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Qatar Secures Second Major Gas Supply Deal with China, Strengthening Asian Market Dominance

2023

In a move that solidifies Asia's lead in securing gas supplies from Qatar's expansive production project, Qatar has signed its second significant gas supply agreement with a Chinese state-controlled company within a year. China National Petroleum Corporation (CNPC) and QatarEnergy have entered a 27-year agreement, under which China will purchase 4 million metric tons of liquefied natural gas (LNG) annually from Qatar.

As part of the deal, CNPC will also acquire an equity stake in the eastern expansion of Qatar's North Field LNG project, according to QatarEnergy's CEO, Saad al-Kaabi. The stake represents 5% of one LNG train, which has a capacity of 8 million metric tons per year.

Kaabi emphasized the importance of the agreement, stating, "Today we are signing two agreements that will further enhance our strong relations with one of the most important gas markets in the world and a key market for Qatari energy products."

This agreement mirrors a similar deal struck by QatarEnergy with China's Sinopec in November, in which Sinopec committed to purchasing 4 million metric tons of LNG annually for 27 years. Sinopec also acquired a 5% equity stake in one LNG train with a capacity of 8 million metric tons per year.

Asia has emerged as a frontrunner in securing long-term supply agreements, surpassing Europe in the race to secure gas supplies from Qatar's two-phase expansion plan. By 2027, Qatar aims to increase its liquefaction capacity to 126 million metric tons per year, up from the current 77 million.

This latest deal marks QatarEnergy's third agreement to supply LNG from the expansion to an Asian buyer. Additionally, Kaabi revealed that other Asian buyers are in discussions for equity stakes in the expansion.

Qatar, known as the world's leading LNG exporter, has witnessed heightened competition for LNG since the beginning of the conflict in Ukraine, particularly from Europe, which seeks alternatives to replace Russian pipeline gas that accounted for nearly 40% of its imports.

CNPC's near-finalized deal with QatarEnergy was expected, with earlier reports suggesting a purchase of LNG over nearly 30 years from the North Field expansion project. QatarEnergy had previously expressed its willingness to offer up to 5% stakes in the gas trains associated with the expansion to "value-added partners."

China's Sinopec became the first Asian energy company to become a "value-added" partner in the project in April. QatarEnergy has also formed equity partnerships on the project with international oil companies, while maintaining a 75% stake in the North Field expansion, which is estimated to cost at least $30 billion, including the construction of liquefaction export facilities.

With strained relations between Beijing, the United States, and Australia, which are Qatar's major LNG export rivals, Chinese national energy firms perceive Qatar as a more secure investment destination for resources.

The Qatar Investment Authority (QIA), the country's $445 billion sovereign wealth fund, will manage a significant portion of the revenues generated from the North Field expansion, ensuring the well-being of the Qatari people and residents of Qatar, according to Kaabi.

The latest gas supply agreement between Qatar and China further solidifies Qatar's role as a leading global LNG supplier, while bolstering the Asian market's dominance in securing Qatari gas supplies for the future.

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