Qatar stands at the forefront of helping Germany by providing 2 million tonnes of LNG annually for at least 15 years, with the delivery to commence in 2026.
Qatar, on Tuesday, November 29, announced an accord to provide Liquefied Natural Gas (LNG) to Germany over 15 years, the first major deal ever inked between the countries. While Germany chalks out to disassociating with Russia, the country is on the hunt for alternatives to Russian energy sources.
Qatar stands at the forefront of helping Germany by providing 2 million tonnes of LNG annually for at least 15 years, with the delivery to commence in 2026. Two sales and purchase agreements were signed yesterday by Qatar Energy, a state-owned petroleum company, and ConocoPhillips, an American petrochemical refinery MNC and Alaska’s largest crude oil producer, to aid Europe’s biggest economy.
The two companies are long-term partners. The US Corporation will receive the LNG from Qatar Energy and deliver it to the LNG floating terminal in Brunsbuttle, which is still under construction. This contract is one of the first long-term LNG supply deals to an EU nation since the Russian aggression into Ukraine in February 2022.
Qatar’s ill-treatment of LGBTQ+ individuals at the World Cup and the existing labour conditions of workers constructing the stadiums has alarmed Germany, the country vocally criticizing the human rights violation. The German government is foraging the globe so the energy industry can remain afloat and households can stay warm.
The immense need for alternatives to Russian gas, however, has forced Germany to look to the gulf country as it attempts to cut out the use of fossil fuels. This deal accounts for about 6% of the volume of Russian gas imported by Germany in 2021. The 2 million tonnes will account for about 3% of Germany’s annual demand for gas which will help fill the void created by Russian president Vladimir Putin’s plan to weaponise energy.
The global LNG market is highly competitive, and competition increases significantly with each passing year as Europe faces rifts with Asia over cargoes that push prices up. Signing an agreement is definitely a significant step in such conditions. Furthermore, it indicates that Germany may be less hostile to long-term contracts of as long as 25 years.
The gas from Qatar will not arrive to help cushion the energy shortage in this and the next looming winter. Germany believes power outages can be avoided this year, but it doesn’t seem to have enough power reserves to steer away from power cuts and rationing in the winter of 2023-2024. The gulf nation is one of the largest exporters and suppliers of LNG.
Qatar and Iran share the world’s biggest gas field. UAE has the third largest gas reserves in the world after Russia and Iran. The majority of exports go towards Asian countries like China, Japan, South Korea and India. Qatar’s energy minister Saad al Kaabi said that Qatar is trying to negotiate with German buyers on additional supplies.
The country is in talks with Uniper SE and RWE of Germany about some other long-term contracts. He mentions that Qatar has agreed to separate politics from business owing to Germany’s protests in the FIFA World Cup. The LNG is to venture from the North Field East and North Field South projects of Qatar, which is expected to boost the domestic LNG production to 126 million tonnes by 2027 from the current 77 million tonnes. The North Field expansion will lead to a 60% production boost.
The rise in international prices has already doubled the value of exports in the past year. Germany has finished the construction of a new LNG import terminal at Wilhelmshaven and has chartered another five floating storage and regasification units to store LNG.
These five chartered import facilities will cost about €6.5 billion ($6.7 billion) and will be built over the next 10-15 years. It also includes a privately chartered terminal. As the operations commence, they are expected to cover one-third of the current gas demand of Germany.
