EnBW to Boost Share of Longer-Term Gas Supply, Trading CEO Says

EnBW Energie Baden-Wuerttemberg AG is in talks with natural gas producers to boost its share of mid- to long-term supply contracts for the fuel, according to the head of the German utility’s trading unit.

EnBW wants longer-term gas contracts to make up 50 percent to 75 percent of its supply portfolio, from about 33 percent now, Ulf Heitmueller, Chief Executive Officer at EnBW Trading GmbH, said in an interview in Berlin yesterday.

The Karlsruhe-based utility agreed in July last year to buy about 2 billion cubic meters of gas a year from Russia’s OAO Novatek (NVTK) in a contract that runs until October 2022. German utilities including EON SE and RWE AG are reviewing money-losing long-term supply contracts tied to the price of crude oil instead of gas markets.

“Long-term oil indexed contracts don’t fit into our world anymore, the trend is toward market-based contracts,” Heitmueller said. “Our current supply contract is profitable.”

Novatek is Russia’s second-largest natural gas producer after OAO Gazprom (GAZP), which is also Europe’s biggest single supplier. Russia was Europe’s largest gas provider in 2012, according to BP data compiled by Bloomberg, followed by Norway, the Netherlands, Algeria and Qatar.

“We are talking to all the big producers,” Heitmueller said, without providing details. “We are not in talks with Gazprom right now.”

No LNG

EON, Germany’s biggest utility, last month signed a five-year supply contract for liquefied natural gas, or LNG, with Qatar in a step toward shorter-term contracts, the company said earlier this month.

“We have no plans to enter the LNG business short term,” Heitmueller said.

Profit at EnBW’s trading and generation unit declined 15 percent in the first nine months of the year, the company reported Nov. 12. Full-year profit is expected to drop 30 percent to 40 percent from last year, the company said.

EnBW buys and sells electricity, natural gas, oil, coal and carbon emissions through its EnBW Trading business.

To contact the reporter on this story: Julia Mengewein in Frankfurt at jmengewein@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net

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