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Germany is looking to lock in liquefied natural gas (LNG) supply deals with a delivery commitment, reported Bloomberg.

The move is part of efforts to stop LNG traders from diverting the supplies elsewhere for higher profits.

According to Deutsche Energy Terminal managing director Peter Röttgen, the government intends to add a delivery provision for at least 50% of the capacity to be offered in an auction in October.

“We not only want to be fully booked but actually receive gas,” Röttgen told the publication in an interview.

“It is clear there has to be a consequence for not delivering,” he added.

The development underscores Germany’s growing dependence on LNG and a potential bone of contention between LNG suppliers and the government.

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By GlobalData

Germany was severely impacted by the energy crisis in 2022 when Russia cut pipeline gas exports and prices surged to all-time highs.

To avoid that situation, Germany has increased its LNG import capacity.

However, as the LNG trade becomes more international, there is a greater chance of delays and cancelled cargoes.

Most shipments are not required to have a destination, which enables traders to quickly fill market shortages by switching supplies between Asia and Europe, for example.

Recently, the need for supply security has become more crucial as uncertainties have in increased volatility in the European gas market.

In case of an unexpectedly cold winter, Germany is also preparing for possible gas shortages, the publication said.

Deutsche Energy Terminal plans to conduct the first short-term auction, for Brunsbüttel and Wilhelmshaven terminals, on 16 October 2023.

It is looking for contracts for gas storage and delivery as well as regasification, with separate auctions for LNG supplies.

In the first quarter of 2024, two more state-run LNG terminals are anticipated to go online.

According to Röttgen, the operator anticipates the first auction to be fully booked and as per prior market study, suppliers often sign three- to five-year contracts.

Earlier this month, Repsol, a Spanish energy company launched arbitration proceedings against Venture Global LNG over non-fulfilment of LNG contracts.

Alongside Repsol, Shell, BP and Edison have taken similar action against Venture Global LNG.