• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 2 hours GREEN NEW DEAL = BLIZZARD OF LIES
  • 2 days How Far Have We Really Gotten With Alternative Energy
  • 3 hours The United States produced more crude oil than any nation, at any time.
  • 4 days Bad news for e-cars keeps coming
Simon Watkins

Simon Watkins

Simon Watkins is a former senior FX trader and salesman, financial journalist, and best-selling author. He was Head of Forex Institutional Sales and Trading for…

More Info

Premium Content

LNG Giant Qatar Walks A Tightrope Between China And The U.S.

  • Despite its dealings with China, Qatar is committed to supplying Europe with increasing volumes of LNG.
  • In May 2022, Qatar signed a declaration of intent on energy cooperation with Germany, aimed at becoming its key supplier of LNG.
  • U.S. oil major ConocoPhilips is involved in this Qatar-Germany deal as part of one of the entities that purchases and transports the gas.

 

Qatar LNG

Given its geographical positioning, with Saudi Arabia on one side of it and Iran on the other, Qatar has long played a delicate diplomatic balancing act between the two great Middle Eastern powers and their principal superpower sponsors. In Saudi Arabia’s case, its key superpower backer for decades was the U.S., and in Iran’s case over the same period it was Russia and then China more latterly as well. Recently, Saudi Arabia also appears to have shifted further into this China-Russia axis, for several reasons analysed in my previous OilPrice.com articles. Despite this, though, Qatar appears to be sticking largely to the informal understanding reached with the U.S. after Russia’s invasion of Ukraine in February 2022, which was to provide the West with vital new supplies of gas to substitute those lost from Russia. This is evidenced again in the very recent split of shares in Qatar’s cornerstone North Field East (NFE) expansion project.

More specifically, last week saw the China Petroleum & Chemical Corporation (Sinopec) sign an agreement with QatarEnergy to acquire a 1.25 percent stake in the NFE expansion project. This project is key to Qatar’s plans to raise its liquefied natural gas export (LNG) capacity to 110 million metric tonnes per year (mtpy) by 2026 from 77 million mtpy currently. The 1.25 percent stake in the NFE expansion project derives from a 5 percent interest in one of the LNG trains (liquefaction and purification facilities), each of which will have a capacity of 8 million mtpy. 

A deal of some size in Qatar’s NFE was always likely for a major Chinese company, given the significant ratcheting up of gas deals between the two countries in the lead up to, and in the early stages of, Russia’s invasion of Ukraine last year. In fact, from just over one year before the invasion, China had been engaged in a flurry of activity to expand its sources and methods of gas supply. This began in earnest with a series of major deals with Qatar, the world’s top LNG supplier, starting with a 10-year purchase and sales agreement by Sinopec and Qatar Petroleum for 2 million mtpy of LNG. December 2021 saw a contract between QatarEnergy and Guangdong Energy Group Natural Gas Co for 1 million mtpy of LNG supplies, starting in 2024 and ending in 2034, although it could be extended.  Related: O’Leary Looks For A U.S. State To Host His $14 Billion Refinery

November 2022 saw the biggest LNG deal to date between the two countries, a US$60 billion+ agreement, again between Sinopec and QatarEnergy. The deal involves 4 million mtpy of LNG being supplied to China for 27 years, starting in 2026. It is China’s longest LNG supply contract and one of its largest in terms of volume. Saad Sherida al-Kaabi, president and chief executive officer of QatarEnergy, and the Emirate’s Energy Minister said of the agreement at that time: “We are very happy about this deal with Sinopec because we have had a long-term relationship in the past and this takes our relationship to new heights, as we have a sales and purchase agreement that will last into the 2050s.” 

