Qatar to supply Germany with LNG as EU seeks secure energy options

Qatar is set to supply Germany with liquefied natural gas in a long-term supply deal that marks a major step forward in Europe’s largest economy’s efforts to wean itself off Russian gas.

Under the two sales and purchase agreements signed on Tuesday by state-owned Qatar Energy and U.S. group ConocoPhillips, about 2 million tons of LNG will be shipped to Germany annually for at least 15 years, with shipments expected to begin in 2026.

The deals are the first long-term agreements to supply LNG to an EU country since Russia invaded Ukraine in February. European countries have been wary of such deals even as they seek substitutes for Russian pipeline gas as they try to move away from fossil fuels.

Robert Habeck, Germany’s economy minister, welcomed the agreements. “Fifteen years is great,” he said. “I would have nothing against contracts for 20 years or even more.”

Habakkuk said German power companies Uniper and RWE had been asked by the government to secure gas on the international market – including from Qatar – for an LNG terminal being built on Germany’s North Sea coast.

But noting that the contracts were between energy groups and Germany’s electricity companies and not its government, he warned: “The contracts themselves are the companies’ business…[they]It should be understood that Germany will do this [in future] buy less [gas] If we want to stick to our climate goals.” In this case, the companies “will have to supply the volumes they bought to other countries.”

The agreements will contribute to Germany’s energy security “with a supply period lasting at least 15 years,” said Saad Sharida Al-Kaabi, Qatar’s energy minister and CEO of Qatar Energy.

Al-Kaabi added that Qatar had separated “politics for business”, referring to Germany’s World Cup team’s alleged protest against FIFA’s decision to ban players from wearing “One Love” armbands in support of the LGBT+ community, where the team covered their mouths. for a photo shoot ahead of their match against Japan last week.

Zongqiang Luo, a senior analyst at Rystad Energy, said the latest deals are “a sign that Europe is getting tired of Russia’s intermittent supplies and is increasingly looking for long-term alternatives.”

The LNG will come from Qatar’s North East Field and North South Field projects, which aim to increase the Gulf state’s domestic LNG production to 126 million tons from the current 77 million tons by 2027.

Russian gas accounted for about 45% of EU gas imports last year. The bloc’s need to find substitutes has increased competition with Asia for cargo, pushing down prices.

The price of LNG delivered to northwest Europe rose to nearly $80 per million British thermal units in August, more than four times the price a year earlier, according to data provider Argus Media. However, prices have since fallen to last year’s level as Europe managed to fill its gas reserves.

While 2 million tonnes of LNG makes up about 3% of Germany’s annual gas demand, it will help fill the gap in the country hit hardest when Russian President Vladimir Putin weaponized energy supplies.

Russian gas accounted for more than half of Germany’s total supply before the invasion, and since then Berlin has been aiming to build a new LNG import infrastructure.

The country recently completed the construction of its first LNG terminal, in Wilhelmshaven on the North Sea, and also rented five floating storage and gasification units, which are used to store LNG and turn it back into gas.