German utility VNG AG signed a deal for the country’s first delivery of pipeline gas from Algerian state energy giant Sonatrach, as Berlin looks to strengthen its energy ties with the North African country.
“The contract lays the foundation for a trusting supply relationship, opens up new perspectives and strengthens the German-Algerian energy partnership,” VNG Chief Executive Officer Ulf Heitmüller said in a statement during a German business delegation visit to Algeria.
Europe’s largest economy has been struggling to find alternative supplies after former top-provider Russia curbed natural gas supplies in the wake of the war in Ukraine. The region has mainly filled the gap with liquefied natural gas.
The agreement, which took effect in January, allows gas to be shipped via pipeline to Italy and then on to Germany, a spokesperson for Sonatrach said. Other details weren’t immediately available, including the length of the deal and volumes to be delivered.
Heitmüller earlier told Bloomberg that the contract is “only a small one, and we are looking at expanding it.” The Leipzig-based utility, majority-owned by EnBW Baden-Wuerttemberg AG, is also looking to establish a partnership with Sonatrach to import hydrogen into Germany.
Long-term gas delivery contracts are still scarce in Germany, with importers mainly relying on the volatile spot market. The US — a top global supplier of LNG — has imposed a moratorium on new export licenses while it studies the climate and economic impacts, creating uncertainty for the market.
The VNG-Sonatrach deal also highlights the possibility of Europe strengthening its relationship with Algeria. The North African country accounts for about 14% of the European Union’s total imports of both pipeline gas and LNG, according to the bloc’s latest market data.
“We now want to expand this and encourage Algeria to produce more green hydrogen in the future, invest more in solar and wind energy and thus create its own added value,” Economy Minister Robert Habeck, who is leading the business delegation, said in a statement.
Germany can provide technical expertise and serve as a potential buyer for green hydrogen, made from renewables, he said. Uniper SE CEO Michael Lewis is also among the participants.
Habeck and Algerian Energy Minister Mohamed Arkab on Thursday signed a declaration of intent to set up a hydrogen task force, including a pilot plant. Feasibility studies for the project are under way.
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