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Conoco, Qatar Ink Deal to Send LNG to Germany

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QatarEnergy and ConocoPhillips have signed a pair of deals that will see the first Qatari LNG flow into Germany to replace Russian gas.

The agreements call for ConocoPhillips to purchase 2 million tons per year of gas and deliver it to the Brunsbuettel LNG terminal, under a 15-year contract that starts in 2026.

The Brunsbuettel terminal is owned by the German LNG Terminal consortium, comprised of German state investment bank KfW (50%) along with utilities Gasunie (40%) and RWE (10%). It is due on line in 2023 with capacity to take in 8 billion cubic meters per year of LNG.

The deals highlight the tradeoffs European countries are having to make to balance meeting their immediate energy needs with their plans for an accelerated low-carbon transition that many see as the ultimate solution to their energy security challenges.

Both the length of the contract and the volume highlight Germany’s complicated relationship with gas, as the country tries to sew up near-term gas supplies to protect its economy while aiming to dramatically reduce its reliance on fossil fuels over the next decade.

Qatar struck a deal last week with China’s Sinopec for 4 million tons/yr delivered over a 27-year period, in one of the largest and longest LNG deals on record.

Government Role

At the ceremony announcing the agreement, Qatar's Energy Minister Saad al-Kaabi, who is also CEO of QatarEnergy, said Qatar was “committed to contribute to the energy security of Germany and Europe at large.”

In an October interview with Energy Intelligence, al-Kaabi highlighted the challenges in arranging supply agreements with European countries keen to replace Russian gas, as such deals need to be agreed with private companies that do not have the same mandate to deliver energy security as state-run firms.

“The difficulty is you have governments that don't have the tools to enable it to buy and most countries don't have the control over companies that can do it for them,” al-Kaabi told the Energy Intelligence Forum. “So it's a little bit of a difficult proposition for governments.”

Germany and other prospective European buyers have also had to balance an declining outlook for gas demand on the continent in the years ahead with Qatar’s preference to sell its LNG under long-term contracts.

But al-Kaabi said there was “no issue” on contract length in the negotiations, with the sides generally finding alignment on “medium to long contracts” of 10-15 years.

German Energy Minister Robert Habeck expressed satisfaction with the 15-year tenure and indicated that he would have been comfortable signing an even longer contract.

The total volumes of the ConocoPhillips deal represent less than 3% of total German gas demand and around 6% of its former imports from Russia.

The country is no longer receiving any volumes directly from Russia following disputes and explosions that knocked out the Nord Stream and Nord Stream 2 pipelines.

Fueled by North Field

The LNG will be sourced from Qatar’s massive two-phase expansion of the North Field, which will boost Qatar’s LNG liquefaction capacity by around 48 million tons/yr to some 126 million tons/yr.

ConocoPhillips has equity stakes in both of the expansion's phases, taking a 3.125% interest in the first phase dubbed North Field East (NFE) and a 6.25% equity stake in the second, known as North Field South (NFS).

“These agreements will provide an attractive LNG offtake solution for our new joint ventures with QatarEnergy and position the joint ventures as reliable sources of LNG supply into Europe,” ConocoPhillips CEO Ryan Lance said in announcing the deal.

Topics:
Gas Supply, Liquefaction, LNG Supply, LNG Trade, LNG Contracts, Trade
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