Strengthening of Qatar-China energy ties entrenches gas as ‘central component’ in journey to sustainable future

As the transformation of the global energy mix advances, the world is increasingly becoming engrossed in a decarbonization frenzy while working around the clock to bolster energy security with more oil and gas and ensuring the development of low-carbon and green energy solutions on the road to a sustainable energy future. This has bolstered further the hopes that gas and LNG will power the energy transition engine, as confirmed by a recent deal between Qatar’s state-owned oil and gas company QatarEnergy and China Petrochemical Corporation (Sinopec).

With a sales and purchase agreement (SPA) with Sinopec in the bag for the delivery of 3 million tons per annum (mtpa) of LNG from the North Field South (NFS) expansion project to the Chinese player’s receiving terminals in China over a 27-year span, the Persian Gulf state’s Minister of State for Energy Affairs and the CEO of QatarEnergy underscores that the partnership with China echoes the solid shared commitments for a sustainable future with natural gas at the helm of the decarbonization journey toward a low-carbon energy mix.

This deal follows another SPA signed in November 2022 for the supply of 4 mtpa of LNG over 27 years, which was the second LNG SPA between the two companies, following the ten-year SPA signed in March 2021 for the supply of 2 mtpa to China.

In a keynote speech at the Sinopec Forum in Shanghai, which was held on the sidelines of the China International Import Expo, QatarEnergy’s CEO underscored the strong fundamentals of energy demand growth in Asia, mainly powered by China’s economic growth, and hailed the growing relationship between the State of Qatar and the People’s Republic of China in the field of energy while highlighting the significance of the recently signed North Field expansion project partnerships and LNG sales agreements with Shell, TotalEnergies, and Eni.

Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs, President and CEO of QatarEnergy, pointed out: “The State of Qatar has firmly supported the role of natural gas as a central component of any energy mix on the road to a realistic energy transition. We are providing the world with the cleanest hydrocarbon source of energy, which enjoys both economic and environmental qualities to support sustainable growth and a better future.

“In fact, by 2029, about 40% of all new LNG supplies will be provided by Qatar. Therefore, we believe that a stronger relationship between the world’s largest LNG producer and the world’s largest energy consumer is a natural development of the realities shaping the energy map today.” 

As Qatar intends to boost its LNG production, Sheikh Tamim bin Hamad Al Thani, Amir of the State of Qatar, laid the foundation stone of the North Field expansion project on Tuesday, October 3, 2023. This will raise the Persian Gulf state’s LNG production capacity from the current 77 mtpa to 126 mtpa by 2026.

Based on the International Energy Agency’s latest report, a surge in new LNG projects is expected to ease prices and gas supply concerns, thanks to projects that are coming online from 2025. This rise in capacity is set to add more than 250 billion cubic meters per year of new capacity by 2030, equivalent to around 45% of today’s total global LNG supply. The United States and Qatar are expected to account for 60% of this increase.

The IEA’s report points out that simply cutting spending on oil and gas will not get the world on track for the net-zero aspirations, as the key to an orderly transition is to scale up investment in all aspects of a clean energy system. The report goes on to highlight the urgent challenge of increasing the pace of new clean energy projects, especially in many emerging and developing economies outside China, where investment in energy transitions needs to rise by more than five times by 2030.

Qatar, which is expected to be among the front-runners delivering the next wave of LNG growth, sees natural gas as a key piece in the energy transition puzzle and beyond due to renewables’ intermittent nature.

Al-Kaabi further highlighted: “We believe that energy transition is one of the most pressing challenges of our time. It is not just about the environment, but also about the future of energy that touches the lives of every individual on this planet, and transcends borders, economies, and cultures.

“It is about a reasonable and realistic shift to cleaner alternatives to power our economies, while at the same time balancing energy security, affordability, and sustainability. The transition to a cleaner, more sustainable energy future cannot be achieved in isolation. It requires open cooperation among nations, industries, and stakeholders towards a common goal.”

The Persian Gulf state’s QatarEnergy LNG recently confirmed the completion of its 1,000th LNG shipment to the South Hook LNG terminal at Milford Haven in the United Kingdom. Thanks to this, South Hook terminal has now received and processed almost 100 million tons of LNG, which is the equivalent of supplying natural gas to every household in the UK for almost five years.

QatarEnergy has also been working on expanding its portfolio. To this end, Qatar’s giant is part of a consortium, which won exploration and production rights for block EGY-MED-E8 (East Port Said) offshore Egypt, as part of the 2022 EGAS International Bid Round.