Qatar Energy has entered a 27-year LNG supply deal with China’s Sinopec, marking the longest gas supply agreement in the industry’s history and also matching the duration of Qatar’s equity partnerships for its major LNG capacity expansion.
Under the sale and purchase agreement (SPA), Qatar will supply China with 4 million tons per year of LNG from its North Field East (NFE) expansion project. The volumes will be delivered to Sinopec’s receiving terminals in China.
Qatar is the world’s number two LNG exporter so far this year, while China is the world’s number two LNG importer, according to Kpler.
Qatar’s LNG exports to China have hit 13.6 million tons in 2022, already shattering the previous high of 9.6 million tons in 2021, Kpler data shows.
As the world faces an LNG supply crunch coupled with price volatility, Qatar has been in ongoing talks with European and Asian customers to sign long-term supply deals.
The agreement with Sinopec is the first supply deal announced for NFE after QatarEnergy finalized equity partnerships for both phases of its giant LNG expansion — NFE and North Field South (NFS).
The final stake of the NFS expansion was awarded last month to ConocoPhillips (6.25%) following a round of awards that kicked off in June this year.
All the equity partnerships will last 27 years from the start of production, expiring in 2054.
The long-awaited lineup for both phases of the North Field LNG expansion was announced this year after many delays and went exclusively to western major companies.
Phase 1 of the expansion — the 32 million ton NFE project — was awarded to TotalEnergies (6.25%), Exxon Mobil (6.25%), Shell (6.25%), Eni (3.125%) and ConocoPhillips (3.125%).
Phase 2 — the 16 million ton NFS project — was awarded to TotalEnergies (9.375%), Shell (9.375%) and ConocoPhillips (6.25%). Total capacity from both phases of the expansion add up to 48 million tons/yr.
NFE and NFS are expected to come online in 2026 and 2027, respectively.
It is worth noting the absence of Asian players, as there was an expectation that one or more Asian companies would be awarded a stake in the mega expansion.
This makes the landmark supply agreement with Sinopec — which is not an equity investor in the North Field expansion — all the more interesting.
Partnership with China
Qatar has signed a number of supply deals with China including an agreement with Sinopec in March last year.
The earlier SPA is for 2 million tons/yr of LNG over 10 years, starting this year — a substantial increase from what Sinopec had sought in an initial tender in 2020 in which it had invited sellers to compete for a 10-year, 1 million ton/yr LNG contract.
Speaking at the signing ceremony, Qatar Energy Minister and QatarEnergy CEO Saad Al-Kaabi praised the partnership with China, saying the deal will further strengthen the emirate’s relationship with China, helping it meet its growing energy needs.
He also hailed the partnership with Sinopec which he expects to “grow and expand into the 2050s.”