Germany and Qatar reach an agreement on LNG

On 29 November, Germany and Qatar signed an agreement providing for the annual supply of 2.8 billion m3 of liquefied natural gas (LNG) from Doha to Berlin from 2026. The agreement was concluded after months of negotiations on the duration of the contract, which was finally set at 15 years. On the one hand, Qatar was aiming for a long-term contract that would amortize its massive investments in the energy sector. On the other hand, Germany was seeking a shorter-term agreement, consistent with its climate neutrality goals.

The gas will come from the offshore North-Dome/South-Pars field in the Persian Gulf, which Qatar shares with Iran. This is the largest natural gas field in the world, with reserves estimated at over 50 trillion m3. According to the agreements, the gas, once extracted from the field, will be sold by the state-owned energy company QatarEnergy to the US oil company ConocoPhillips, which will eventually deliver it by ship to the floating regasification terminal in Brunsbüttel, currently under construction.

On the Berlin side, this agreement responds to the need to forge new energy partnerships in order to find alternative resources to Russian gas. From Doha’s perspective, the agreement, firstly, consolidates the country’s role as a gas player, in the wake of the other important agreement concluded a few weeks earlier with the Chinese company Sinopec. Secondly, it manifests Qatar’s ambition to expand into new contexts, outside of Asian countries, which, to date, represent the main market for Qatari gas. In particular, Qatar aims to establish itself as a European gas supplier, filling the gap in the gas market left by Russia. This ambition would explain Qatar’s willingness to accept an agreement of a rather limited duration compared to the standard for this type of contract.

In the long run, the Qatar-Germany agreement could pave the way for new agreements between EU countries and Qatar. The EU has already been looking at the country’s LNG with interest for some time in its strategies to diversify energy sources, as the regasification plants for LNG transport require much shorter construction time than alternatives such as pipelines. Indeed, in recent months many EU countries, including Italy, have held dialogues with Doha on the issue. However, until now, the reluctance of European energy companies to enter into long-term commitments, related to the expected falling gas demand in the coming years, had prevented the conclusion of energy agreements. Therefore, reaching a more limited-term arrangement with Berlin could open up new and interesting prospects for future agreements.