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Europe at risk of 'much worse' energy crisis next year, Qatar warns

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Qatar’s energy minister has warned that Europe should have enough gas for electricity and heating this winter, but a tougher challenge will come in 2023 as reserves run out.

Saad al-Kaabi said that if there was a harsh winter, “next year would be much worse”, adding that if President Vladimir Putin’s war in Ukraine continues and gas “does not start flowing back, the energy crisis could be prolonged into the middle of the decade.” again” from Russia.

“This coming winter, it’s okay if the storage capacity is full,” said Kaabi, head of state gas company QatarEnergy. “It will be a problem to really replenish reserves or storage for next year.

“So . . . it will be a problem next year and next year, even by 2025.”

Many European countries have been in talks with Qatar, the world’s largest exporter of liquefied natural gas, because they want to give up on Russian fossil fuels. But Kaabi warned he could not envision a future where “zero Russian gas” would flow into Europe.

“If that’s the case, I think the problem is huge and will continue for a very long time,” he said. “You don’t have enough volume to fetch [in] to replace that gas in the long run, unless you say ‘I’m going to build a big nuclear’ [plants]I will allow coal, I will burn fuel oil.’”

Russia supplied about 155 billion cubic meters of natural gas to EU countries last year, which accounted for about 40 percent of the bloc’s total gas consumption. Brussels hopes to reduce this dependency by increasing pipe supplies from countries such as Algeria and Norway, as well as drastically increasing LNG imports from remote areas.

However, substituting all Russian gas for Europe would require 112 million tons of LNG annually, equivalent to almost a third of today’s entire market, according to Bernstein Research.

Qatar, which traditionally ships 70 percent of its LNG to Asian customers on long-term fixed contracts, said it could only divert 10-15 percent of its current production to Europe until new projects come into play.

However, Kaabi said no new, large-scale gas projects globally will begin production until 2025, when QatarEnergy’s Golden Pass joint venture with ExxonMobil is expected to add 16 million tonnes of LNG per year to the market.

Qatar is also spending approximately $30 billion to expand its North Field, the world’s largest gas field, to increase its annual LNG production capacity from 77 million tons to 126 million tons by 2027.

Britain began negotiations with Qatar almost a year ago to become the Gulf state’s “supplier of last resort”. Meeting with UK energy secretary Jacob Rees-Mogg this month, Kaabi said the two countries were “showing more interest” but added that it was difficult to say when an agreement would be reached.

“We are very committed to the UK and eventually we will get to a place where we can support the UK,” he said. “We will be a key player that will definitely support England in the long run.”

Night view of Jagal pipeline compressor station in Germany

The Jagal pipeline was established to transport Russian gas to Germany © Sean Gallup/Getty Images

Qatar signed an interim agreement with Germany in March, but these talks have been backed by disagreements over the length of the contracts. Doha also held talks with France, Spain, Italy, Belgium, Poland and Slovakia on increasing exports to these countries.

QatarEnergy prefers to sell its gas on long-term contracts as it invests billions of dollars in energy infrastructure. Qatar’s state-owned Asian buyers generally agree to supply contracts of 15 to 20 years.

Kaabi said that the main issue affecting Qatar’s negotiations with European states relates to the challenges faced by governments as they try to best procure gas through fixed contracts in an environment where energy companies are privately owned.

He also warned that Europe should “let go of the long argument that there is no need for gas”, citing hopes that the continent could move away from fossil fuels and switch to renewable sources.

Because everyone who will invest in the gas sector is looking at 25, 30, 40-year horizons to invest and get reasonable returns from investments.” “If governments aren’t going to support it, investors will be hard to come by.”

Liquefied natural gas delivered by QatarEnergy is unloaded in Tianjin, China

Liquefied natural gas delivered by QatarEnergy is discharged in Tianjin, China © VCG/Getty Images

Kaabi added that European negotiations for Qatari gas have created “major competition” with Asian importers who want to lock up long-term supplies while Qatar ramps up production.

“It’s because of this pull of Europe asking for additional gas. . . Asian buyers are looking at the same thing and saying ‘wait, we need to be able to secure our future development needs,'” he said. “We’re talking to almost every customer in Asia, where they are trying to negotiate very seriously.”

LNG prices have risen globally since Russia’s invasion of Ukraine. Benchmark prices for North Asia reached $70 per million British thermal units (mmbtu) in August, more than double the price at the start of the year. TTF, the European standard for pipeline gas and LNG, reached €311 ($88.5/mmbtu) per megawatt hour in August, up nearly 250 percent from the start of this year. Prices have fallen in both Europe and Asia as the weather conditions are milder and Europe’s gas storage reaches near full capacity.

Additional reporting by Shotaro Tani in London