Germany and Qatar ‘at odds over LNG deals’

Germany and Qatar’s talks over liquefied natural gas supply deals have run into difficulties, according to three sources familiar with the negotiations.

Berlin needs to secure large volumes of LNG to reduce its dependence on Russian gas, but sources said the Germans were reluctant to accept Qatar’s condition that they sign deals lasting at least 20 years.

Qatar, the world’s largest LNG supplier, also wants a destination clause that would prevent Berlin from rerouting the gas to other parts of Europe – a condition that is opposed by the European Union.

The tough talks between Qatar Energy and German utilities highlight the challenges the EU faces in its ambition to diversify from Russian gas, as well as the German government’s struggles to balance any deals with its aim of cutting carbon emissions by 88 percent by 2040.

Germany consumes around 100 billion cubic meters of natural gas each year, with around 55 percent of that coming from Russia and smaller volumes piped from the Netherlands and Norway.

It has backed the construction of two LNG terminals and has rented four floating storage and regasification units as a stop-gap measure. What it needs now is the actual gas.

“The issue of LNG contract length potentially putting Germany’s decarbonisation targets at risk is part of the ongoing discussions with Qatar,” one of the sources said, adding that Germany was also competing with other nations for Qatari LNG.

Another source said securing LNG supplies from Qatar “is not expected to happen soon”.

Qatar’s government communication office declined to comment on the negotiations. Germany’s economy minister was not immediately available for comment.

Qatar is also firm on oil-indexation – linking the contracts to oil price – while the Germans are seeking link to the Dutch TTF benchmark, said Felix Booth, head of LNG at energy intelligence firm Vortexa.

“Qatar is in the driving seat in these discussions, with a new project underway, strong interest in their volumes and a long history as a reliable supplier,” he said.

“To secure this supply, it is expected that the German team will need to accept a traditional oil-linked pricing structure, leaving the European buyer with significant financial exposure compared to the European hub prices,” he added.

Another round of talks in May

Robert Habeck, Germany’s economy minister, visited Qatar in March, along with officials from German utilities RWE and Uniper, to discuss procuring additional volumes but no deal has been agreed so far.

RWE, Germany’s largest power producer, struck a deal with Qatargas, a unit of Qatar Energy, in 2016. Under this agreement, up to 1.1 million tonnes of liquefied natural gas will be delivered to northwestern Europe annually by the end of 2023.

RWE declined to comment on the talks. Uniper also declined to comment, saying only that its ties with Qatar go back a long way and that it hoped to be able to build on that relationship.

German gas companies will return to Qatar in May to resume talks, according to two people familiar with the process.

They said the 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 the LNG deals will be concluded, as the partnership is aimed at paving the way to ramp up long-term Qatari LNG deliveries to Germany, they added.

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

Germany hopes for a possible two-way partnership with Qatar where German companies such as Siemens Energy and others could help Doha with the sustainability plan it launched late last year.

“There needs to be a gentlemen’s agreement between the Qataris and German companies that LNG should only be the first step in a longer collaboration between the two countries,” said a German industry source.