Qatar signs $1.5 billion deal with TotalEnergies for LNG expansion
French energy giant TotalEnergies will have a 9.3% stake in Qatar's North Field South project, part of the world's biggest natural gas reserves.
France's TotalEnergies on Saturday signed a new $1.5 billion deal to help expand Qatar's natural gas production as Europe struggles to find new energy sources to replace Russian supplies.
The French energy giant will have a 9.3% stake in Qatar's North Field South project, part of the world's biggest natural gas reserves, Qatar Energy Minister Saad Sherida Al-Kaabi mentioned at a signing ceremony.
TotalEnergies chairman Patrick Pouyanne said the French company would invest $1.5 billion in the new field.
The company had already agreed in June to put more than $2 billion into Qatar's North Field East, and Al-Kaabi said, "With this agreement, we see an enhanced position for TotalEnergies as a long term strategic partner."
According to Al-Kaabi, 25% of the field is to be reserved for foreign firms and more deals will be announced in the coming weeks.
Britain's Shell, Italy's ENI, and US giants ConocoPhillips and ExxonMobil have already signed up to be part of North Field East.
Qatar aims to increase LNG production by more than 60%
Qatar has embarked on a massive expansion of the whole North Field, aiming to increase its liquefied natural gas (LNG) production by more than 60% by 2027.
The boost comes as Europe struggles to replace supplies of Russian oil and natural gas due to anti-Russian sanctions imposed by the European Union over the war in Ukraine.
Al-Kaabi, who is to host talks with German Chancellor Olaf Scholz in Doha on Sunday, refused to discuss negotiations with Germany but expressed surprise at media reports that Qatar was insisting on a 20-year supply deal.
The war in Ukraine came as Europe was already facing an energy crisis, and Qatar has hosted multiple visits by European leaders seeking gas supplies.
Europe had to accept longer deals to guarantee supplies
Europe had rejected the long-term deals that Qatar seeks, but a change in attitude has been forced as it faces a looming winter of energy shortages.
"We are in active discussions with the majority of buyers around the world and some are advancing more than others," Al-Kaabi told a news conference after the ceremony.
"For us, 15 years plus constitutes a long term deal," the Qatari Minister added.
Pouyanne considered that Europe had to accept longer deals to guarantee supplies. Producer countries and energy majors have insisted on the need for certainty in contracts to justify the huge investments needed in the gas industry.
"The question is simple -- the longer it (the contract) is, the better the price will be for the buyer," Pouyanne said.
"If you want a cheap price for a short duration, the answer will be 'no'," he added.
Qatar's gas is among the cheapest to produce
It is noteworthy that Qatar is one of the world's top LNG producers, alongside the United States, Australia, and Russia.
State-owned Qatar Energy estimates the North Field holds about 10% of the world's known natural gas reserves. LNG from the North Field is expected to start coming on line in 2026.
South Korea, Japan, and China have traditionally been the main markets for Qatari LNG.
Qatar's gas is among the cheapest to produce and has fuelled an economic boom in the tiny Gulf emirate.