After QatarEnergy as well as ConocoPhillips (COP.N) on Tuesday inked two purchase and sale agreements for its exports spanning at least 15 years, Germany is expected to begin receiving additional supplies of Qatari liquefied natural gas (LNG) in 2026.
Since Russia’s assault on Ukraine in February, there has been a fierce rivalry for LNG, as Europe needs a significant amount to help substitute Russian pipeline gas, which accounted for roughly 40% of the continent’s supplies before.
As per QatarEnergy’s CEO, the agreement, the first of its type from Qatar’s North Field development project to Europe, will furnish Germany with 2 million tonnes of LNG yearly.
The LNG will go from Ras Laffan in Qatar and all the way to Germany’s northern LNG port at Brunsbuettel.
In a joint press briefing with ConocoPhillips CEO Ryan Lance, Saad al-Kaabi stated that the agreements represent the very first long-term LNG supply agreements to Germany, with a delivery period that lasts for at least 15 years. This will help to ensure Germany’s long-term energy security.
The agreed-upon amounts will be purchased by a ConocoPhillips subsidiary and transported to the currently under-construction German receiving terminal.
For most of this year, QatarEnergy with German utility companies has been negotiating long-term LNG contracts as Berlin searches for alternates to Russia, which had maintained its stance as Germany’s top gas supplier.
The largest economy in Europe, whose industries are primarily powered by natural gas, wants to completely phase out its imports of Russian energy by the middle of 2024.
The largest consumer of Russian gas in Europe, Germany would require about 40 million tonnes of LNG to substitute the 50 billion cubic metres (bcm) of pipeline gas that it currently receives from Moscow. It used roughly 88 bcm of gas in 2021.
Kaushal Ramesh, a veteran LNG analyst at Rystad Energy, said Germany’s gas consumption by 2027 may be around 73 billion cubic metres (bcm), which means that this transaction would pay for about 3.7% of that.
He continued, saying this is not a little volume and is a significant step in diversifying suppliers.
The deal’s 15-year lifespan, according to German Economy Minister Robert Habeck, is “great.”
The start date of 2026, according to Andreas Schroeder, director of energy analytics at ICIS, is too late because Germany needs LNG in 2023 and 2024.
German players will be forced to turn to spot LNG markets and subject themselves to global price fluctuations if they are unable to secure enough volumes at a fair price for 2023.
Kaabi reported that talks for additional supply were still going on with other German businesses.
Kaabi, who had recently ruled out the prospect, responded that QatarEnergy separated politics from business when questioned on Tuesday about whether certain German politicians’ condemnation of Qatar holding the soccer World Cup had any effect on negotiations.
The agreement was reached just a couple of days after QatarEnergy and Sinopec in China struck a 27-year purchase and sale agreement. The largest gas field in the world, which Qatar and Iran share, includes the North Field.
The first and greater of the two phases of the North Field development plan, North Field East (NFE), involves six LNG trains that would increase Qatar’s liquefaction potential to 126 million tonnes each year by 2027 from the current 77 million.
QatarEnergy secured five deals for NFE earlier this year.
On the same front— Five OPEC+ sources predicted that the group would maintain its current oil output policy at its meeting on Sunday, though two of them added that a further production cut might be taken into consideration to support oil prices, which have fallen as a result of concerns about an impending economic slowdown.
