Qatar and Germany sign long-term natural gas agreement

Gulf country will supply the EU's largest economy with gas for at least 15 years

The LNG will be sourced from the two joint ventures between QatarEnergy and ConocoPhillips that hold interests in Qatar’s North Field East and North Field South projects. EPA
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QatarEnergy has signed two sales and purchase agreements with ConocoPhillips to deliver up to 2 million tonnes per annum (mtpa) of liquefied natural gas (LNG) to Germany.

A ConocoPhillips unit will buy the agreed quantities to be delivered to the German LNG terminal, which is currently under development in Brunsbüttel, with deliveries expected to start in 2026, the state-owned energy company said on Tuesday.

The LNG will be sourced from the two joint ventures between QatarEnergy and ConocoPhillips that hold interests in Qatar’s North Field East and North Field South projects, the company said.

“The agreements mark the first ever long-term LNG supply to Germany with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security,” Saad Al Kaabi, Qatar’s Minister of State for Energy Affairs, said.

“This is a concrete demonstration of QatarEnergy’s resolve to provide reliable energy supplies to all major markets around the world, and of our commitment to the German people.”

The agreement will help Germany diversify its supplies as it grapples with dwindling Russian gas exports.

To replace Russian gas in the short-term, Germany and other European countries have brought coal-fired power plants back into operation and this has triggered concerns about their ability to meet climate commitments.

“Germany is the largest gas market in Europe, with significant demand in the industrial, power, and household sectors, and we are committed to contribute to the energy security of Germany and Europe at large,” said Mr Al Kaabi.

Europe has also boosted its LNG imports from the US and Gulf countries following Russia’s invasion of Ukraine. To resolve existing bottlenecks, several EU countries are increasing their LNG import capacity by pumping more money into building new terminals.

The deal indicates that Europe is beginning to “tire” of Russia’s intermittent supply and is increasingly seeking long-term alternatives, Zongqiang Luo, senior analyst at Rystad Energy, said.

“Europe’s gas market continues to adapt to the possibility of a winter of ever lower Russian gas volumes, despite Gazprom withdrawing its threat to cut gas flows via Ukraine’s Sudzha entry point.”

The Ukraine transit route is one of two pipelines still moving gas from Russia to Europe after the Nord Stream 1 pipeline supply was suspended indefinitely in September.

Last month, Austrian energy company OMV signed a preliminary agreement with Abu Dhabi's Adnoc with the aim of purchasing an LNG cargo for next winter.

This is QatarEnergy’s second consecutive LNG agreement in less than two weeks.

The company recently signed a 27-year deal to supply China Petroleum & Chemical Corporation (Sinopec) with 4 mtpa of LNG.

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 this year.

“These agreements will provide an attractive LNG offtake solution for our new joint ventures with QatarEnergy and position the joint ventures as reliable sources of LNG supply into Europe,” Ryan Lance, chief executive of ConocoPhillips, said.

The US oil and gas producer owns about 3 per cent in the NFE project and holds a 6 per cent stake in the NFS development, which are planned to commence production in 2026 and 2027, respectively.

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.

Updated: November 29, 2022, 2:13 PM