Eyes on QatarEnergy’s ‘Record Year’ of Supply Deals

Qatar's LNG sector has seen plenty of activity over the past 12 months, and more is expected to come as a record number of LNG supply deals are set to be awarded this year.

In 2022, QatarEnergy began awarding equity stakes in its highly-anticipated North Field mega expansion project and also struck several sales and purchasing agreements (SPAs) for the long-term supply of LNG volumes to Asian and European customers.

Europe Next?

QatarEnergy has already signed historically long supply deals with China, a key customer, but only struck one longer-term supply agreement with LNG newcomer Germany last year. The agreement was signed with Qatari North Field partner ConocoPhillips for the supply of 2 million tons per year of LNG for at least 15 years to Germany’s Brunsbuttel terminal, starting in 2026.

The duration of the agreement was a first because European buyers are typically keen on shorter-term supply deals due to energy transition policies aimed at reducing consumption of fossil fuels. Qatar meanwhile prefers deals with longer durations to lock in demand given its need to make large upfront investments in LNG capacity.

Some market observers say such diverging interest in deal tenures might have been the main challenge to Qatar signing more supply agreements with European customers, many of which have scrambled to seek alternative gas supplies after Russia cut gas flows last year. Against this backdrop, interest in gas supplies from Qatar — and other Mideast Gulf producers — has come from European countries including Germany and Austria over the past year.

Germany, which has been supportive of building more import terminals, is likely to become a significant LNG buyer as it replaces its Russian pipe gas. Uniper and RWE are understood to have been in talks with Qatar since last year. Central and Eastern European countries including Hungary, Czech Republic and Slovenia are also reportedly interested in snapping up volumes from Qatar.

Speaking at a press conference in Doha earlier this year, QatarEnergy CEO Saad al-Kaabi said he expected to sign more deals with European customers “after the summer,” dismissing any talks of long-term deals being an issue holding back more supply agreements.

More Deals with Asia

In Asia, Chinese state firms Sinopec and China National Petroleum Corp. (CNPC) have dominated purchases of Qatari supplies, with each agreeing to offtake 4 million tons/yr over 27 years and to take a 1.25% stake in the overall four-train North Field East (NFE) development, the first expansion phase. Those long-term deals were unprecedented in length and marked a new historic era in LNG trading.

Qatar also signed a 15-year deal with Bangladesh’s Petrobangla in early June for 1.8 million tons/yr, with first deliveries to start in January 2026.

More deals with Asian buyers are expected. Qatar is understood to be holding talks with Asian buyers for long-term supplies and as potential value-added partners in its NFE expansion, where there is up to 2.5% still available. Potential offtakers and partners include Thailand’s state PTT, the largest buyer in Southeast Asia, Japan’s Jera, Tokyo Gas, Mitsui and Marubeni, and buyers in South Korea and India.

It remains to be seen how buyers which harbor trading ambitions — such as PTT and Japan’s Jera — seek to incorporate flexibility in their volumes from Qatar, which tends to include destination restrictions in its contracts.

It also remains to be seen whether recent policy reforms in Australia would revive Japan’s interest in sourcing new Qatari supplies to replace expiring contracts following Japanese Premier Fumio Kishida’s visit to Doha last month.

Pricing in Focus

Pricing remains a key hurdle for emerging markets in South Asia which have appetite for more long-term volumes but are price sensitive. Buyers are hoping to secure the same pricing as their existing contracts.

One keen buyer is state-owned Pakistan LNG (PLL), which is seeking a new 10-year contract for one cargo per month. Talks with Qatar last year did not make headway.

PLL wants to restart efforts this year by either signing a new contract under a government-to-government deal or issuing a tender. Qatar is already the largest LNG supplier to Pakistan under two term contracts with Pakistan State Oil for 3.75 million tons/yr and 3 million tons/yr.

“We are not afraid of relying too much on Qatar as they are a reliable supplier,” said a source with PLL. Unlike some sellers which failed to deliver cargoes to Pakistan when the spot market was more lucrative, the source said Qatar has continued to meet its obligations to the South Asian nation.

Rumors have emerged that Qatar and Abu Dhabi, another Mideast LNG producer, are engaged in a marketing battle. Like Qatar, Abu Dhabi is also looking to sell Brent-linked LNG supplies starting in the mid-2020s. Last month, Adnoc Gas signed a 14-year supply deal with Indian Oil Corp. (IOC), marking India’s first term LNG deal with the United Arab Emirates.

IOC’s deal with Adnoc Gas received a boost from the UAE-India Comprehensive Economic Partnership Agreement, which went into force in May 2022. Under the deal aimed at boosting bilateral trade, IOC would avoid having to pay a 2.5% import tax for LNG sourced from the UAE.

Other Indian buyers are also in talks with Qatar. Gail is now negotiating with Qatar, as well as the UAE, Russia, the US and Mozambique for combined term supplies of 7 million–8 million tons/yr by 2030. India’s largest LNG importer Petronet is in advanced talks with Qatar to renew a 7.5 million-8.5 million ton/yr LNG import contract by December, a deadline for renewing the contract expiring in April 2028.

North Field Expansion — What’s Next?

QatarEnergy is adding 49 million tons/yr of liquefaction capacity in its home market through the NFE and North Field South (NFS) projects. The latter represents phase two and is set to add 16 million tons/yr. Combined, the two phases will boost Qatar’s LNG production capacity to 126 million tons/yr, from 77 million tons — making it the world's top producer.

Questions have been raised on whether QatarEnergy will seek further expansion of the North Field, possibly North Field West, but no concrete plans have been announced so far. When asked the question at a Doha press conference, al-Kaabi said QatarEnergy was “always looking into expanding and studying reservoirs.”

A line-up of international oil companies has been awarded stakes in the NFE and NFS expansion projects over the past year. They include TotalEnergies, Exxon Mobil, Shell, ConocoPhillips and Eni, and both China’s CNPC and Sinopec.

Marketing Expansion

In a move to consolidate its marketing efforts and strengthen its position as major LNG supplier, QatarEnergy announced earlier this year that it was taking over LNG sales managed by Qatargas by the end of 2023.

Al-Kaabi had signaled that such a move could be in the works when he vowed that QatarEnergy Trading would be “in the next five to 10 years the largest LNG trader in the world by far,” in an interview at the Energy Intelligence Forum in London last October.

The restructuring is not expected to have any impact on existing SPAs and operations.