Qatar is firming up another huge long-term deal to supply liquefied natural gas to China.
Under the latest deal, Qatar is set to supply China with 4 million tons of LNG per year over the course of 27 years.
CNPC will also take a 5 percent equity stake of one LNG train of QatarEnergy’s North Field Expansion gas project.
With Saudi Arabia on one side of it and Iran on the other, Qatar had for a long time to play a delicate diplomatic balancing act between the two great Middle Eastern powers and their principal superpower sponsors. In Saudi Arabia’s case, its key superpower backer for decades was the U.S., of course, and in Iran’s case over the same period it was Russia and then China as well. Following the recent landmark relationship resumption deal between Saudi Arabia and Iran, brokered by China, analysed in depth in my new book on the new global oil market order, there have been fears in Washington that Qatar might slip firmly as well into the China-Russia sphere of influence. This would jeopardise the informal understanding reached between the U.S. and Qatar after Russia’s invasion of Ukraine in February 2022, which was that Qatar would continue to provide the West with vital new supplies of gas to substitute those lost from Russia. According to sources close to the U.S.’s and European Union’s energy security complexes spoken to exclusively by OilPrice.com last week, Qatar is firming up another huge long-term deal to supply liquefied natural gas to China.
The latest deal involves two parts. The first is a 27-year agreement for Qatar – the world’s largest exporter of LNG – to supply China (in the shape of the China’s National Petroleum Corporation, CNPC) with 4 million tons of LNG per year. The second is an agreement for CNPC to also take a 5 percent equity stake of one LNG train of QatarEnergy’s North Field Expansion gas project. On the first part, as also analysed in depth in my new book, from just over one year before Russia’s invasion of Ukraine, China had been engaged in a flurry of activity to expand its sources and methods of gas supply. This began in earnest with Qatar in March 2021 when a 10-year purchase and sales agreement was signed between the China Petroleum & Chemical Corp (Sinopec) and Qatar Petroleum (QP) for 2 million tonnes per annum (mtpa) of LNG. December 2021 saw another major long-term contract for Qatar to supply China with LNG
Such sizeable and long-term LNG deals with Qatar have three critical advantages for China. First, they are vital to securing access to the world’s swing gas supplies. Second, the global gas and oil market being a ‘zero sum game’ as it is, such access for China from the world’s biggest supplier of LNG means reduced access to these supplies for Europe. And third, it means China’s control over the world’s largest gas resource is strengthened. This is because Qatar’s North Field (on ‘North Dome) is one half of this huge gas reserve, which holds an estimated 1,800 trillion cubic feet (51 trillion cubic metres) of non-associated natural gas and at least 50 billion barrels of natural gas condensates. The other half is Iran’s South Pars gas field. And China took effective control of this, along with the rest of Iran’s gas and oil sector, back in 2018 through the ‘Iran-China 25-Year Comprehensive Cooperation Agreement’.