About a decade ago, Europe had a good idea: pass a pipeline from natgas-producing giant Qatar through Syria, Turkey and into Europe, reducing or completely eliminating Europe’s reliance on Russian gas. We then get the entire staged ISIS interlude which captivated the world’s attention for several years, and which gradually faded away as CIA funding dwindled after Putin and Assad proved too powerful to be removed by western “liberators.” And just as fast as ISIS disappeared as quickly as it appeared, so did Europe’s ambitions of a natgas pipeline from Qatar.
But while Qatar may not send gas by land, nothing prevents it from doing so by sea, and with Europe facing a historic energy crisis and desperate to try literally anything, overnight Reuters reported that German utility giants RWE and Uniper are close to striking long-term deals to buy liquefied natural gas (LNG) – the kind that doesn’t need a pipeline but needs a rather expensive ship to transport it from expensive LNG terminal A to expensive LNG terminal B, or in this case from Qatar’s North Field Expansion project. Why? Simple: to help replace Russian gas, three Reuters sources said.
While talks between Germany and Qatar have been riddled with differences over key conditions such as the length of contracts and pricing – Reuters reported in May that the talks had run into difficulties because Germany was reluctant to commit to deals for at least 20 years and also wanted prices linked to Dutch benchmark gas prices, rather than oil – the industry told Reuters the parties were expected to reach a compromise soon; one of the sources said the talks were now more constructive than a few months ago. Another source said the utilities were likely to agree 15-year deals, while a third source said a deal could be reached within weeks.When asked for comment, Uniper told Reuters on Monday that it remained in talks with Qatar but had not reached a deal. “Uniper is currently working hard to diversify its sources of gas supply. Qatar also plays an important role in this,” it said. RWE was similarly evasive and told Reuters it was in “good and constructive” talks with Qatar, without being more specific.
At the moment, the two utilities buy LNG from Qatar on the spot market. RWE signed a deal with Qatar in 2016 for up to 1.1 million tonnes of LNG a year, but that expires next year.
German Chancellor Olaf Scholz will travel to Saudi Arabia on Saturday for a two-day visit to the Gulf region that will also take him to the United Arab Emirates and Qatar. Scholz is expected to sign LNG contracts during his visit to the UAE, Economy Minister Robert Habeck said.
Europe’s biggest economy has stated its ambitious goal of replacing all Russian energy imports by as soon as mid-2024, a Herculean effort for a country that mainly relies on natural gas to power its industry.
And while we applaud Germany finally realizing it has been held hostage by Russian energy all along – as Donald Trump warned it back in 2018 to sarcastic smile by Germans such as Heiko Maas, there is a big catch to the proposed push to replace dependency on Russia with dependency on Qatar: simply said, while supply deals with Qatar would be positive for Germany, they would not offer an imminent solution to Berlin’s energy crisis – or even a near-term solution – as the vast North Field Expansion project is not expected to come online before 2026.
The North Field Expansion project includes six LNG trains that will ramp up Qatar’s liquefaction capacity from 77 million tonnes per annum (mtpa) to 126 mtpa by 2027. Qatar has partnered with international companies in the first and largest phase of the nearly $30 billion expansion that will reinforce its position as the world’s top LNG exporter.
Of course, there is another catch: as the recent unexplained accident at the Freeport LNG plant over the summer vividly demonstrated, LNG transit is extremely vulnerable to “weakest link” choke points: were the Russian leader so inclined, he could easily precipitate a handful of explosions at key facilities in the process crippling Qatar LNG exports for months if not years, while sending Europe back into the dark ages… again.
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