Germany signs 15-year gas export deal with Qatar

The agreement will supply Germany with two million tonnes of LNG per year for at least 15 years  beginning in 2026, Reuters reported.

Germany will receive new flows of Qatari liquefied natural gas (LNG) beginning in 2026, after QatarEnergy and ConocoPhillips  signed two sales and purchase agreements covering at least a 15-year period on Tuesday.

“[The agreements] mark the first ever long-term LNG supply agreement to Germany, with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security,” CEO Saad Al Kaabi said in a joint news conference with ConocoPhillips CEO Ryan Lance.

Since Russia’s invasion of Ukraine in February, competition for LNG has intensified, with Europe in particular in desperate need of large quantities to help replace Russian pipeline gas. Russian gas previously accounted for nearly 40% of the continent’s imports.

As European countries backed Ukraine following Russia’s invasion, Moscow cut supplies of natural gas used to heat homes, generate electricity, and power industry, causing an energy crisis that is fuelling inflation and putting pressure on businesses.

Germany, which received more than half of its gas from Russia prior to the war, has not received LNG from Russia since the end of August.

QatarEnergy and German utility companies have been negotiating long-term LNG contracts for much of this year as Berlin seeks alternatives to Russia, Germany’s largest gas supplier.

Germany, Europe’s largest importer of Russian gas, would require approximately 40 million tonnes of LNG to replace the 50 billion cubic meters (bcm) of pipeline gas it previously received from Moscow. Its gas consumption in 2021 is expected to be around 88 billion cubic meters.

“By 2027, we think Germany’s gas consumption would be around 73 bcm a year so this deal could cover around 3.7% of that,” said Kaushal Ramesh, senior LNG analyst at Rystad Energy. “This is not an inconsequential volume and is a big step in diversifying supplies.”

A subsidiary of ConocoPhillips will purchase the agreed-upon quantities for delivery to the German receiving terminal, which is currently under construction.

“Fifteen years is great,” German Economy Minister Robert Habeck told a business conference in Berlin following the agreement. “I wouldn’t have had anything against 20 [years] or longer contracts.”

However, he added that Germany’s plan to become carbon-neutral by 2045 will limit the amount of gas the country would receive in the future.

Germany will have to start reducing its gas consumption in the mid-2030s if it is to meet its ambitious climate change goal, according to the minister.

When asked on Tuesday whether some German politicians’ criticism of Qatar’s hosting of the FIFA World Cup had any effect on negotiations, Al Kaabi, who had previously ruled out the possibility, said QatarEnergy separated politics and business.

He also added that negotiations were ongoing with other German companies for further supply.

The deal comes a few days after QatarEnergy signed a 27-year sales and purchase agreement with China’s Sinopec.  The North Field is part of the world’s biggest gas field, which Qatar shares with Iran.

The latest agreement also adds to other long-term LNG deals that Qatar has with other Asian buyers. It is also the second between QatarEnergy and Sinopec following a previous 10-year SPA signed in 2021 over the supply of two million tonnes per annum of LNG.

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