Germany Inks Major LNG Deal with Qatar

30.11.2022 - QatarEnergy, teamed with US energy major ConocoPhillips, has agreed to supply Germany with around 2 million tonnes of liquefied natural gas (LNG) annually over 15 years, starting in 2026.

The agreement announced during the ongoing 2022 football World Cup follows a preliminary agreement inked in September this year, after what the German government said were tough negotiations.

Commenting on clinching the deal at the present time, Saad Sherida Al-Kaabi, Qatar’s energy minister and CEO of state-owned QatarEnergy, said the emirate had “separated politics from business,” obviously alluding to protests by the German (and other) World Cup teams against a decision to ban players from wearing “One Love” armbands.

Al-Kaabi said Qatar is continuing to talk to German buyers about additional supplies.

While the gas from the North Field East and North Field South that Qatar is planning to exploit with the help of Western partners will cover only about 3-6% of Germany’s annual needs, it is expected to play more than a symbolic role in the country’s transition away from the now defunct Russian pipelines, which in the past two decades accounted for more than half of its gas usage.

Commentators called the agreement a significant step, especially as the global LNG market is growing increasingly competitive, with Europe and Asia in a virtual tug-of-war over cargoes with Asia. Days ago, China signed a major gas supply deal with the emirate.

Officially, the new German-Qatari pact consists of sales and purchase agreements with two energy utilities, RWE and Uniper. At times during the recent talks, discord over the length of the contracts appeared to threaten Berlin’s negotiating position as the governing coalition hopes to complete the switch to renewable energy by 2045.

To secure its financial advantage as it invests heavily in the $30 million expansion of its vast natural gas reserves, Qatar up to now had insisted on 20-year contracts while Germany had pushed for a 10-year limit.

In announcing the deal, German economics and energy minister Robert Habeck, a Green party member, stressed that the contract length was agreed by the private gas importers; however, he said they “must realise” that purchases volumes may shrink as the share of renewables in the energy mix expands.

With energy constraints expected to remain acute for the foreseeable future in any case, Germany is making rapid strides – some think too rapid in view of the price volatility – to bridge the energy gap. The country’s first floating LNG import terminal was recently inaugurated at Wilhelmshaven on the North Sea coast, and several more will follow.

The expansion of the Qatari gas field is aimed at boosting the Gulf state’s domestic LNG production to 126 million t/y from the current 77 million t/y by 2027.

The output earmarked for Germany will come from ConocoPhillips’ joint ventures in Qatar and will be delivered to the Brunsbüttel floating import terminal currently under construction.

Author: Dede Williams, Freelance Journalist