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Germany inks Qatar LNG deal in move away from Russian gas

Germany has taken a significant step towards reducing its reliance on imports of Russian natural gas, with an agreement to purchase LNG from Qatar for at least the next 15 years. 

QatarEnergy, a state-owned company that operates Qatar’s oil and gas activities, announced on November 29 it had signed two long-term sale and purchase agreements with US-headquartered exploration and production giant ConocoPhillips. 

Under the agreements, Germany will receive up to two million tonnes per year of LNG, with deliveries expected to start in 2026.  

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Saad Sherida Al-Kaabi, Qatar’s energy minister and chief executive of QatarEnergy, hails the deal as “the first ever long-term LNG supply to Germany with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security”. 

“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,” Al-Kaabi adds. 

Deliveries will be to a terminal currently under construction in Brunsbüttel, situated on the river Elbe, north-west of Hamburg. 

The sellers are joint ventures established by QatarEnergy and ConocoPhillips – frequent collaborators in the Qatari energy market – while the buyer is a wholly owned subsidiary of ConocoPhillips. A spokesperson for the US company was unable to comment on any details regarding financing. 

Ryan Lance, chairman and chief executive of ConocoPhillips, adds that the agreements provide an “attractive” offtake solution for LNG “and position the joint ventures as reliable sources of LNG supply into Europe”. 

The agreements mark a significant moment in Germany’s attempts to source gas from non-Russian markets. 

International Energy Agency (IEA) data shows Germany imported nearly 43 billion cubic metres of natural gas from Russia in 2020, equivalent to around two-thirds of the country’s gas imports.  

It is by far Europe’s largest gas importer; the next-largest buyer of Russian gas in 2020 was Italy, with imports totalling 29 billion cubic metres, the IEA says. 

The fallout of Russia’s war in Ukraine has severely disrupted those flows, however, with Germany’s gas market becoming a pawn in the battle between eastern and western powers. 

In February, German Vice-Chancellor Robert Habeck said German gas storage facilities operated by Russian state-owned energy giant Gazprom had been emptied over the winter, and that the company was “systematically holding back gas deliveries”. 

The German Economic Institute estimates that as much as a quarter of Germany’s gas reserves are run directly or indirectly by Gazprom-linked entities. 

More recently, the Nord Stream 1 natural gas pipeline – which has historically supplied large volumes of gas to Germany – sustained damage from seemingly deliberate explosions four weeks later. It had been closed indefinitely by Gazprom around four weeks earlier. 

The EU has already significantly reduced its imports of Russian gas this year.  

The completion of construction of another pipeline, Nord Stream 2, was blocked by German officials in February as a retaliatory measure following Russia’s invasion. Nord Stream 2 also sustained damage from explosions during the same incident. 

Data from think tank Bruegel shows that since mid-September, the EU and UK have together imported less than 600 million cubic metres per week from Russia, compared to between 2 and 3 billion cubic metres over the same period last year. 

European imports of LNG, meanwhile, are 40-50% higher than this time in 2021.  

US exporters have reaped the rewards so far, reporting huge increases in LNG sales to European buyers. 

Speaking to Reuters, Kaushal Ramesh, senior LNG analyst at Rystad Energy, called the Germany-Qatar deal a “big step” in moving away from Russian gas, adding that by 2027 it could cover a “not inconsequential” 3.7% of Germany’s projected gas consumption of 73 billion cubic metres per year. 

German minister Habeck told reporters in Berlin that the 15-year term of the deal is “great”, and that he would not have opposed contracts for 20 or more years. 

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