Qatar seals 27-year LNG deal with China as competition heats up

  • Talks with other Chinese and European buyers are ongoing – Al Kaabi
  • He says buyers may take up to 5% of the stock in an expansion
  • He says the deal indicates the importance of securing supply in the long term

DOHA (Reuters) – Qatar Energy has signed a 27-year deal to supply liquefied natural gas (LNG) to China’s Sinopec, the longest LNG agreement to date, as volatility prompts buyers to seek long-term supplies.

Since the Russian invasion of Ukraine in February, competition for LNG has intensified, with Europe in particular needing massive amounts to help replace Russian pipeline gas that made up nearly 40% of the continent’s imports.

The head of Qatar Energy, Saad Al-Kaabi, told Reuters, shortly before the Sinopec deal was signed, that European companies looking to buy LNG needed to look at how Asian buyers approached their own negotiations and were willing to make long-term deals.

“Today is a milestone in the first sale and purchase agreement (SPA) for the Northeast Field project, as it amounts to 4 million tons for a period of 27 years for the Chinese company Sinopec,” Al-Kaabi said.

“It indicates that there are long-term deals here that are important for both the seller and the buyer,” he said in an interview in Doha, adding that the deal was the largest recorded sale and purchase agreement in the LNG sector.

The North Field is part of the largest gas field in the world that Qatar shares with Iran, which calls its share South Pars.

Qatar Energy earlier this year signed five deals for the North East Field (NFE), the first and largest of a two-phase North Field expansion plan that includes six LNG trains that will increase Qatar’s liquefaction capacity to 126 million tons per year. By 2027. 77 million.

See also  Elon Musk says a lower-price Twitter deal is 'out of the question'

It later signed contracts with three partners in North South Field (NFS), the second phase of expansion.

Deal on Monday, confirmed by Sinopec (600028.SS)is the first announced supply transaction for non-financial entities.

“This takes our relationship to new heights as we have a health resort that will continue until 2050,” Al-Kaabi said.

“It sends the message that a lot of Asian buyers are already approaching us for a long-term deal because they see less and less gas volumes coming in the future.”

Long term supply

Kaabi said negotiations with other buyers in China and Europe who wanted to secure supplies were continuing.

Qatar is already the world’s largest exporter of liquefied natural gas, and the North Field expansion project will enhance that position and help ensure long-term supplies of the gas to Europe as the continent seeks alternatives to the Russian flows.

“The recent volatility has prompted buyers to understand the importance of having stable and affordable long-term supply over the long term,” Al-Kaabi said.

“There aren’t many projects that make a final investment decision, and the next two big pieces of LNG capacity that will come into the market are Golden Pass LNG that we’ve partnered with ExxonMobil in Texas and the next big piece if you’re going to do that is North Field. Field East and North South.” .

Al-Kaabi also said that there is a greater recognition globally that gas must be an essential part of any energy transition.

“The wind doesn’t blow all the time and the sun doesn’t shine all the time,” he said, adding that Qatari LNG is “a less carbon-intensive solution.”

See also  China meets with banks to discuss asset protection from US sanctions

Sinopec’s deal prices will be similar to other prices in the past that were related to crude oil.

“The way we price our deals with Asia is interconnected. We’ve done it this way in the past and that’s the mechanism we use going forward.”

The deal was signed on a freight basis, which means that Qatar Energy will provide the shipping and delivery of the LNG.

Al-Kaabi added that negotiations for a stake in the expansion project in the Gulf state are underway with several entities.

The supply contract is a key component of an integrated partnership in NFE, Sinopec said in a statement, indicating that it may participate in stake negotiations.

Al-Kaabi said Qatar Energy has retained a 75 percent stake overall in the expansion and may cede up to 5 percent of its stake to some buyers.

“Significant buyers who want a long-term commitment in large quantities want to see some of the benefits of the upstream business…so I think it’s an important win if you will and makes the partnership even more solid.”

Sources told Reuters in June that major Chinese national oil companies were in advanced talks with Qatar to invest in non-financial colleges.

(Reporting by Andrew Mills and Maha El Dahan). Additional reporting by Chen Aizhou; Editing by Jason Neely, Mark Potter and Alexander Smith

Our standards: Thomson Reuters Trust Principles.

Leave a Reply

Your email address will not be published.