German utilities reportedly near gas deal with Qatar

Belgium, (Brussels Morning Newspaper) German utilities Uniper and RWE are close to reaching agreements for long-term gas supply with Qatar.

Three sources familiar with the matter noted that the utilities are negotiating liquefied natural gas (LNG) supplies from Qatar’s North Field Expansion (NFE) project, according to Reuters reporting on Monday.

Sources noted that the two sides disagree on conditions including price and duration of supply contracts, but expressed belief that they will strike deals soon.

Germany is planning to wean itself off Russian gas imports in the coming years and deals with Qatar would not solve the country’s problem as the NFE project is expected to come online no sooner than 2026.

According to earlier reports, Germany was against committing to long-term deals and wanted to peg prices to the Dutch benchmark rather than oil.

According to one of the sources, negotiations between German utilities and Qatar are more constructive compared to a few months ago.

Deals on horizon

Another source added that utilities are now more open to 15-year supply deals and the third source predicted that agreements could be reached in the coming weeks.

Uniper pointed out on Monday that it was “currently working hard to diversify its sources of gas supply” and added that “Qatar also plays an important role in this.” RWE described negotiations as “good and constructive,” but did not provide any details.

German utilities currently buy Qatari LNG on the spot market. While RWE signed a supply agreement with Qatar in 2016, it expires in 2023.

German Chancellor Olaf Scholz is to visit the Persian Gulf region at the end of the week and, according to Minister of Economic Affairs and Climate Action Robert Habeck, he is to sign LNG agreements in the United Arab Emirates.

One source pointed out that German utilities are not likely to close deals during Scholz’s visit, noting that government officials usually negotiate broad agreements that lay the foundation for companies to finalise deals.

The NFE project includes investments in infrastructure that will up Qatar’s liquefaction capacity from the current 77 million tonnes annually to roughly 126 by 2027.Qatar is implementing the project worth nearly USD 30 billion in cooperation with international partners with the aim of consolidating its position as the largest LNG exporter.