Germany and Qatar: gas geopolitics, hydrogen and… football

Posted on June 13, 2022



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An article on Conflicts

On May 20, 2022, the Emperor of Qatar, Tamim bin Hamad al-Thani, was warmly welcomed during his state visit to Berlin. Germany who demanded gas could not do less when we learned that the day Vladimir Putin announced the recognition of the pro-Russian republics of Donbass, Qatar had made it known that it had obligations with clients in Asia and that there would not be enough gas to meet the demand of the EU member states. The country exports at its maximum, so demand in Asia is strong.

A statement of intent has been signed for a strengthened cooperation in liquefied natural gas (GNL), but the hardest remains to be done. We have to negotiate the terms of the contracts that will allow Qatar Gas (a joint venture between Qatar Energy and ExxonMobil) to deliver this gas. But that obviously doesn’t bother me. Qatar did not attend the guerre in Ukraine for preparing to augmenter GNL production at the partir du champ géant Nord Dôme, and at golfe Persique. French Technip Energies and Japanese Chiyoda won in February 2021 a $ 13 billion contract to build four liquefaction trains that will increase Qatar’s production capacity by 43 %. This could lead to deliveries to Germany, but not before 2026, or even 2027.

Sale of GNL

Qatar Petroleum holds 70 % to ExxonMobil 30 % of a $ 10 billion project to develop the Golden Pass gas terminal in Port Sabine, Louisiana, to export 24 billion mA per year of gas. Schiste produced in Texas. The first of GNL’s three production trains is expected to start by the end of 2024. This should only be by default in Germany, as it would like to be released as soon as possible from the bridge it has built. It should be noted that this project started in 2016, at a time when in Germany there is only talk of EnergyWende. Fortunately, real industrial strategies do not survive in the world of utopia.

But investing large amounts of money does not go without market guarantees. When the international gas trade developed in the early 1980s, in order to ensure the reimbursement of the billions of investments required in the construction of thousands of kilometers of gas (starting from Norway, Algeria, Russia or the United Kingdom- Uni), the banks must be willing to take the risk. They demanded that the contracts include a dito clause take-or-pay which obliges the customer to take the contractual quantities or at least to pay even if they do not choose, the price being indexed on the basis of various parameters (originally, it was mainly the price of oil) . In addition, this commitment had to last a sufficiently long period to guarantee reimbursement of loans. These “long -term” contracts have a term of 20 to 25 years. Russia has always maintained such contracts, especially with France, Germany and Italy. D’ailleurs, Gaz de France (GDF, aujourd’hui Engie) announced in a reference document in 2005 that it had ensured its supply thanks to these long -term contracts. In 2006, the gas supply contracts concluded by GDF with Gazprom were renewed until 2030. This is also one of the reasons why gas continues to flow from Russia.

FIGURE 1 EXTRACT FROM PAGE 19 OF THE 2005 GDF REFERENCE DOCUMENT

As the GNL developed, it was thought that the market would be less rigid given the abundance of gas in the world. The competition has led to a growing evolution towards a spot market.

The question of price

But the new situation creates a panic that allows sellers to be more demanding. No one is going to invest tens of billions if there is no market guarantee. So we are back to the old system. If Germany wants to get rid of Russian gas (it remains to be seen how it will free existing contracts), it will have to engage with Qatar and its competitors to buy it for 20 years at a fixed price, even if it is indexed. Of course, Qatar and ExxonMobil do not provide service for all Germans who detect nuclear and fossil energies. The price will be higher, even more than that of Russian gas. The Italian expression “cocufié et matraqué” fits perfectly in this situation.

In order not to completely lose face, the Minister of Economy Robert Habeck (Verts) mentioned what I qualify as hydrogen utopia and climate protection; one can ask what the emir thought. Chancellor Olaf Scholz was interested in the fate of the workers who are building the infrastructures for the next football World Cup and – in the sense of diplomacy interested – he acknowledged the “progress”. He also raised the question of the right of homosexuals to travel to Qatar to attend matches. The emir warned that everyone was welcome, but “We expect and want people to respect our culture.”

The emperor, Olaf Scholz, immediately flew to Senegal and other African countries to prepare for the importation of fossil fuels. Senegal has unused gas reserves, as do many other African countries. But Senegal is, however, not on the radar of energy geopolitics: the best references do not give any figures on reserves, even if the Great Turtle Ahmeyin project is underway and should go into production in 2023. However, this project offshoreon horseback in Senegal and Mauritania will produce essentially for the enormous needs of these two countries. The liquefaction plant will have a capacity of 3.5 billion mA per year (2% of European gas imports from Russia). Of course, Germany will have to wait before it can benefit from this gas. But it is important to point out that a deprived Germany will be obliged to import natural gas at an elevated price for a long time.

Germany refuses to acknowledge its blindness when its EnergieWende is a total failure of an economic and geopolitical point of view. The federal government even opposes the nuclear taxonomy, while a compromise has been difficult to find between member states. It is regrettable that the European Commission, led by the German Ursula von der Leyen, insists on following the EnergyWende with its REPowerEU communication. Meanwhile, Qatar and the oil companies are managing the geopolitics of energy.

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