Responding to the western sanctions on Russia for invading Ukraine, Qatar and Germany have agreed to an LNG (Liquified Natural Gas) supply agreement for a long period of 15 years which will start in 2026. LNG is natural gas that has been converted into a liquid. This is done to save space, because 610 cubic feet of natural gas can be converted into 1 cubic foot of LNG. Converting natural gas to LNG makes it easier to store and easier to transport when pipelines are not available. The refrigeration process is used to condense natural gas into LNG by cooling it to minus 260 degrees Fahrenheit. This cooling process is usually accompanied by a process of removing water, carbon dioxide, hydrogen sulfide and other impurities (Setiadi, 2017). Natural gas is an important part of the solution in the energy transition, especially as the world strives to eliminate energy-poverty. Energy demand growth over the next few decades will be substantial, and LNG supplies will be essential to meeting this demand.
In 29th November 2022, Qatar Energy and ConocoPhillips have signed an agreement to ship 2 million tons of LNG per year from Qatar to Germany from 2026. Qatar Energy is a state-owned public corporation responsible for all phases of the oil and gas industry in the State of Qatar. As a fully integrated energy corporation, they cover the full spectrum of the oil and gas value chain from exploration to production, from processing and refining to sales and delivery. As stewards of Qatar's natural resources and the world's largest provider of LNG, their strength rests in their ready access to Qatar's unique reserves to provide energy that fuels social and economic prosperity.
Meanwhile, ConocoPhillips Company is an American multinational energy company with its headquarters located in the Energy Corridor district of Houston, Texas in the United States. It is a pure exploration & production company as well as the world's largest independent player and also a Fortune 500 company. ConocoPhillips was created through the merger of Conoco Inc and Phillips Petroleum Company on August 30, 2002 and was the fifth largest oil company integrated until rotating off downstream assets to Phillips 66.
This company has a branch in Qatar, namely ConocoPhillips Qatar. In 2003, ConocoPhillips and Qatar Petroleum signed a Heads of Agreement to develop Qatargas 3, a large-scale liquefied natural gas (LNG) project in Ras Laffan Industrial City, Qatar. ConocoPhillips holds a 30 percent interest in this integrated project comprising approximately 1.4 gross BCFD of natural gas production over the 25 year life span of the project, as well as an initial average volume of approximately 70 gross MBPD of liquefied petroleum gas and condensate combined from Qatar's North field (ConocoPhillips, 2022)
His Excellency Saad Sherida Al-Kaabi, the Minister of State for Energy Affairs, and President and CEO of QatarEnergy, and Ryan Lance, chairman and chief executive officer of ConocoPhillips, signed the LNG sale and purchase agreements during a special ceremony held at QatarEnergy's headquarters in Doha in the presence of senior executives from both companies.
Saad al-Kaabi said the deal would provide Germany with 2 million tonnes of LNG annually, arriving from Ras Laffan in Qatar to an under-construction northern Germany's Brunsbuettel LNG terminal. "(The agreement) marks the first long-term LNG supply agreement to Germany, with a supply period extended for at least 15 years, thereby contributing to Germany's long-term energy security," Saad al-Kaabi said during a joint press conference with ConocoPhillips CEO Ryan Lance.
"By 2027, we estimate Germany's gas consumption will be around 73 bcm annually so this deal could cover around 3.7 percent of that," said Kaushal Ramesh, senior LNG analyst at Rystad Energy. "This is not unimportant volume and is a big step in diversifying supply," he added (CNN, 2022).
"QatarEnergy and ConocoPhillips are excited for the opportunity to responsibly and securely supply world markets with LNG from the Qatari expansion projects," said Ryan Lance. "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."
"This is the culmination of efforts between two trusted partners, QatarEnergy and ConocoPhillips, over many years, to provide reliable and credible LNG supply solutions to customers across the globe, and today, to German end-consumers," said His Excellency Minister Al-Kaabi. "Germany is the largest gas market in Europe, with significant demand in the industrial, power, and household sectors, and we are committed to contribute to the energy security of Germany and Europe at large."
Qatar's gas will not arrive early enough to help Germany avoid energy shortages this winter and, potentially, the winter after. At present, Germany is confident it can avoid power outages this winter but is less confident that it will have the reserves to avoid power cuts or rationing in 2023-24 (The Guardian, 2022)
Qatar Energy previously had clients in the Asian continent. However, the presence of new clients in Europe does not make them cut off supplies to Asia to be given to Europe. Qatar Energy CEO Saad Al-Kaabi said Qatar Energy is working to expand its gas production and trading operations as global demand soars.