Qatar signs second major LNG supply deal with China

Qatar has made its second huge deal with a Chinese state-owned company in less than a year in a sign that the energy-hungry Asian powerhouse is rushing to secure a long-term contract with one of the world’s leading liquefied natural gas exporters. signed a gas supply contract for .

China National Petroleum Corporation and Qatar Energy signed a 27-year contract on Tuesday. China It plans to purchase 4 million tons of LNG annually from the Gulf countries. As a joint venture partner, CNPC will also acquire a 5% stake in one of the LNG trains in Qatar’s Northfield expansion project, the world’s largest natural gas field.

The deal came just seven months after China’s Sinopec. signed a similar 27-year contract The deal with Qatar Energy was described by the Gulf countries as “the longest gas supply contract in the history of the LNG industry” at the time.

Qatar Energy has been courted by European and Asian governments and energy companies as it pursues a $30 billion expansion of the North Oilfield, with domestic LNG production capacity increasing from 77 million tonnes per year by 2025. to 110 million tons in 2010, and to 126 million tons. Two years later.

Qatar’s energy minister, Saad Al-Khabi, told the Financial Times that it plans to sign long-term supply agreements with “several European countries” by the end of the year.

He said Qatar Energy was close to signing deals with Britain, France and Italy.

Kirby, who is also the chief executive of Qatar Energy, said: “We are in and continuing discussions with various companies to supply gas to the UK. We hope to reach an agreement by the end of the year. I hope we can,” he said. . “We will have some European contracts before the end of the year – 100 per cent, of course.”

He said there were still some “commercial issues” to finalize with the UK, which has been in talks with Qatar for about two years to secure long-term LNG supplies from the Gulf countries.

Qatar Energy is the majority owner of the South Hook LNG terminal in Wales and has the capacity to supply one-fifth of Britain’s gas needs. In 2020, it also secured rights to storage and redistribution capacity for 25 years from 2025 at the UK grain LNG terminal in Kent.

As one of the few energy producers to invest heavily in additional gas capacity in recent years, Qatar Energy has become a focus for European nations desperate to move away from Russian gas.

In May, European natural gas prices fell back into the normal trading range for the first time since oil regulations began. energy crisis It followed last year’s Russian invasion of Ukraine.

However, it rose sharply again in June, highlighting that the market remains under tension over gas supplies, even as storage levels hit a record high for the time of year.

European governments courted Qatar in the early days of the energy crisis, but it turned out to be a slow process, especially for the very long-term contracts Qatar wanted to secure for its own financial future. Germany is so far the only European country with a significant long-term deal with Qatar since Russia’s all-out invasion of Ukraine, and analysts worry about the balance between short-term energy security and emissions reduction commitments. points out.

Most of Qatar’s LNG is shipped to Asia, but Kirby hopes to distribute it more evenly between east and west in the future to give the Gulf nation a more diverse market. said.

He was happy that prices were down from their 2021 highs, but warned that prices could rise next year as the global economy recovers and winter temperatures return to normal.

“I doubt if this surge is as dramatic as what happened in Ukraine, because I think this is a very special situation.

Even though Europe’s gas storage facilities are more than 70% full, Kirby warned that there will still be shortages if economic growth picks up.

“There’s not going to be enough to fill it further,” he said. “If you don’t resupply for one summer, the winter will last for two years.”