The backstage is tough as Germany tries to get rid of its dependence on Russian gas

Basic difference

VirtueQatar is at odds over the terms of its long-term LNG supply deal negotiations amid differences on key conditions, including the duration of any contracts, three sources told Reuters. .

Germany, which aims to cut its carbon emissions by 88% by 2040, is reluctant to commit to Qatar conditions to sign agreements lasting at least 20 years to secure the huge volumes of LNG that the country produces. needed to reduce dependence on Russian gas, the source said.

Qatar, the world’s largest LNG supplier, is also specifying terms, for example a destination clause that could prevent Berlin from rerouting gas to other parts of Europe. This is a provision that the European Union (EU) opposes.

The tough negotiations between Qatar Energy and Germany highlight the challenges facing the EU in its ambition to diversify away from dependence on Russian gas. In this effort, with any deal, Germany must focus on balancing the terms with its carbon reduction target.

Germany consumes about 100 billion cubic meters of gas annually, with about 55% of that coming from Russia and smaller amounts coming from the Netherlands and Norway.

Germany has supported the construction of two LNG depots and has leased four FSRU systems for the transportation and storage of liquefied natural gas (LNG) in vacancy measures.

“The issue of potential LNG contract durations putting Germany’s decarbonization targets at risk is part of ongoing discussions with Qatar,” the source said, noting that Germany is also competing with other countries. other countries on the purchase of LNG from Qatar.

Another source said securing LNG supplies from Qatar was “not expected anytime soon”.

Qatar insists on oil-indexation in relation to the pricing structure of the option to sell oil to Asia while Germany looks for a link to the Dutch TTF benchmark, said Felix Booth, head. on LNG at energy information company Vortexa, revealed.

“Qatar is at the forefront of this discussion, with a new project underway, a strong interest in output and a long-standing reliable supplier,” he noted. To secure supplies from Qatar, Germany is expected to accept a pricing structure that exposes the country to significant financial risk relative to the prices it desires.

There is reciprocity

In March, German Economy Minister Robert Habeck visited Qatar, along with officials from German companies RWE and Uniper to discuss further purchases of liquefied natural gas, but no agreement has been reached so far.

In 2016, RWE, Germany’s largest electricity producer, signed an agreement with Qatargas, a subsidiary of Qatar Energy, to supply 1.1 million tonnes of liquefied natural gas to the northwest a year. Europe before the end of 2023.

German gas companies will return to Qatar in May to resume negotiations, two sources familiar with the negotiations revealed. The source also said that Emir of Qatar Sheikh Tamim bin Hamad Al Thani will visit Germany in the second half of May to sign a partnership agreement between the two countries.

However, this does not mean that long-term LNG contracts will be concluded as this partnership is intended to pave the way to significantly increase the long-term LNG supply from Qatar to Germany.

Qatar’s sovereign wealth fund, QIA, has about $20 billion in investments in Germany, with stakes in Volkswagen and Deutsche Bank.

Germany hopes to have a two-way partnership with Qatar, where German companies such as Siemens Energy and others can help Doha’s efforts to implement a sustainability plan launched late last year. .

“There should be an informal agreement between Qatar and the German companies, that LNG should only be the first step in a longer-term cooperation between the two countries,” said an industry source. German energy speak.