Qatar Extends Its Natural Gas Dominance at Russia’s Expense
Russia’s war in Ukraine has jolted global energy markets, leaving Europe short of natural gas, raising prices for all fossil fuels and threatening a global recession.
But one country has maneuvered effectively to gain economic and political advantage from the turmoil: Qatar.
Long a big exporter of liquefied natural gas to Asian countries, Qatar is poised to become a critical energy source for Europe, which is pivoting away from its dependence on Russia. Qatar is also drawing closer to China, undermining Russian hopes of diverting to Asia most of the energy Europe is no longer buying.
Qatar, many energy experts said, is becoming the Saudi Arabia of natural gas — an indispensable energy supplier with vast reserves and very low costs. This means Qatar will be able to sell natural gas longer and more profitably than other major exporters like Australia and Russia even as climate change forces many countries to reduce their use of fossil fuels.
“This is Qatar’s moment,” said Ben Cahill, an energy expert at the Center for Strategic and International Studies. “Everyone in the world needs them.”
Qatar is virtually tied with Australia and the United States as the largest producer of liquefied natural gas, fuel that is super chilled and shipped on tankers. Experts say Australian exports have likely peaked and some of its aging fields are beginning to decline. New export terminals are being built in the United States but at a relatively modest pace that has been limited partly by big investors who are less willing to put money into fossil fuels than they were a few years ago because of concerns about climate change.
Russia is also a major exporter of gas, much of which it has long sold to Europe via pipelines. But those exports have slowed to a trickle since Russia invaded Ukraine in February.
The State of the War
- Russia’s Long War: As his war in Ukraine drags on, President Vladimir V. Putin warned Russians that the battle would be protracted, but tried to allay the worst fears of an increasingly war-weary population.
- Striking Deep in Russia: In its most brazen attacks into Russian territory, Ukraine has been using drones to strike military bases inside Russia, showing an ability to take the war beyond its borders.
- Weaponizing Winter: Russian attacks on Ukrainian infrastructure have left millions without power, heat or water as the snow begins to fall. The Daily looks at what life is like in Ukraine as winter sets in.
- Russian Oil Price Cap: The E.U. agreed on a $60-a-barrel limit for Russian oil, the latest effort by Western allies to try to deprive Moscow of revenue to finance its war in Ukraine. Here’s how it will work.
That leaves Qatar, a Middle Eastern monarchy with a population of just three million people, in prime position. Last year, the country started building four giant new production and export terminals, investments that will increase its export capacity more than a third by 2026. And officials have announced plans to build two more terminals later in the decade. All told, the country’s capacity to produce liquid natural gas will grow more than 60 percent to 126 million tons a year later in the decade.
The United States currently is slightly ahead of Qatar in export capacity, although exports have been hurt in recent months by an explosion at a Texas export terminal. Analysts expect U.S. export capacity to increase about 40 percent by 2026.
“Qatar is in a better position than anyone else to take advantage of the situation in Europe,” said Chakib Khelil, a former president of the Organization of the Petroleum Exporting Countries and a former Algerian energy minister. “Qatar’s competitors are either blocked by political problems like Iran and Libya or, like Nigeria or Algeria, don’t have the resources to supply the additional volumes that are needed.”
Qatar is betting that even as much of the world is trying to cut greenhouse gas emissions, demand for liquefied natural gas, or L.N.G., will keep growing. That’s because many elected leaders and energy experts believe the fuel is essential as a replacement for coal and to back up solar and wind energy, which can be limited by inclement weather.
The United States has pushed for a faster transition to green energy, but the Biden administration has embraced Qatar. In remarks at the White House in January before meeting Qatar’s leader, Sheikh Tamim bin Hamad al-Thani, President Biden noted that the two countries shared a desire of “ensuring the stability of global energy supplies.”
Last month, the administration approved a $1 billion arms sale to Qatar. “The Biden administration seems to value Qatar’s role in the gas market, especially when it comes to providing supplies to Europe,” said Dania Thafer, executive director of the Gulf International Forum, a Washington research institute.
