QatarEnergy signs 27-year deal to supply natural gas to China

Global LNG supply has been tight following Russia's military offensive in Ukraine

Qatari Energy Minister Saad Al Kaabi, centre, also chief executive of Qatar Energy, at the signing ceremony on Monday. Photo: QatarEnergy

QatarEnergy has signed a 27-year deal to supply China Petroleum & Chemical Corporation (Sinopec) with 4 million tons per annum (mtpa) of liquefied natural gas.

The contracted LNG volumes will be supplied from QatarEnergy’s North Filed East (NFE) LNG expansion project and will be delivered to Sinopec’s terminals in China, Qatar’s state energy company said in a statement on Monday.

The financial terms of the deal were not disclosed.

“We are pleased to enter into this agreement, which will further solidify the excellent bilateral relations between the People’s Republic of China and the State of Qatar and help meet China's growing energy needs,” Saad Al Kaabi, Qatar’s Minister of State for Energy Affairs and the chief executive of QatarEnergy, said.

“In addition, it opens a new and exciting chapter in our relationship with Sinopec, one that is very special and spans a number of different areas, and which we are excited about further growing and expanding into the 2050s.”

The current strains on gas supply have led to energy shortages in several parts of the developing world that rely on imported gas, notably Pakistan and Bangladesh. Major growth markets for gas, such as India and China, meanwhile sharply reduced their LNG imports in 2022.

Natural gas markets are expected to remain tight in 2023 as Russia, one of the world’s largest exporters, further reduces supplies to Europe, according to the International Energy Agency (IEA).

Demand in China and Japan, the world's biggest importers of LNG, was almost unchanged in the first eight months of 2022, compared with the same period a year earlier, while it contracted in India and Korea, the Paris-based agency said in an October report.

Demand in China is expected to rise by less than 2 per cent in 2022, its lowest yearly growth rate since the early 1990s.

“Qatar is the world’s largest LNG supplier, and China is the world’s largest LNG importer. The two countries share inherent complementarities and a good foundation for energy co-operation,” MA Yongsheng, chairman of Sinopec, said.

“The friendly and close ties between the two countries have created a good environment for us to constantly deepen co-operation.”

In September, Qatar selected France's TotalEnergies as its first international partner at its North Field South (NFS) LNG project.

Together, NFE and NFS form the North Field Expansion project, which aims to add 48 mtpa to Qatar’s export capacity and bring it to 126 mtpa by 2028.

Qatar, alongside the US and Australia, is seeking to increase its LNG production and respond to higher global demand for LNG.

As the global energy crisis deepens and countries seek reliable energy sources, investments in new LNG infrastructure are set to surge, reaching $42 billion annually in 2024, Rystad Energy said in an August report.

The shutdown of Freeport’s LNG export plant in Texas has added to the squeeze on global gas supplies.

Freeport LNG, one of the seven export facilities for the commodity in the US, represents about 4 per cent of the global LNG market and its shutdown has curtailed the country's LNG export capacity by about 2 billion cubic feet per day, according to the US Energy Information Administration.