China’s Sinopec and QatarEnergy sign longest supply contract in LNG history

Theagreementannouncedyesterday by the state-owned groups comes as Europe races to secure alternative supplies of natural gas in the wake of Russia’sinvasionofUkraine. The deal “marks the longest gassupply agreement in the history of the LNG industry”, said Saad Sherida alKaabi, QatarEnergy’s chief executive and theGulf state’s energyminister. He added that it would “solidify the excellent bilateral relations” between the two nations and “help meet China’s growing energy needs”. The agreement follows a shorter 10-year LNG purchase arrangement signed in 2021 between QatarEnergy and Guangdong Energy GroupNaturalGas Company. Executives said yesterday’s move was likely to be followed by further agreements. “Sinopec attaches great importance to the co-operation with QatarEnergy, who we regard as a strategic, long term and all-round partner, and we are expecting more co-operation fruits to come,” said Ma Yongsheng, Sinopec’s chair. Germany has also been pursuing Qatari LNG imports, and the countries signedan energy partnershipinMay. However, European nations have hesitated over longer-term deals as they plan to move away from fossil fuels in a shorter timeframe. “This shows how things have changed in the LNG market and how committed the Chinese are to continue the use of gas in the long run within the energy mix,” said Neil Beveridge, an analyst at Bernstein, who said that it was the longest contract he had ever seen. “It comesata timewhenwe have been seeing buyers seeking shorter-term contracts and increased flexibility . . . There is a lot of hesitancy among European utilities to commit to longerterm contracts given targets among decarbonisation.” Qatar’sNorth Field East project began in 2020 with a goal to increase the Gulf state’s LNG export capacity from 77mn tonnes to 110mn tonnes by 2026, putting it in a position to overtake Australia. ShareholdersinNorth FieldEast, controlled by QatarEnergy, include Shell, ExxonMobil,TotalEnergiesandEni.