Gulf State of Qatar to Become a Major Supplier of Energy to Europe

by Wall Street Rebel - Michael London | 12/09/2022 9:28 AM
Gulf State of Qatar to Become a Major Supplier of Energy to Europe

There is no country better situated than Qatar to take advantage of the current scenario in Europe. Unlike Qatar, its regional rivals either lack the infrastructure to produce the necessary quantities, as is the case in Nigeria and Algeria or are unable to overcome political obstacles, as is the case in Iran and Libya.


Energy markets throughout the world have been rocked by Russia's conflict in Ukraine, causing a shortage of natural gas in Europe, a rise in the price of fossil fuels generally, and the possibility of a worldwide economic downturn.

But one nation has used the chaos to its advantage, both economically and politically, and that is Qatar.

Since the 1990s, Qatar has been a major supplier of liquefied natural gas to Asian nations. Now, as Europe seeks to diversify its energy sources away from Russia, Qatar stands to play a pivotal role. And as Qatar becomes closer to China, Russian aspirations of rerouting much of the energy Europe no longer buys to Asia are dashed.

Many professionals in the energy industry have compared Qatar to Saudi Arabia in terms of natural gas, praising the country for its growing importance as a reliable fuel supplier because of its large reserves and low prices. Because many nations are reducing their use of fossil fuels due to climate change, Qatar will be able to sell natural gas for longer and more economically than other large exporters like Australia and Russia.

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U.S. export terminal expansion is proceeding at a slow clip, partly because large investors are warier of putting money into fossil fuels than they were a few years ago due to climate change fears. Liquefied natural gas is fuel that is super cooled and carried on tankers, and Qatar, along with Australia and the United States, are almost tied as the major producers. Some of Australia's older fields are already showing signs of deterioration, and experts think the country's exports have likely peaked.

Russia is also a significant gas exporter, with the majority of its supply going to Europe via pipelines. Since Russia invaded Ukraine in February, shipments have dropped to a trickle.

Qatar, a monarchy in the Middle East with a population of little over 3 million, is now in a commanding position. To raise export capacity by more than a third by 2026, the nation began construction on four massive new manufacturing and export facilities last year. As revealed by authorities, two more terminals are set to be constructed later this decade. At the end of this decade, the nation will be able to generate 126 million tons of liquid natural gas annually, an increase of more than 60 percent over the current level.

The United States presently has a somewhat higher export capacity than Qatar; however, shipments have suffered in recent months due to an explosion that occurred at an export terminal in Texas. The ability of the United States to export goods is forecast to grow by around 40 percent by the year 2026.

Qatar is a major exporter of petroleum products. According to Chakib Khelil, a former president of the Organization of the Petroleum Exporting Countries and a former energy minister of Algeria, "Qatar is in a better position than anybody else to take advantage of the situation in Europe." "Qatar's rivals are either barred by political difficulties like Iran and Libya or, like Nigeria and Algeria, don't have the resources to offer the extra volumes that are required," Qatar says. "Iran and Libya" are two examples of countries with political problems.

Even while much of the globe is working to reduce greenhouse gas emissions, Qatar is placing its bets that the market for liquefied natural gas, often known as L.N.G., will continue to rise. This is due to the fact that many political officials and energy experts feel the fuel is necessary both as a substitute for coal and as a backup for solar and wind energy, all of which may have their output curtailed by adverse weather conditions.

While the Obama administration advocated for a more rapid shift to renewable energy sources, the Biden administration welcomed Qatar. President Biden said in January at the White House before meeting with the leader of Qatar, Sheikh Tamim bin Hamad al-Thani, that both nations wanted to "ensure the stability of global energy supply."

The government gave the go-ahead for a $1 billion weapons deal to Qatar last month. "The Biden administration appears to recognize Qatar's participation in the gas market," said Dania Thafer, executive director of the Gulf International Forum in Washington, DC.

