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Liquefied natural gas (LNG) immediately became the world’s key emergency energy supply when Russia invaded Ukraine on 24 February 2022. Unlike oil or gas transported through pipelines, LNG does not require vast expense and years of building a complex infrastructure before it is ready to transport. On the contrary, it can be bought quickly and reliably either through short- or long-term contracts or in the spot market and then shipped anywhere within a matter of days. In the event of further major conflicts breaking out in the coming years as many expect, LNG’s importance will only increase further, as existing oil and gas land transportation routes involving Russia and China are unlikely to remain functional for long. Even without such a conflict, global demand for LNG is projected to increase by more than 50% by 2040, according to Shell. Before the U.S. became the world’s biggest exporter of LNG at the end of last year, Qatar had long held that position, only occasionally relinquishing the top spot to Australia. As it stands now, Qatar forecasts that it will more than double its current 77 million metric tonnes per annum (mtpa) production to 160 mtpa by 2030. By that time, the Emirate will account for at least 40% of all new LNG supplies across the globe. This makes it even more crucial to the U.S. and its allies and to China and its alliance.
Prior to 2022’s invasion of Ukraine by Russia, the pendulum of superpower influence in Qatar had swung in China’s favour. Information received around the time by OilPrice.com from impeccable security sources indicated that China had been broadly told by Russia of its plans for a ‘large-scale special operation’ in Ukraine months before it happened, not just prior to the 4 February 2022 start of the Beijing Winter Olympics, as many reports have it. This tallies with the commencement of multiple long-term deals for huge LNG supplies by China in March 2021, as analysed in full in my latest book on the new global oil market order. The first was the signing of a 10-year purchase and sales agreement by the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million mtpa of LNG. December 2021 saw another major long-term contract for Qatar to supply China with LNG, on that occasion a deal between QatarEnergy and Guangdong Energy Group Natural Gas Co for 1 million mtpa of LNG, starting in 2024 and ending in 2034, although it could be extended. And further deals followed aimed not only at safeguarding China from any immediate energy supply shocks in the event that Russian gas supplies were sanctioned after it invaded Ukraine but also at depriving the West of access to these Qatari LNG supplies into the bargain. It was little wonder, then, that both China and Russia were bullish enough about Moscow’s prospects before it launched its ‘special operation’ against Ukraine – and Beijing’s ability to benefit from it – that they issued a very carefully worded and equally carefully timed joint statement that their partnership had “no limits”. In retrospect, many commentators highlight this as the green light for Putin to go ahead with his plans for invading Ukraine. In fact, Beijing had signalled to Putin around a year before that it had no objection to what he was planning.
This does not necessarily mean that Qatar was decisively aligning itself for the long term with China and Russia. A small country in a precarious geographical position between the two great Middle Eastern powers (Saudi Arabia and Iran) and their principal superpower sponsors (the U.S. up until relatively recently, and China, respectively), it has long been compelled to play a delicate diplomatic balancing act between these respective parties. Instead, with LNG being its primary budget income generator, these huge deals with China – although they turned out to be enormously strategically beneficial to Beijing – were just business, as far as Doha was concerned. Ultimately in business, sellers will always finally align with the best offer available to them, and after Russia failed to secure its anticipated lightning capture of Ukraine, this turned out to be the U.S. and its allies. The end of March 2022 saw the first in a series of strategically crucial meetings for Washington and its allies with senior representatives from Qatar aimed at securing vital LNG supplies urgently for the West. They also signalled to China and Russia that the West was not going to allow them to get away unopposed with yet another land grab in Europe, following the 2014 forced annexation of Ukraine’s Crimea as ordered by Putin. Indeed, following one such meeting that month — between Qatar’s Emir, Sheikh Tamim bin Hamad Al Thani, German economy minister, Robert Habeck, and a representative presence by the U.S. – President Joe Biden reiterated his view of Qatar as a “major non-NATO ally”.
Several more business and political ‘carrots and sticks’ were laid out by the U.S. to Germany and Qatar designed to ensure that the 2022 invasion of Ukraine by Russia did not end up as consequence-free as its 2014 invasion of the country, as also detailed in my new book. May 2022 saw Qatar sign a declaration of intent on energy cooperation with Germany aimed at becoming its key supplier of LNG. These plans would run in parallel with, but were likely to be finished significantly sooner than, the plans for Qatar to also make available to Germany sizeable supplies of LNG from the Golden Pass terminal on the Gulf Coast of Texas. QatarEnergy holds a 70 percent stake in the project, with the U.S.’s ExxonMobil holding the remainder. Following on from these developments, December 2022 saw two sales and purchase agreements signed between QatarEnergy and the U.S.’s ConocoPhillips to export LNG to Germany for at least 15 years from 2026.
Looking ahead, 18 million mtpa of Qatar’s forecast 160 million mtpa of LNG output by 2030 will come from its share in the Golden Pass Project. The remainder is to come from the ongoing expansion of its part of the world’s biggest gas reservoir – the 6,000 square kilometre North Dome (or ‘North Field’) site. The other part is Iran’s 3,700 square kilometre South Pars section, which accounts for around 40% of the Islamic Republic’s total estimated 33.8 trillion cubic metres (tcm) of gas reserves and about 75% of its gas production. The inextricable relationship between Qatar and Iraq over this prize asset is another reason why Qatar is so strategically important to the U.S. and its allies. The Emirate’s cooperation with Iran to enhance the yield from its side of the reservoir provides major leverage over Iran, while doing nothing to help would have a significantly negative impact on Iran’s gas flows and finances from the site over time. For Qatar’s side, the remainder of the output boost is to come partly from its six major new developments in the North Field East (NFE) and North Field South (NFS) to the end of 2029. Four new ‘trains’ (production facilities) – each with 8 million metric tonnes per annum (mtpa) – will be built on the NFE site, and two (with the same production capacity) in the NFS site, totalling 48 million mtpa of new LNG production. Additionally, at the end of February, QatarEnergy announced another set of projects – focused on its North Field West (NFW) – that will increase its LNG output from the current 77 million mtpa to 142 million mtpa before the end of this decade. This compares to the 404 million mtpa of LNG traded globally in 2023 and to industry estimates that this figure will reach around 625-685 million mtpa in 2040. It is with an eye on these NFW sites that Qatar very recently announced that it will very shortly sign more long-term LNG supply deals to add to the 25 million tonnes of sales secured last year. With Trump entering a second presidential term on 20 January, these will provide an interesting marker as to how the U.S.’s long-term plans for Qatar will pan out in the next four years.
