Qatar Pulls Europe Closer with Spate of LNG Supply Deals

By Therese Robinson

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Published in: Daily Gas Price Index Filed under:

Even as Qatar faces criticism over its links to Palestinian militant group Hamas, Europe is increasingly tying its future energy security to the natural gas-rich state.

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Energy Aspects’ James Waddell said Israel’s war against Hamas is “concerning for European buyers,” but not enough for them to stop signing long-term liquefied natural gas deals with Qatar. He said there is still a “fairly low likelihood” that the Strait of Hormuz, through which Qatari cargoes pass,  will be disrupted by the conflict.

Last month, Europe’s long-term relationship with Qatar was further solidified after QatarEnergy signed three 27-year deals to supply Eni SpA, Shell plc and TotalEnergies with LNG for delivery to the continent starting in 2026. All three majors are stakeholders in Qatar’s North Field expansion project. ConocoPhillips, another stakeholder, also agreed last year to supply Germany with 2 million tons (Mt) of Qatari LNG annually for a term of 15 years.

Despite the Israel-Hamas war, there were already challenges for Qatar to sell volumes to Europe given the length of its contracts and the continent’s decarbonization goals.

“Europe will certainly consider the events in the Middle East with a geopolitical lens and what it means for their energy security,” said Rystad Energy analyst Kaushal Ramesh. “We think it is too early to guess if Qatar will have problems selling to Europe. It can’t be ruled out, but we will need to see how the conflict evolves.”

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Qatar’s North Field expansion projects would boost the country’s output from current annual levels near 80 million tons (Mt) to 125 Mt by the end of the decade. Qatar signed another 27-year deal with China Petroleum & Chemical Corp. on Nov. 5 to supply 3 Mt annually from the project. Roughly 40% of the North Field project’s supply has been contracted.

Qatar exported 80.21 Mt of LNG last year, up from 77.91 Mt in 2021. Qatar exported 70% of its supply to Asia in 2022, with 25% delivered to Europe, according to Kpler data.

Europe imported 19.39 Mt  of LNG from Qatar last year, up from 16.85 Mt imported in 2021.

“We understand Qatar is keen to send more volume into Europe than before,” Ramesh said. He added that 20 Mt/year of Qatari LNG from the North Field project could end up in Europe, or about 12 Mt/year more than Eni, Shell and TotalEnergies have already committed to. 

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However, Qatar continues to face competition from U.S. LNG producers, said Kunro Irie, a visiting fellow at the Washington Center for Strategic and International Studies.

“If that is the case, we can assume that a big portion of their uncontracted gas will head to Asia,” Irie said.  

Waddell also said EnergyAspects expects Asian buyers to contract the majority of Qatar’s new volumes. 

Signing new contracts after 2025, when more U.S. LNG projects start-up, could ultimately push QatarEnergy to offer contracts with more flexible options.

Waddell said QatarEnergy’s latest deals with Eni, Shell and TotalEnergies “may contain cargo diversion clauses, but it is unclear if smaller European buyers would be able to negotiate the same agreements.”

The destination of Qatar’s cargoes are typically restricted. While TotalEnergies has agreed to deliver Qatari volumes to France under its latest deal, CEO Patrick Pouyanné said last month that they could be diverted if it’s in the interest of both companies.

“QatarEnergy has become more flexible with destination clauses and even price indexations,” Ramesh said. “This is likely a response to buyers' demands and competition from U.S. projects, which have more than 70 million metric tons/year of LNG unsanctioned but likely to be developed.”

Waddell agreed, saying that “deals with European firms will need to contain diversion clauses if they run into the 2040s.”

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Therese Robinson

Therese Robinson started her energy career in London covering international oil and gas markets. She was managing editor-Europe at Platts, director of Standard & Poor’s Credit Ratings division, and managing editor at UK consultancy, Gas Strategies. She also served as business development and crude editor for Argus. As both project director and managing editor, she launched Natural Gas Daily for Interfax Energy Services. She is from New England.