2023-10-23 17:52:26
Replace one addiction with another and for a long time. The Italian energy company Eni announced, Monday October 23, the signing of a liquefied natural gas (LNG) supply contract for a period of twenty-seven years with Qatar. The first deliveries, of up to 1 million tonnes per year, will start in 2026 and end in 2053. That is to say after 2050, the date set by the European Union to achieve carbon neutrality.
China has paved the way for this type of agreement
This is not the first agreement of this type. On October 10, TotalEnergies unveiled a similar contract, but even bigger. This provides for the delivery to France of 3.5 million tonnes of LNG from Qatar. Again over twenty-seven years, with a start in 2026. On October 18, the energy company Shell signed an identical contract with Qatar Energy, the emirate’s gas company.
In November 2022, China led the way by concluding with Qatar the purchase of 4 million tonnes of LNG over twenty-seven years, which was then presented as the longest duration in the history of the LNG industry. , while long-term contracts in the sector generally range between ten and twenty years.
At the same time, the Germans Uniper and RWE had signed a contract in Doha to purchase 2.7 million tonnes of LNG, but only over fifteen years. The German government had imposed a shorter date, precisely taking into account the commitment to carbon neutrality in 2050, and had agreed in return to pay more for gas.
An alternative to Russian gas
For Europeans, the objective is the same each time. It is a question of finding, quickly at all costs, new sources of supply, since they decided to considerably reduce their purchases of Russian gas, after the invasion of Ukraine by Russia, in February 2022. Before the war, Russian gas provided 45% of Europe’s needs.
Qatar is presented as a good alternative, despite current tensions in the region and the troubled links between the emirate and Hamas. But for now, its gas exports to Europe remain limited. They represented 12 billion cubic meters in 2022, compared to 87 billion cubic meters from Norway, 57 billion cubic meters from the United States and 42 billion cubic meters from Algeria. For the record, Russia delivered 150 billion cubic meters of gas per year to Europeans each year before the war.
The Qataris cannot provide more. They are at maximum production capacity and already linked by long-term contracts, mainly with Asia. But this should quickly change with the rise of the North Field, under the Persian Gulf and which Qatar shares with Iran. It alone is believed to contain around 10% of the world’s known natural gas reserves.
Huge investments are at stake
Qatar hopes to increase its LNG production by 60% or more, to reach 126 million tonnes per year by 2027. To achieve this, Qatar Energy has signed agreements with large Western companies, which provide financing but especially skills. TotalEnergies thus has stakes in two fields (6.25% in North Field East and 9.375% in North Field South). The same goes for Shell and Eni.
The emirate is also investing massively in the construction of gas liquefaction plants, again with Western support. These are gigantic units, which bring the gas to –161°C in order to be able to transport it by ships in liquid form, which cost, depending on the size and number of trains, between 10 and 30 billion euros. To make these amounts profitable, Qatar needs visibility over a very long period. This explains the multiplication of these contracts over twenty-seven years.
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