SEFE and Oman LNG: New gas pact focused on Europe

SEFE, a German state-owned trader, signs a contract with Oman LNG for 400,000 mt/year of LNG, with a price linked to the European gas hub index.

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Contrat SEFE Oman LNG

The contract between SEFE and Oman LNG, announced on March 21 after a binding terms sheet in August 2023, provides for delivery of liquefied natural gas over four years, from 2026 to 2029. According to market sources, this agreement features something new for Oman: indexation to European gas hub prices rather than crude oil.

Price specificities and indexation mechanisms

The LNG price in this contract is linked to the Dutch TTF (Title Transfer Facility) index, less a fixed discount. This approach, a first for Oman in terms of long-term contracts, reflects changing market dynamics, with Europe becoming a major importer of LNG.

Strategy and market reactions

This strategic shift could be seen as an optimization in the face of Europe’s growing preference for contracts indexed to gas hub prices. Market participants expressed surprise, as Oman traditionally offered contracts linked to the price of crude oil.

Other agreements and the global context

SEFE also announced an agreement with ADNOC LNG for a 15-year supply of 1 million mt/year of LNG from the Ruwais project, linked to oil prices. This contract includes delivery flexibility and demonstrates SEFE’s adaptability to various price structures and LNG sources.

Implications and future prospects

The inclusion of the TTF index in LNG contracts, such as the one between SEFE and Oman LNG, could foreshadow a trend where long-term contracts in Europe increasingly favor gas hub indices over traditional crude oil links, influencing contracting practices in the global LNG sector.

The agreement between SEFE and Oman LNG represents an important pivot in LNG pricing strategies, underlining a significant shift in European market preferences and energy supply strategies.

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