November 21, 2022

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Qatar Signs 27-Year LNG Supply Deal with Sinopec

QatarEnergy has entered a 27-year LNG supply deal with China's Sinopec, marking the longest gas supply agreement in the industry's history and also matching the duration of Qatar's equity partnerships for its major LNG capacity expansion.

Under the sale and purchase agreement (SPA), Qatar will supply China with 4 million tons per year of LNG from its North Field East (NFE) expansion project. The volumes will be delivered to Sinopec's receiving terminals in China.

Qatar is the world's number two LNG exporter so far this year, while China is the world's number two LNG importer, according to Kpler.

Qatar's LNG exports to China have hit 13.6 million tons in 2022, already shattering the previous high of 9.6 million tons in 2021, Kpler data shows.

As the world faces an LNG supply crunch coupled with price volatility, Qatar has been in ongoing talks with European and Asian customers to sign long-term supply deals.

Stakes Sold

The agreement with Sinopec is the first supply deal announced for NFE after QatarEnergy finalized equity partnerships for both phases of its giant LNG expansion — NFE and North Field South (NFS).

The final stake of the NFS expansion was awarded last month to ConocoPhillips (6.25%) following a round of awards that kicked off in June this year.

All the equity partnerships will last 27 years from the start of production, expiring in 2054.

The long-awaited lineup for both phases of the North Field LNG expansion was announced this year after many delays and went exclusively to western major companies.

Phase 1 of the expansion — the 32 million ton NFE project — was awarded to TotalEnergies (6.25%), Exxon Mobil (6.25%), Shell (6.25%), Eni (3.125%) and ConocoPhillips (3.125%).

Phase 2 — the 16 million ton NFS project — was awarded to TotalEnergies (9.375%), Shell (9.375%) and ConocoPhillips (6.25%). Total capacity from both phases of the expansion add up to 48 million tons/yr.

NFE and NFS are expected to come online in 2026 and 2027, respectively.

It is worth noting the absence of Asian players, as there was an expectation that one or more Asian companies would be awarded a stake in the mega expansion.

This makes the landmark supply agreement with Sinopec — which is not an equity investor in the North Field expansion — all the more interesting.

Partnership with China

Qatar has signed a number of supply deals with China including an agreement with Sinopec in March last year.

The earlier SPA is for 2 million tons/yr of LNG over 10 years, starting this year — a substantial increase from what Sinopec had sought in an initial tender in 2020 in which it had invited sellers to compete for a 10-year, 1 million ton/yr LNG contract.

Speaking at the signing ceremony, Qatar Energy Minister and QatarEnergy CEO Saad Al-Kaabi praised the partnership with China, saying the deal will further strengthen the emirate's relationship with China, helping it meet its growing energy needs.

He also hailed the partnership with Sinopec which he expects to "grow and expand into the 2050s."
Yousra Samaha, Dubai

BP Starts Tangguh LNG Train 3 Commissioning

BP has started the commissioning of its long-delayed $8.9 billion Tangguh LNG Train 3 in Indonesia.

The 3.8 million ton per year Train 3 is expected to start commercial operations in March 2023, Indonesia’s upstream regulator SKK Migas also told Energy Intelligence.

However, BP’s CEO Bernard Looney said in May that Train 3 is expected “to start up by the end of next year.”

The facility that will bring Tangguh’s production capacity to 11.4 million tons/yr was initially expected to come online in the third quarter of 2020, but the Covid-19 pandemic prompted significant delays in construction activities.

Tangguh’s Train 3 is one of BP’s key LNG projects that would help reduce current LNG market tightness although 74% of its production will be sold to Indonesia state-owned electric company PLN.

The remaining 26% is set to be exported to Japan’s power company Kansai Electric.

Tangguh is operated by BP (40.22%). Other partners include MI Berau (16.30%), CNOOC (13.90%), Nippon Oil Exploration (12.23%), KG Berau Petroleum (8.56%), KG Wiriagar Petroleum (1.44%) and Indonesia Natural Gas Resources Muturi Inc. (7.35%).

Recent BP Wins and Losses

In addition to the Tangguh LNG Train 3 commissioning this week, BP last week saw the first cargo leave Coral South LNG off Mozambique.

All of the LNG from the 3.4 million ton per year Coral South project is committed to BP under a 20-plus year contract.

However, a significant portion of BP's volumes from the 2.5 million ton per year Greater Tortue project off Senegal and Mauritania may be diverted by US independent Kosmos under a provision of its contract with BP.

Elsewhere, BP continues to bet on LNG exports from Trinidad despite upstream hurdles.
Marc Roussot, Singapore


Data Snapshot

LNG Netbacks at Key Receiving Terminals

LNG Exporter Netbacks Between Key Receiving Ports
($/MMBtu)AlgeriaAustralia WestAustralia EastMalaysiaNigeriaNorwayOmanPeruQatarRussiaTrinidadUS GulfUS East Coast
Dahej, India16.9217.7316.6017.8015.6215.4819.0114.0518.7716.7615.0214.2715.15
Sodegaura, Japan15.9319.3219.3419.6915.476.0518.2412.2817.9220.5613.7211.2316.13
Zeebrugge, Belgium29.8225.5124.2425.8428.4529.3527.6424.2927.2924.4228.6826.0028.93
Huelva, Spain-0.73-4.57-5.68-4.28-2.04-2.66-2.68-5.92-2.97-5.56-1.99-4.63-1.96
Isle of Grain, UK12.037.916.708.2010.8011.5710.256.759.636.8710.958.3911.18
Everett, US4.760.491.370.813.943.360.012.922.26-0.615.35----
Created with Highcharts 9.0.0($/MMBtu)QATAR TO NORTHEAST ASIANetbackNetback20. Jun4. Jul18. Jul1. Aug15. Aug29. Aug12. Sep26. Sep10. Oct24. Oct7. Nov21. Nov10203040506070Energy Intelligence

LNG Market Indicators

Spot LNG Pricing
Latest WGIDailyDaily Chg.Chg. From Latest WGI
NE Asia24.0021.54-0.03-2.46
SW Europe20.10------
Futures Pricing
($/MMBtu)Chg.LatestPreviousWeek Ago
Henry Hub, US (futures)0.476.786.305.93
NBP, UK (futures)-0.3031.9932.2932.45
European Spot Pricing
Chg.LatestPreviousWeek Ago
Dutch TTF--33.96--33.00
Zeebrugge (Belgium)--------
German NCG--32.35--31.64
NBP (UK)--13.26--11.89
US Markets
US Spot Prices
Sabine Pass, Louisiana0.186.256.076.15
Corpus Christi, Texas0.546.105.565.19
Cove Point, Maryland-1.676.558.226.31
Elba Island, Georgia--------
Nymex Henry Hub Futures
Near Month0.476.786.305.93
Second Mth0.517.226.726.30
Third Mth0.486.966.486.05
Created with Highcharts 9.0.0($/MMBtu)GLOBAL GAS PRICINGUS NymexDutch TTFNE AsiaDec '21Jan '22Feb '22Mar '22Apr '22May '22Jun '22Jul '22Aug '22Sep '22Oct '22Nov '220255075100125Energy Intelligence