Sourcing Gas to Europe


Economic News

22 Jul 2010
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Already the world's largest exporter of liquefied natural gas (LNG), Qatar has unveiled plans to more than double its gas production, a timely move as the country looks to step up its energy supplies to European markets.

On April 8, Mohammed Saleh Al Sada, Qatar's minister of state for energy and industrial affairs, said gas production would be raised to 77m tonnes by 2010, up from the present output of 31m tonnes. The planned increase will be the result of new fields coming on line and further investments to boost output, he said.

Along with the plans for the massive expansion of gas production, Al Sada also announced Qatar would increase its oil output to more than 1m barrels per day, from the present level of 850,000.

With the world's third-largest gas reserves, behind only Iran and Russia, Qatar is seeking to maximise the benefits of its resources and to further diversify its client group.

Having already become the largest single supplier to the Asian market, Qatar is now going head-to-head with Russia, which has all but cornered the European market. In part, Qatar is seeking to benefit from Europe's growing unease at the continent's dependence on Russia for much of its natural gas needs.

With Moscow regaining much of the political clout lost in the years after the fall of communism and the economic meltdown that ensued, many of its traditional European clients are becoming increasingly concerned about the reliability of Russian sources. At various times in recent years, Russia has cut gas supplies to Ukraine and Belarus, to add pressure during disputes.

In their search for an alternative source of gas supplies, an increasing number of European countries are turning to Qatar. One of these is Poland, which currently imports 70% of its gas needs from Russia. However, having had supplies disrupted when Russia turned off the taps on its pipeline running through Ukraine last year, Polish officials have started talks with Qatar over the possibility of forming a strategic partnership in a LNG terminal being built on the Baltic coast by the Polish Oil and Gas Company, in addition to supplying gas for processing and distribution.

During a visit to Doha on April 8, Andrzej Arendarski, the president of the Polish Chamber of Commerce, said Poland was looking for Qatari partners in the energy sector.

"LNG is an area of possible future co-operation because Poland has decided to diversify the sources of supplementation," Arendarski said.

Another potential client for Qatari gas is Hungary, which has flagged an interest in reducing its reliance on Russian imports, which currently account for 80% of its liquefied natural gas requirements.

Abel Garamhegyi, Hungary's deputy minister of economy and transportation, said Budapest was keen to source gas from Qatar, though this was dependent on being able to access supplies. Hungary has announced plans to link its gas pipeline network to that of Croatia by 2010, with a terminal at Rijeka scheduled to come on line by 2011, which could allow it to access gas from Qatar.

"We can use LNG from Qatar but it is dependent on when the Croatian terminal will be ready," he said during a visit to Doha on April 9.

Though not sourcing gas from Russia, Spain is another European country looking to expand its gas-buying options. While Algeria currently meets most of Spain's gas needs, a series of disputes over pricing, as well as Algeria's demands to be allowed greater direct access to the Spanish market, have resulted in importers scouting around for alternatives. Last year, Qatar supplied 13% of Spain's gas needs, a figure both buyer and seller are looking to increase.

On April 7, the Qatargas LNG tanker Duhail docked in the Spanish port of Cartagena to unload a delivery of gas for Spain's Gas Natural. The Duhail, with a capacity of 210,000 cubic metres, is a Q-Flex tanker, a new model of LNG transport vessel that is marketed as being more efficient, as well as larger, than traditional ships.

While en-route to Cartagena, the Duhail made a small piece of history, being the first tanker of its size and model to transit the Suez Canal, an event Qatargas shipping manager Abdullah Al Sulaiti described as a milestone achievement, one he indicated was part of Qatar's push to expand into Europe.

"The Q-Flex is currently the largest vessel to pass through the canal and we expect several more voyages by Q-Flex vessels this year," Al Sulaiti said.

Having grabbed a large slice of the Asian LNG market, Qatar now appears to have set sail for Europe.

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