Qatar’s energy minister has warned that while Europe should have enough gas for power and heating this winter, the biggest challenge will come in 2023 as reserves run out.
Saad al-Kaabi said “it will be very bad next year” if there is a severe winter, adding that the energy crisis could extend to the middle of the decade if President Vladimir Putin’s war in Ukraine continues and gas “does not start coming back again” from Russia.
“This coming winter, because the storage is full, it’s good,” said Kaabi, head of the QatarEnergy gas company. “Really filling the reserves, or the storage space, next year will be an issue.
“As for . . . Next year and the year after that, until 2025, it will be an issue. “
Several European countries are holding talks with Qatar, the country’s biggest exporter of liquefied natural gas, as it seeks to wean itself off Russian fossil fuels. But Kaabi warned that he cannot imagine a future where “no Russian gas” goes to Europe.
“If that’s the case, I think the problem is going to be big and long,” he said. “You don’t have enough voice [in] to replace that gas for a long time, unless you say ‘I’m going to build a big nuclear plant [plants]I’m going to allow coal, I’m going to burn gasoline.’”
Russia supplied about 155bn cubic meters of natural gas to EU countries last year, about 40 percent of total gas consumption. Brussels hopes to reduce that dependence by increasing pipeline supplies from countries such as Algeria and Norway, as well as significantly increasing LNG sales from further afield.
However, returning all of Russia’s gas to Europe would require 112mn tons of LNG per year, equivalent to a third of today’s entire market, according to Bernstein Research.
Qatar, which supplies 70 percent of its LNG to Asian customers under long-term fixed contracts, said it would only be able to divert 10-15 percent of current production to Europe until new projects come online.
But Kaabi said no new, large-scale gas projects will begin production until 2025, when QatarEnergy’s Golden Pass joint venture with ExxonMobil is expected to add 16 million tons of LNG a year to the market.
Qatar is also spending nearly $30 billion to expand the North Field, the world’s largest natural gas field, to increase its annual LNG production capacity from 77mn tons to 126mn tons by 2027.
The UK opened talks with Qatar almost a year ago for the Gulf country to be the “donor of last resort”. Kaabi, who met with UK energy secretary Jacob Rees-Mogg this month, said the two countries were “engaging more” but added it was difficult to say when an agreement would be reached.
“We are very committed to the UK and eventually we will get to a point where we can support the UK,” he said. “We will be a major player in supporting the UK for a long time for sure.”
Qatar signed an interim agreement with Germany in March, but those talks have been marred by disagreements over the length of the contract. Doha is also in talks with France, Spain, Italy, Belgium, Poland and Slovakia about increasing exports.
QatarEnergy prefers to sell its gas through long-term contracts, which it offers as it invests billions of dollars in energy infrastructure. Qatar’s government-affiliated buyers in Asia agreed to offer contracts for 15 to 20 years.
Kaabi said the main issue affecting Qatar’s negotiations with European countries was related to the challenges faced by governments in working on a better way to buy gas through permanent contracts where energy companies are privately owned.
He also warned that Europe should “get out of the argument that gas is not needed for a long time”, referring to the hope that the continent can move away from fossil fuels and switch to renewable sources.
“Because everyone who will invest in the gas sector, they look at 25, 30, 40-year horizons to invest and get a good return on investment,” he said. “If governments are not going to support that, it will be difficult for investors to come in.”
Kaabi added that European negotiations for Qatari gas have created “great competition” with Asian traders looking to lock in long-term supplies as Qatar expands its output.
“Because of this attraction, Europe needs more gas. . . Asian buyers are looking at one thing and saying ‘hold on, we need to be able to secure our future development needs,’ he said. “We are talking to almost all Asian buyers where they are seriously trying to close deals.”
LNG prices have risen globally since Russia invaded Ukraine. Benchmark prices in northern Asia hit 70 million British thermal units (mmbtu) in August, more than double the price earlier in the year. TTF, the European benchmark for pipeline gas and LNG, reached €311 per megawatt hour ($88.5/mmbtu) in August, an increase of about 250 percent compared to the beginning of the year. Prices fell in Europe and Asia due to cooler weather and European gas reserves reaching full capacity.
Additional reporting by Shotaro Tani in London