy for Europe) and Venture Global LNG also inking deals. Berlin's objective to achieve carbon neutrality by 2045 aligns with its view of natural gas as a bridging fuel to support the expansion of renewable energy sources. The presence of multiple corporations entering into long-term LNG contracts reflects Germany's intention to continue using gas as an essential energy source.

Cheniere, known for its pioneering role in the US gas export business during the shale boom, will be supplying the gas to BASF from its Sabine Pass facility. The facility's expansion plan is currently under regulatory review, with an aim to increase production capacity to up to 50 million tonnes annually from the current 30 million tonnes.

The pricing for the gas remains undisclosed, but both BASF and Cheniere mentioned that it will be indexed to the US natural gas benchmark Henry Hub, which typically tends to be more affordable than European gas prices due to the abundance of shale gas in the US. As of now, the US natural gas benchmark trades at around $2.5 per million British thermal units, while the European benchmark TTF is at approximately $13/million Btu.