This said, the specific NFE stake just awarded to Sinopec is small compared to the stakes already given to Western companies. The U.S.’s ExxonMobil, and ConocoPhillips, France’s TotalEnergies, Italy’s Eni, and the United Kingdom’s Shell were all awarded 6.25 percent stakes in the NFE expansion project last year, which would see them own a collective 25 percent stake of the project. The remainder was to have been held by QatarEnergy. At the time, TotalEnergies’ chief executive officer, Patrick Pouyanne, highlighted that the company’s 25 percent stake would be for one 8 million mtpy capacity train of the project. Al-Kaabi confirmed that, as Qatar has a unified approach in which all four trains are considered to be one unit, TotalEnergies’ 25 percent stake in one virtual train would give it around a 6.25% holding in the whole four trains. The same applied to the stakes of the other Western companies. The same mix of companies is expected in the North Field South (NFS) expansion project, with the latter part of 2022 seeing three Western companies awarded major stakes. In September 2022, TotalEnergies was selected as the first international partner, awarded a 9.375 percent stake in the NFS project out of a total 25 percent interest made available for international partners. Shell (9.375 percent stake) and ConocoPhillips (6.25 percent stake) joined the project as the second and third international partners in October 2022. This apparent re-weighting of Qatar’s major North Field awards towards companies from the West – and companies at the vanguard of the efforts of the U.S. and its allies to secure new gas supplies following sanctions on Russian supplies – comes after a major shift in the Emirate’s energy policies as Russia’s advance in Ukraine stalled.

In the early aftermath of the Russian invasion, plans were quickly put into place by the U.S. to secure substitute sources of gas and oil for Europe as quickly as possible. The overriding objective of this strategy was to ensure that Europe – led by Germany – did not backslide in its support for sanctions against Russia being championed by the U.S, and the U.K. Germany had for decades been a major buyer of plentiful, cheap, Russian gas, which had powered its economic growth. The extreme reliance of Germany on these Russian energy supplies had translated into continental Europe’s ‘Macbeth Response’ (‘a tale told by an idiot, full of sound and fury, signifying nothing’) to Russia’s previous invasion of Ukraine in 2014 and its subsequent annexation of Crimea.

U.S. pressure not only put a halt to the Nord Stream 2 gas pipeline from Russia directly into Germany but was also instrumental in obtaining new substitute gas supplies for Germany from Qatar. May 2022, then, saw Qatar sign a declaration of intent on energy cooperation with Germany, aimed at becoming its key supplier of LNG. The new supplies of LNG from Qatar would come into Germany through existing importation routes augmented by new infrastructure approved by the German Bundestag on 19 May. This would include the deployment of four floating LNG import facilities on its northern coast, and two permanent onshore terminals, which were under development. 

The plans would run in parallel with, but were likely to be finished significantly sooner than, the plans for Qatar to also make available to Germany sizeable supplies of LNG from the Golden Pass terminal on the Gulf Coast of Texas. QatarEnergy holds a 70 percent stake in the project, with the U.S.’s ExxonMobil holding the remainder. The Golden Pass terminal’s estimated send-out capacity is projected to be around 18 million mtpa of LNG and the facility is expected to be operational in 2024. Around one month after this declaration of intent on energy cooperation with Germany was signed by Qatar, the Emirate signed new the NFE expansion project deals with France’s TotalEnergies and Italy’s Eni. 

Following these deals, another two sales and purchase agreements were signed between the U.S.’s ConocoPhillips and QatarEnergy to export LNG to Germany for at least 15 years from 2026. The gas would come from Ras Laffan in Qatar to Germany’s northern LNG terminal of Brunsbuettel, according to Saad al-Kaabi. He said at the time: “[The two sales and repurchase agreements] mark the first ever long-term LNG supply agreements to Germany, with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security.” The U.S.’s ConocoPhilips is involved in this Qatar-Germany deal, as one of its subsidiaries will be the entity that purchases the LNG from Qatar that will then be delivered to Brunsbuettel, which is currently still under development.

By Simon Watkins for Oilprice.com

ADVERTISEMENT

More Top Reads From Oilprice.com:


Download The Free Oilprice App Today

Back to homepage





Leave a comment

Leave a comment




EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News