QatarEnergy has signed a 27-year deal to supply China’s Sinopec with liquefied natural gas (LNG) in the longest such agreement to date, as volatility drives buyers to seek long-term supplies.
Since Russia’s invasion of Ukraine in February, competition for LNG has become intense, with Europe, in particular, needing vast amounts to help replace Russian pipeline gas that used to make up almost 40 percent of the continent’s imports.
European companies looking to buy LNG needed to look at how Asian buyers were approaching their own negotiations and were willing to lock into long-term deals, QatarEnergy chief Saad al-Kaabi told the Reuters news agency shortly before signing the Sinopec deal.
“Today is an important milestone for the first sales and purchase agreement (SPA) for North Field East project, it is 4 million tonnes for 27 years to Sinopec of China,” al-Kaabi said.
“It signifies long-term deals are here and important for both seller and buyer,” he said in an interview in Doha, adding that the deal was the LNG sector’s largest single sales and purchase agreement on record.
The North Field is part of the world’s biggest gas field that Qatar shares with Iran, which calls its share South Pars.
QatarEnergy earlier this year signed five deals for North Field East (NFE), the first and larger of the two-phase North Field expansion plan, which includes six LNG trains that will ramp up Qatar’s liquefaction capacity to 126 million tonnes per year by 2027 from 77 million.
It later signed contracts with three partners for North Field South (NFS), the second phase of the expansion.
Monday’s deal, confirmed by Sinopec, is the first supply deal to be announced for NFE.
“This takes our relationship to new heights as we have an SPA that will last into the 2050s,” al-Kaabi said.
“It sends a message that a lot of Asian buyers are actually approaching us to have a long-term deal because they see the volumes of gas that are coming in the future are less and less.”
Long-term supply
al-Kaabi said negotiations with other buyers in China and Europe who want to have supply security were ongoing.
Qatar is already the world’s top LNG exporter, and its North Field expansion project will boost that position and help guarantee long-term supplies of gas to Europe as the continent seeks alternatives to Russian flows.
“The recent volatility has driven buyers to understand the importance of having long-term supply that is fixed and that’s reasonably…