Qatar’s gas riches have enabled it to host the World Cup and become a power broker in North Africa and the Persian Gulf. Al Jazeera, the satellite television station funded by the Qatari government, has projected the country’s influence and given voice to dissidents across the Middle East.
Despite Western concerns about Qatar’s human rights record, several top European leaders, including Chancellor Olaf Scholz of Germany and Charles Michel, president of the European Council, have traveled to Doha, Qatar’s capital, this year in their efforts to secure more energy.
“Qatar will continue to do its best to support its allies in Europe,” said Ali Al-Ansari, a spokesman for the Qatari embassy in Washington. “While most in the industry stopped investing in new hydrocarbon discovery, Qatar doubled down on L.N.G.”
The country’s energy exports, of which natural gas is by far the most important, doubled this summer from last year, reaching $9.2 billion in August. Qatar is on course to break its record for annual export revenue, set in 2013 before booming U.S. gas exports lowered gas prices.
“The crisis is giving them a lot of momentum,” said Leslie Palti-Guzman, chief executive of Gas Vista, a research firm.
In addition to managing its large domestic offshore gas field, Qatar Energy, a state-owned company, has been expanding around the world with investments in Brazil, Suriname, Angola, South Africa and elsewhere. It has worked with Exxon Mobil to build a liquefied natural gas export terminal in Louisiana that will come on line by 2024. Qatar Energy and Exxon are also producing gas in a field off the coast of Egypt and exploring for gas in Cyprus.
Qatar Energy recently began talks with TotalEnergies of France and Eni of Italy to work together in Lebanese waters, a project made possible by a recent maritime border deal between Israel and Lebanon.
Just in the last few weeks, Qatar Energy also agreed to build a $8.5 billion plastic plant in Texas with Chevron Phillips Chemical and negotiated a 15-year deal to supply gas to Germany.
The deal with Germany represented a big win for Qatar because Germany and other European countries have been reluctant to sign such long-term contracts, fearing being locked into using fossil fuels for too long given the European Union’s ambitious plans to address climate change. But with global gas supplies tight and Europe’s urgent need to replace Russian energy, Germany’s leaders may have had little choice but to agree to a 15-year deal with Qatar.
“The Qataris are not going to let a big European energy crisis go to waste,” said Jim Krane, an energy expert at Rice University. “They’re locking in a new long-term contract in Germany with desperation still hanging in the air.”
Qatar will supply two million tons of gas a year, giving Germany a measure of energy security. Even still, the Qatari gas represents a small fraction of what Russia has supplied to Germany and will not start arriving until 2026. Germany is also courting other producers, including the United Arab Emirates.
In addition to that deal, Qatar recently signed a contract to supply natural gas to China for 27 years — the longest such contract ever recorded. That contract, for about four million tons of gas a year, will guarantee Qatar a market for much of the additional gas it expects to produce once it finishes its new terminals.
Qatar already provides China with one-quarter of its gas. Along with several other smaller deals, the new contract will allow China to reduce its dependence on Russia notably.
Saad Sherida al-Kaabi, Qatar’s energy minister and Qatar Energy’s chief executive, said in a statement that the deal “opens a new and exciting chapter” with Sinopec, the state-owned Chinese company that will buy the Qatari gas.
The emerging partnership with China also comes with some geopolitical benefits. It gives Qatar more protection from a potentially hostile Iran, with which Qatar shares one of the largest gas fields in the world. Qatar has long relied on a U.S. military base near Doha as a bulwark. But as some lawmakers in the United States grow wary of foreign entanglements, experts say Qatar is looking for an additional buffer against Iran, which counts on China as an important energy customer and geopolitical partner.
Throughout its history, Qatar has sought protection from foreign powers and, at various times, come under the sway of Portugal, the Ottoman Empire and Britain. Its gas wealth has given it more independence and security but it is larger neighbors still pose threats.
“Qatar’s pre-eminent interest is security,” said Alex Munton, a global gas and liquefied natural gas expert at Rapidan Energy Group, a consulting firm. “Qatar is acutely aware of its vulnerabilities and its gas resource is a route to enhancing its security.”