Khaleej Times, Tuesday, Nov 22, 2022 | Rabi Al Thani 27, 1444
Qatar signs 27-year deal with China as LNG competition heats up
Qatar :
QatarEnergy has signed a 27-year deal to supply China’s Sinopec with liquefied
natural gas (LNG), the longest such LNG agreement so far as volatile markets
drive buyers to seek long-term deals.
Following 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 per cent of the continent’s
imports.
“Today is an important milestone for the first sales and purchase agreement
(SPA) for North Field East project, it is four million tonnes for 27 years to
Sinopec of China,” QatarEnergy chief Saad Al Kaabi told Reuters in Doha, shortly
before the deal signing.
“It signifies long-term deals are here and important for both seller and buyer,”
he said, adding that the deal was the LNG sector’s largest single sales and
purchase agreement on record.
The North Field is part of the world’s biggest gas field that Qatar shares with
Iran, which calls its share South Pars.
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.
It later signed contracts with three partners for North Field South (NFS), the
second phase of the expansion.
Monday’s deal, confirmed by Sinopec, is the first supply deal to be announced
for NFE.
“This takes our relationship to new heights as we have an SPA that will last
into the 2050s,” Kaabi said.
LONG-TERM SUPPLY
Kaabi said negotiations with other buyers in China and Europe that want to have
security of supply were ongoing.
Qatar is already the world’s top LNG exporter and its North Field expansion
project will boost that position and help guarantee long-term supplies of gas to
Europe as the continent seeks alternatives to Russian flows.
“I think the recent volatility has driven buyers to understand the importance of
having long-term supply that is fixed and that’s reasonably priced for the long
term”,” Kaabi said.
He said the pricing of the deal would be similar to others in the past that were
linked to crude oil.
“The way we’re pricing our deals with Asia is crude linked. We’ve done it this
way in the past and that’s the mechanism we’re using going forward.”
The deal was signed on an ex-ship basis, meaning QatarEnergy will provide the
shipping and delivery of the LNG.
Kaabi added negotiations for an equity stake in the Gulf country’s expansion
project were ongoing with several entities.
The supply contract is a key component for an integrated partnership in the NFE,
Sinopec said in a statement, indicating it could be involved in stake
negotiations.
QatarEnergy has maintained a 75 per cent stake overall in the expansion and
could give up to a five per cent stake from its holding to some buyers, Kaabi
said.
“Important buyers that want to commit for the long term on a substantial volume
want to see part of the benefits of the upstream business... so I think it’s an
important win if you will and it makes the partnership even more solid.”
Sources told Reuters in June that China’s national oil majors were in advanced
talks with Qatar to invest in NFE.