The Gulf nation has produced less LNG in 2022 so far, despite Europe’s scramble for potential oil suppliers and its ensuing energy crisis.
Qatar’s production of liquified natural gas (LNG) has dropped this year, in spite of a surge of requests from European countries to secure Doha as an energy supplier as they move away from dependence on top supplier, Russia.
Europe receives 40% of its gas supplies from Russia and almost a third of those shipments pass through Ukraine. The region is juggling with an energy crisis as a result of a hike in oil prices caused by the Russian-Ukrainian conflict.
The decrease in the Gulf country’s LNG production is partially due to several liquefaction trains being unavailable due to scheduled maintenance, Bloomberg reported.
According to ship-tracking data compiled by Bloomberg, Doha exported less than 35 million tonnes of LNG between the months of January and May, which is down from last year’s 36 millions tonnes.
Qatar was the world’s biggest LNG producer in 2021, however Australia and the US exported more in May, according to Bloomberg.
Although Qatar’s exporting capacity does not level up to last year’s output, it is generating more income from sales. Most of Doha’s long-term contracts are linked to oil prices, which were about 60% higher in the first five months of this year, compared with 2021.
Qatar’s energy sector
According to a report by the World Bank in April, Qatar’s gross domestic product is estimated to increase to 4.9% in 2022, due to its boosted hydrocarbon exports of 10%.
The Gulf country is likely to witness an expansion in its hydrocarbon dependence as its North Field projects begin production. The multi-billion plan is the largest of its kind, and seeks to boost Qatar’s annual LNG production capacity from 77 million metric tonnes to 126 million tonnes by the year 2027.
The unforeseen economic ramifications unravelled by the Russian-Ukrainian War onto the world has particularly had a ‘positive’ effect on Qatar’s economy.
“The effects of the war in Ukraine on the commodity markets and of its associated economic sanctions are positive, on balance, for Qatar’s economy, the largest exporter of Liquid Natural Gas in the world,” the World Bank’s GCC Economic Update report stated.
The EU and Russian gas
With energy security becoming a looming international concern in recent months as the conflict persists between Moscow and Kyiv, European countries have introduced a series of sanctions targeting individuals, banks, businesses and major state-owned enterprises and exports, among others.
Oil prices will remain above $100 a barrel so long as the Russian-Ukrainian conflict continues to escalate, an Economist Intelligence Unit global outlook report said. The existing energy inflation further exacerbated by the conflict has caused oil prices to near a 100% gain, the highest level since 2008.
Some European countries are highly dependent on Russian gas supply which makes them worse off than their counterparts. In particular, Germany imports 42.6 billion cubic meters from Russia, while Italy imports 29.2.
The United States has banned all Russian oil and gas imports, while the UK will phase out Moscow oil imports by the end of this year.
As for Germany, it has paused plans for the opening of the offshore Nord Stream 2 gas pipeline from Russia, which runs under the Baltic Sea connected from Russia to Germany.
The EU has also said it aims to terminate Russian coal imports by August 2022.
Qatar’s stance on LNG supply to Europe
During Amir Sheikh Tamim bin Hamad Al Thani’s visit to the UK in late May, a Memorandum of Understanding was signed between QatarEnergy and the Department for Business, Energy and Industrial Strategy. The agreement is aimed at strengthening energy cooperation between the Gulf country and the UK.
The move is seen as a means of expanding cooperation in the fields of energy security, renewable energy, and decarbonisation.
Regarding Qatar’s role in potentially alleviating LNG supply concerns, Qatar’s Energy Minister Saad Sherida Al Kaabi on 24 May noted: “Unfortunately, it’s a little bit painful because it will take time [and the price is] amplified by the Ukraine issue,” he said.
“But we’re absolutely ready [to help]. The UK is a very important country for us in Europe, and we will definitely do our best.”
Qatar has the world’s third-biggest proven natural gas reserves, and is now one of the biggest providers of the fuel to the UK, shipping it in vast LNG tankers to Britain’s three LNG terminals.
During Sheikh Tamim’s visit to Berlin in May, the two countries agreed to expand their energy cooperation in a new signed declaration. The agreement focuses on LNG and hydrogen trade. It also entails arranging a Qatari-German working group that will meet regularly to develop trade of LNG and hydrogen.
Speaking to German news outlet, Handelsblatt, Qatar’s Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani said his country hopes to start sending gas from the US Golden Pass LNG plant in Texas, in which QatarEnergy holds a 70% stake, to Berlin in 2024.