Qatar Energy signed a 27-year agreement to supply China’s Sinopec with liquefied natural gas, the longest of its kind in the history of liquefied natural gas deals so far, as market volatility prompts buyers to seek long-term deals.
Competition for liquefied natural gas intensified after the Russian invasion of Ukraine in February, with Europe in particular needing huge quantities to help replace gas coming from a Russian pipeline, which accounted for about 40 percent of the continent’s imports.
Saad Al-Kaabi, CEO of Qatar Energy, said in an interview with Reuters in Doha, shortly before the signing of the agreement, “Today is a milestone in the first sale and purchase agreement for the Northeast Field project, amounting to four million tons for a period of 27 years, for the Chinese company Sinopec.”
He added that it indicates that “long-term deals exist and are important to both the seller and the buyer,” and that the deal is “the largest sale and purchase agreement in the LNG sector ever.”
The North Field is part of the largest gas field in the world that Qatar shares with Iran, which calls its share the South Pars field.
Earlier this year, Qatar Energy signed five deals for the North East Field, which represents the first and largest phase of a two-stage North Field expansion plan that includes six LNG trains (liquefaction and refining facilities) that will increase Qatar’s liquefaction capacity from 77 million tons. to 126 million tons annually by 2027.
It also later signed contracts with three partners for the North South Field, which is the second phase of the expansion.
Monday’s deal, confirmed by Sinopec, is the first announced supply deal from the Northeast field.
“This (the agreement) takes our relationship to new heights, with a sale and purchase agreement that will last until the fifties of this century,” Al-Kaabi said.
He added that the agreement “sends a message that many Asian buyers are contacting us to obtain long-term (supply) agreements because they see that the quantities of gas are declining in the future.”
Kaabi said he was negotiating with other buyers in China and Europe who wanted to secure supplies.
Qatar is already the world’s largest exporter of liquefied natural gas, and the North Field expansion project will boost its position and help ensure long-term supplies of gas to Europe, which is seeking alternatives to Russian gas.
Sinopec said in a statement that the supply contract is a key component of an integrated partnership in the Northeast field, noting that it may participate in negotiations to obtain a stake.
Sources told Reuters in June that China’s major national oil companies were in an advanced stage of talks with Qatar to invest in the Northeast field.