The Emirate of Qatar and the QatarEnergy chief executive announced on Tuesday that the Gulf country has reached an agreement with Berlin on liquefied natural gas (LNG) deliveries to Germany.
Germany is set to receive new flows of Qatari LNG from 2026 after QatarEnergy and ConocoPhillips signed two sales and purchase agreements for its export covering at least a 15-year period.
Since Russia's invasion of Ukraine in February, competition for LNG has become intense, with Europe, in particular, needing vast amounts to help replace Russian pipeline gas that used to make up almost 40% of the continent's imports.
The deal, the first of its kind to Europe from Qatar's North Field expansion project, will provide Germany with 2 million tonnes of LNG annually, arriving from Ras Laffan in Qatar to Germany's northern LNG terminal of Brunsbuettel, QatarEnergy's CEO Saad Al Kaabi said.
"(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," Al Kaabi said in a joint news conference with ConocoPhillips CEO Ryan Lance who highlighted that the gas would be marketed to various buyers in Germany.
A ConocoPhillips subsidiary will purchase the agreed quantities to be delivered to the German receiving terminal, which is currently under development.
QatarEnergy and German utility firms have been thrashing out long-term LNG deals for much of this year as Berlin looks for alternatives to Russia, which is Germany's biggest gas supplier.
Europe's biggest economy, which mainly relies on natural gas to power its industry, aims to replace all Russian energy imports by as soon as mid-2024.
Talks ongoing
German Economy Minister Robert Habeck welcomed the agreement but said that gas consumption must be gradually reduced to reach the country's climate goals.
Habeck, who is also responsible for energy, visited Qatar in March – about a month after Russia invaded Ukraine – as part of the government's effort to diversify gas supplies.
ICIS head of energy analytics Andreas Schroeder said the starting date of 2026 was late, as Germany needed LNG for 2023 and 2024.
"If German players do not secure sufficient volumes at an OK price for 2023, they will have to revert to spot LNG markets, and expose themselves to global price volatility," he added.
Al Kaabi said negotiations were still taking place with other German companies for further supply.
When asked whether some German politicians' criticism of Qatar hosting the soccer World Cup had impacted talks, Al Kaabi, who had previously ruled out the possibility, said QatarEnergy separated politics and business on Tuesday.
German Chancellor Olaf Scholz had said only last week that the purchase of LNG from Qatar was not off the table. "German companies are in very concrete talks, which I could tell you more about than I will," Scholz said during an interview.
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.
QatarEnergy earlier this year signed five deals for North Field East (NFE), the first and larger of the two-phase North Field expansion plan, which includes six LNG trains that will ramp up Qatar's liquefaction capacity to 126 million tonnes per year by 2027 from 77 million.
Qatar is one of the world's largest exporters of LNG and it has the world's third-largest gas reserves after Russia and Iran. The vast majority of its exports go to Asia, so far mainly to Japan, South Korea and India.
On the other side, Germany in order to cope with the energy crisis is in constant search for new gas sources while it's also building up new gas terminals on the North sea coast to escape from relying on Russian pipelines.