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Europe courts Qatar for an alternative to Russian gas

Qatar, a country of less than three million people, is the world’s second largest exporter of natural gas and may replace Russian gas imports to Europe.

Russia supplies 40% of Europe’s gas needs, but Europe wants to become less dependent on Russia for gas after its invasion of Ukraine. Europe is in talks with Qatar to determine if it could emerge as an alternative to the Russian gas that has powered European economies for decades.

Qatar can help bail out Europe

The talks over Qatari gas have taken on a sense of urgency. While Russia may gradually switch to seeking payment in rubles or gold rather than euros or the US dollar for gas sold to “unfriendly countries,” Europe is considering a new round of sanctions against Russia and is bracing for Russia’s threat to slash energy exports.

Meanwhile, Qatar is attempting to entrench itself deeply into European gas markets, even though the Persian Gulf state is aware that it is impossible to replace long-term Russian gas supplies to Europe overnight.  But it could in the future. In this direction, Qatar is exploring providing some short-term emergency liquefied natural gas (LNG) to Europe should Russia cut off gas supplies.

Qatar is looking to transfer gas shipments in storage in east Asia, as long as Japan and South Korea agree, to divert gas cargoes to Europe. Qatar estimates that only about 8%-15% of its LNG can be redirected to Europe in the short-term to offset any Russian supply disruptions, and those shipments will cost more than Russian gas.

Long-term gas agreements and expanding production

As a gas-rich nation, Qatar is also hoping to return to the European market backed by long-term contracts and on a bigger scale as its own production levels have been ramped up.

“Qatar has invested $28 billion into expanding its giant North Field and expects gas capacity to rise by more than 60% in four years,” Qatar's energy minister Saad Sherida al-Kaabi said in a recent interview with CNN. After that, around half of its capacity is expected to go to Europe. 

“We will be supplying Europe,” commented the Qatari minister, who is also president and CEO of QatarEnergy.

Spurred by the export of LNG to South Korea, India, China, Japan and other Asian countries on dedicated and long-term contracts, Qatar has become the fourth richest country in the world.

“The country had long wanted to expand into Europe. Buyers there were reluctant, with cheaper sources from Russia that could be shipped by existing pipelines and obtained on shorter-term, more flexible contracts,” reported the Wall Street Journal in a recent article.

Moving to Qatari gas may come with logistical issues for Europe. Russia’s gas supply to Europe is delivered via pipelines. There are no gas pipelines from Qatar to Europe, so the small but prosperous Arab nation’s energy would have to be shipped to Europe in liquefied form.

For now, Qatar has taken a clear stance on the Ukraine war by supporting Ukraine's sovereignty and territorial integrity within its internationally recognised borders.

EU drops Qatar Petroleum probes

One tangible benefit for Qatar: The European Union (EU) last month dropped antitrust investigations into Qatar Petroleum, the state energy company, clearing the way for the country to pursue more long-term contracts in Europe, as was published in the Wall Street Journal recently.

“The flood of goodwill for Qatar in the West comes as the country is preparing to host the 2022 FIFA World Cup starting in November 2022.”

For the soccer sporting event, Qatar is being transformed with new roads, hotels, stadiums and airport expansion, and is ready to open the door for long-term contracts between EU members and itself. A little more than 3,000 miles away, Europe is gearing up to develop trustworthy energy alternatives to wean itself off Russian energy. Qatar may be its new hope and best alternative to end its dependency on Russian fossil fuels.

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