Energy Qatar trade patterns shift as UK fills gas shortfall By Andy Sambidge February 17, 2023 Reuters/Issei Kato The UK relies on more imports of Qatar liquefied natural gas (LNG) since its ban on Russian gas UK reported total trade deficit of £4bn with Qatar after 2021 surplusGas made up 90.3% of all imports from Qatar, worth £6.8bn The trade relationship between the UK and Qatar is being transformed as the Gulf state helps to fill a gap left by a British government ban on Russian gas imports following Vladimir Putin’s war in Ukraine. Latest figures from the UK’s Department for International Trade reveal a 196 percent increase in goods and services to more than £12 billion ($14.5 billion) in the year to the end of September last year compared to the year-earlier period. The soaring statistics were driven by UK imports from Qatar which rose to £8.1 billion, an increase of 443.5 percent or £6.6 billion compared to the four quarters to the end of Q3 2021. Qatar promise may trigger deluge of Gulf investments in UKNew deals aim to enhance UK-Qatar trade and investments Gas imports dominated bilateral trade as the British government pivoted to Qatar after stopping supplies from Russia. Gas made up 90.3 percent of all goods imported from Qatar, worth £6.8 billion, and experts predict that Qatar will remain a key partner to the UK going forward. As a result, the UK report a total trade deficit of £4 billion with Qatar, compared to a trade surplus of £1.1 billion in the year to the end of Q3 2021. Robin Mills, CEO of Qamar Energy and author of The Myth of the Oil Crisis, told AGBI: “Qatar is particularly significant in the UK because of its 70 percent ownership in the South Hook receiving terminal in Wales. Qatar is the largest gas exporter to the UK after Norway. “Qatar, as the world’s biggest LNG exporter, is certainly crucial for the UK’s and EU’s energy security. Its output won’t increase though until 2026-7, when its major expansion project starts coming into service, so there is not much more it can do in the interim to replace Russia. “There may also be more competition for Qatari exports this year, as prices have fallen, bringing back price-sensitive buyers such as India. Chinese demand is likely to increase with its post-Covid reopening,” he added. From January to November 2022, the UK imported 80.7 terawatt hours (twh) of liquefied natural gas (LNG) from Qatar, up from 62twh. Assuming the same pattern held for December, the UK increased the volume of imports by 30 percent but receipts soared by 443.5 percent after spot prices skyrocketed as a result of the Russian invasion of Ukraine, which prompted the UK and other parts of Europe to scramble for a deal with Qatar. Lautaro Zeka, oil & gas analyst at Fitch Solutions, said: “European LNG import needs will rise, although gas demand destruction amid the broader energy transition will help to temper this dependency. “Qatar will meet a part of this growth and may see some increase in its share of the import mix as a result. But the US will be by far the more important trade partner, in our view. “We expect more of contracted Qatari LNG to flow East to its preferred markets in Asia.” In November, Germany, which bought half of its gas from Russia before the war, struck a long-term gas deal with Qatar to ship up to 2 million tonnes of LNG per year from 2026. The government of Qatar, alongside ExxonMobil, is investing millions of pounds in the expansion of the South Hook LNG terminal in Milford Haven, as the UK becomes more dependent on shipments of LNG imported from abroad. Ahmed Helal, director of Global Counsel Mena, said: “As Qatar undergoes a historic expansion of LNG production and Europe seeks to bolster its energy security, Qatari natural gas will be an increasingly prominent component in the UK’s energy mix. “With the instability to global energy flows from the Russia-Ukraine conflict, the UK is now forced to count the costs of having shut down its key gas storage sites and increasing its reliance on ‘spot’ purchases of LNG.” He added that as Qatar expands its LNG output from around 80 million tonnes per annum (mtpa) to 126 mtpa by 2027, it will be vying with the US for supremacy in LNG exports. “Qatar’s record as a reliable supplier means that the UK will inevitably look to Qatar for securing the fuel it needs.” According to a House of Commons research briefing published last month, imports from Russia in 2021 made up 4 percent of gas used in the UK, 9 percent of oil and 27 percent of coal, worth a combined £4.5 billion. The UK government committed to ending imports of oil and coal from Russia by the end of 2022 and ending imports of gas “as soon as possible thereafter”. It legislated for a ban on Russian gas which started on January 1. In November, the ninth full month since Russia’s invasion, the UK imported £7 million of oil, but no coal or gas from Russia, the eighth month in a row with no Russian gas imports. Graham Freedman, principal analyst European gas and LNG at energy consultancy Wood Mackenzie, said: “The UK will be more reliant on LNG imports in future, so we should expect to see further strengthening of the ties [with Qatar].” However, it should be expected that any additional contracts between Qatar Energy and UK gas buyers would be done on a purely commercial basis without any favours from one to the other. “Supplies of LNG from Qatar to Europe and the UK will continue to be an important feature of gas supply going forward,” said Freedman. “The addition of numerous new regasification terminals in Europe, particularly Germany, will offer Qatar opportunities to market greater quantities in the future.” Last year, the UK and Qatar signed a Strategic Investment Partnership which will see the Gulf state invest up to £10 billion over the next five years in key sectors of the UK economy including fintech, zero emissions vehicles, life sciences and cyber security.