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Qatar is expected to become one of the major gas suppliers in Europe. Will the small emirate be one of the big winners of the war in Ukraine?
It already is since it benefits from the surge in gas prices. Prices have quadrupled in 2021, the spot price has more than doubled in one year. Qatari exports have slightly decreased in volume since the beginning of the year for maintenance reasons. But in value, they exploded, because of this rise in prices. Buoyed by this upturn, the emirate’s growth will be 4.9% this year, predicts the World Bank. A record since 2015.
The war in Ukraine is a boon for the emirate. Providential demand from Europeans is giving new impetus to the gas industry. It’s a new driver for the economy which will benefit for a few more months from the World Cup effect, an effect which will fade after the event scheduled for the end of the year.
Can Qatar become one of Europeans’ preferred suppliers of liquefied natural gas, as European Commissioner Thierry Breton said a few days ago?
He has the profile. Qatar has the third largest reserves in the world and specializes in LNG. It was the leading exporter in the world from 2015, ahead of the United States and Australia, two countries that have now caught up with it. This LNG is precisely what the Europeans are now looking for to get out of their dependence on Russian gas transported by pipeline. Germany, Europe’s biggest importer of Russian gas, Italy, Spain, France, Belgium, the UK have all started talks to get a surplus of Qatari cargo as quickly as possible.
But we will have to wait, because for the moment 90% of the gas extracted from Qatar is exported to Asia under very long-term contracts. Doha has no intention of calling them into question. Qatar has promised Germany a first delivery in 2024.
But it will be gas extracted from American soil
Gas exploited in Texas by the American subsidiary of QatarEnergy and sent by ship to Germany. For the moment, the United States is by far the leading LNG supplier to Europe. For a real increase in Qatari deliveries to Europe, it will be necessary to wait until 2027. When the emirate will have completed the work to extend the NorthField field, in the waters of the Persian Gulf. Its production will then increase by 60% and half of the supplement could go to Europe. At a price and under conditions that remain to be negotiated.
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Germany wants to sign a ten-year contract. An insufficient commitment for the Qataris, they want to secure longer contracts and invest in terminals on European soil. Like the gas pipelines for Russia, these facilities would guarantee a long-term presence. But the German Minister of the Economy has another agenda in mind, that of the energy transition which involves the development of renewables to achieve carbon neutrality by 2050. This is why Germany has not planned to build hard terminals, but plans to acquire floating installations.
A pre-agreement on energy has been signed between Qatar and the United Kingdom
When the Emir came to London at the end of May. It essentially concerns the supply of gas and hydrogen. In addition, Qatar has invested in terminals in France, Belgium and England to deliver more LNG. The emirate has every interest in finding common ground with the Europeans. This is good for its economy.
Wealth per capita is close to that of Switzerland. And it is beneficial for its diplomacy: this saving gas is the new tool of influence of this mini territory of the Middle East.
► IN BRIEF
The Indian central bank raises its key rate by 0.5%.
A new brake to curb inflation. This is the second time in two months that the central bank has raised its interest rates, inflation is now above 7% in India.