LNG - Germany and Qatar May Soon Reach Common Ground

LNG - Germany and Qatar May Soon Reach Common Ground

While the prospect of a rapid agreement between Qatar and Germany on the delivery of liquified natural gas (LNG) still seemed unlikely a month ago, in particular owing to Berlin's reluctance to sign long-term deals with its Gulf partner as well as Doha’s willingness to prevent Germany from rerouting the gas to other member states of the European Union (EU),  the German Chancellor Olaf Scholz and the Emir of Qatar Sheikh Tamim bin Hamad al-Thani signed a joint declaration to eventually expand their energy partnership during an official meeting in the German capital on Friday 20 May 2022. According to the terms of the declaration, Qatar is to deliver LNG to Germany by 2024.

"The energy security issue plays an important role for us. Germany will develop its infrastructure to be in a position to import liquefied gas by ship," Scholz said during a joint press conference with his Qatari counterpart. "It's a big step and Qatar plays an important role in our strategy," Scholz added. 

Like many of its European neighbours, Germany is seeking to reduce its dependence on Russian gas and oil (Berlin imports 55% of its gas and 35% of its oil from Moscow). Nord Stream 2, a 1,200-km long pipeline under the Baltic Sea which was set to facilitate the delivery of gas from the Russian North-western coast to Germany, would have further increased Berlin’s dependence on Russian energy supplies. The pipeline, completed in September 2021, has not received any operating licence so far and, given the situation with the war in Ukraine, is not expected to come into operation any time soon. 

Since the Russian invasion of Ukraine, Russian oil has only accounted for 12% of Berlin's oil imports. And the embargo on Russian oil that was agreed by EU leaders during the European Summit that took place in Brussels on 30-31 May 2022 is expected to further decrease this share.

At present, Germany does not have the infrastructure to import and use LNG from Qatar. Two LNG terminals are yet to be built for that purpose. Pending the construction of these terminals, which is expected to be completed in 2026, Berlin will rely on the rental of four floating storage and regasification units.

The exact terms and conditions of the agreement are yet to be disclosed. According to sources familiar with the matter, the joint declaration does not equate to long-term agreements between the partners and negotiations between Berlin, Doha and the concerned stakeholders are to continue to eventually reach a common ground for a broader form of collaboration. A working group dedicated to developing LNG and hydrogen trade projects has been created. This group will also be responsible for supervising cooperation projects pertaining to renewable energy. 

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