In addition to hosting the World Cup, Qatar has risen to regional prominence as a result of its gas wealth in North Africa and the Persian Gulf. Supported by the government of Qatar, Al Jazeera has spread the country's influence and offered a platform to dissidents across the Middle East.

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Several prominent European politicians, including German Chancellor Olaf Scholz and European Council President Charles Michel, have visited Doha, Qatar's capital, this year to negotiate for more energy supplies despite Western worries over Qatar's human rights record.

The value of the nation's energy exports, of which natural gas is by far the most significant component, increased by a factor of two from the previous summer to reach a total of $9.2 billion in August of this year. Qatar is on track to beat its record for yearly export earnings, which it achieved in 2013 before booming U.S. gas exports dropped gas prices. The record was set before booming U.S. gas exports depressed gas prices.

In addition to operating its vast domestic offshore gas field, the state-owned corporation Qatar Energy has been extending its operations throughout the globe by making investments in countries such as Brazil, Suriname, Angola, South Africa, and other places. It has collaborated with Exxon Mobil to construct a liquefied natural gas export facility in Louisiana, which is scheduled to become operational in 2024. Gas is also being produced at a field off the coast of Egypt by Qatar Energy and Exxon, and the companies are conducting gas exploration in Cyprus.

A recent agreement between Israel and Lebanon over the maritime boundary has made it feasible for Qatar Energy, Total Energies of France, and Eni of Italy to collaborate on a project in the Lebanese seas. This project was made possible as a result of the agreement.

In the last several weeks, Qatar Energy has reached an agreement with Chevron Phillips Chemical to construct an $8.5 billion plastic factory in Texas, and they have also signed an agreement to provide Germany with gas for the next 15 years.

Because Germany and other European countries have been hesitant to sign such long-term contracts out of the fear of being locked into using fossil fuels for an excessively long period of time, given the ambitious plans that the European Union has to address climate change, the deal with Germany represented a significant victory for Qatar. However, since global gas supplies are constrained, and Europe urgently needs to replace energy supplied by Russia, the authorities of Germany may have had no alternative but to agree to a contract with Qatar that is 15 years long.

Germany will have greater energy security due to Qatar's commitment to delivering two million tons of gas annually. Even still, Germany will only get a very tiny portion of the gas that Russia has historically provided since Qatari gas will not begin arriving until 2026. Additionally, Germany is pursuing business relationships with other manufacturers, such as the United Arab Emirates.

In addition to that agreement, Qatar just sealed a contract to provide natural gas to China for an unprecedentedly lengthy period of 27 years, making it the longest agreement ever documented. This arrangement, for around four million tons of gas per year, will ensure that Qatar will have a market for a significant portion of the extra gas it anticipates producing once its new terminals are finished.

Already, Qatar supplies China with one-quarter of its natural gas requirements. The new agreement, in conjunction with a number of other, more modest arrangements, will make it possible for China to reduce its reliance on Russia significantly.

In a statement, Qatar's Energy Minister and Chief Executive of Qatar Energy, Saad Sherida al-Kaabi, stated that the arrangement "opens a new and exciting chapter" with Sinopec, the state-owned Chinese corporation that will purchase the Qatari gas. Sinopec is the buyer of Qatari gas.

One geopolitical aspect of the developing relationship with China is the potential for a mutually beneficial collaboration. Qatar has long seen the U.S. military station near Doha as a fortress against potential invaders. Since Qatar shares one of the world's biggest gas resources with Iran, this provides extra security for the country. However, analysts believe that Qatar is searching for a further buffer against Iran, which depends on China as a vital energy client and geopolitical partner, especially as certain politicians in the United States become leery of foreign entanglements.

Qatar has looked to other countries for protection throughout its history and has been ruled by the likes of Portugal, the Ottoman Empire, and Great Britain. Though its gas reserves have increased its autonomy and safety, it remains vulnerable to aggression from bigger neighbors.


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                     How Qatar Became the World's Most OP Country

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