Exclusive German utilities close to long-term LNG contracts with Qatar, sources say By Reuters

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© Reuters. FILE PHOTO: The logo of German energy services company Uniper SE is pictured at the company’s headquarters in Duesseldorf, Germany March 10, 2020. REUTERS/Thilo Schmuelgen

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By Marwa Rashad and Christoph Steitz

LONDON/FRANKFURT (Reuters) – German utilities RWE and Uniper are set to strike long-term agreements to buy liquefied LNG (LNG) from the Qatar North Field expansion project to help replace the Russian gas, three sources familiar with the matter said.

Talks between Germany and Qatar have been marred by differences over key terms such as contract lengths and prices, but industry sources, who declined to be named, said the parties should reach a compromise soon.

Europe’s largest economy aims to replace all Russian energy imports by mid-2024, a Herculean effort for a country that relies primarily on natural gas to power its industry.

While supply deals with Qatar would be positive for Germany, they would not offer an imminent solution to Berlin’s energy crisis, as the massive northern field expansion project is not expected to come online until 2026.

Reuters reported in May that the talks had run into difficulties because Germany was reluctant to commit to deals for at least 20 years and also wanted prices tied to Dutch gas benchmark prices, rather than oil. .

One of the sources said the talks are now more constructive than a few months ago. Another source said the utilities were likely to strike 15-year deals, while a third source said a deal could be done within weeks.

Qatar Energy did not immediately respond to a request for comment.

Uniper told Reuters on Monday it remained in talks with Qatar but had not reached an agreement. “Uniper is currently working hard to diversify its gas supply sources. Qatar is also playing an important role in this regard,” he said.

RWE told Reuters it was in “good and constructive” talks with Qatar, without being more specific.

GULF TRIP

Currently, both utilities purchase LNG from Qatar on the spot market. RWE signed an agreement with Qatar in 2016 for up to 1.1 million tonnes of LNG per year, but which expires next year.

German Chancellor Olaf Scholz will travel to Saudi Arabia on Saturday for a two-day visit to the Gulf region which will also take him to the United Arab Emirates and Qatar.

Scholz is expected to sign LNG contracts during his visit to the United Arab Emirates, Economy Minister Robert Habeck said.

RWE and Uniper are unlikely to sign deals with Qatar during Scholz’s visit, as government officials usually strike broader deals first, which then lay the groundwork for commercial parties to finalize details, said one of the sources.

Uniper said it would not participate in Scholz’s trip.

The North Field expansion project includes six LNG trains that will increase Qatar’s liquefaction capacity from 77 million tonnes per annum (mtpa) to 126 mtpa by 2027.

Qatar is partnering with international companies in the first and largest phase of the nearly $30 billion expansion that will strengthen its position as the world’s largest LNG exporter.

Qatar has signed agreements with TotalEnergies, Eni, Shell (LON:), Exxon Mobil Corp (NYSE:) and ConocoPhillips (NYSE:) for stakes in the project.

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