UK Eyes Security of LNG Supply in Talks With Qatar

Talks aimed at strengthening bilateral relations between the UK and Qatar will likely focus on security of LNG supply, sources tell Energy Intelligence.

But one source said it's unclear that the high-level talks, due to start early next year, would result in a formal agreement — let alone a gas deal that would make Qatar a "supplier of last resort" to the UK, as reported by the Financial Times.

Qatar does need to secure markets for the 48 million tons per year of new LNG capacity it plans to bring on stream by end-2027.

Its search for buyers has focused overwhelmingly on the Asia-Pacific region, but it would make sense for state-owned QatarEnergy (QE) to avoid putting all of its eggs into that one basket.

UK's Top LNG Supplier

QE remains the UK's top LNG supplier, but it has lost a lot of market share in recent years, falling from 91% in 2016 to 40% in the first seven months of this year (see table). And it might be prepared to offer a few carrots to secure demand.

The UK has pledged to attain net-zero greenhouse gas emissions by 2050 and has championed zero-carbon renewable energy in its current role as host of the COP26 climate talks in Glasgow.

Nevertheless, the government is also keen to minimize its vulnerability to shortages that can drive up energy price rises. And Qatar is taking steps to ensure that its LNG has a lower carbon intensity than that supplied by other producers.

Diverted Cargoes

The Financial Times also reported that four large cargoes of Qatari LNG were recently diverted to the UK at the request of Prime Minister Boris Johnson.

But a UK government spokesman denied that London had "requested or secured any additional shipments from the Qatari government."

A government statement said that UK "gas supply remains secure, thanks to a diverse range of sources at home and abroad."

It also said the UK has had "regular discussions with our key energy partners around the world ahead of winter and to discuss the global transition to clean energy."

The Financial Times article did not specify whether the diverted cargoes it mentioned were sold at term volume prices, which would suggest preferential treatment, or were normal spot purchases at current high prices.

Meeting in Glasgow

The UK statement noted that Johnson and Qatar's emir did meet briefly during the COP26 summit in Glasgow, but said those discussions centered on a climate change research partnership between UK firm Rolls-Royce and the Qatar Foundation.

However, Johnson's government is keen to show that the UK is benefiting from leaving the EU and may believe it is better positioned to negotiate with Qatar than other European countries as the EU investigates Qatar's long-term LNG contracts.

The talks between the UK and Qatar are set to follow bilateral talks between the US and Qatar that are supposed to start soon.

Trade and security issues had previously been expected to dominate the UK-Qatar discussions, but the source said "the focus has switched to energy and gas," while adding that the talks with Qatar should be seen as part of a wider UK push to secure a free trade agreement with the Gulf Cooperation Council group of countries.

Big Spender

Qatar has invested heavily in the UK. QE owns 70% of the 15.6 million ton/yr South Hook LNG import terminal, which is capable of supplying some 20% of UK gas needs.

And last year it booked 7.2 million tons of LNG storage capacity at the UK's Isle of Grain import terminal for some 25 years.

Outside the energy industry, Qatar's sovereign wealth fund owns London's prestigious Harrods department store.