Qatar seeks EU guarantees emergency gas stays within bloc

Qatar has told the European Union the bloc would need to restrict the resale of gas outside the EU so major suppliers can provide gas in case of a Russia-Ukraine conflict and prevent a short-term crisis, a person briefed on the talks said.

The Gulf Arab state says it is also necessary to resolve a long-running EU probe into Qatar’s long-term gas contracts, for the EU to be less dependent on spot sales and more on long-term contracts to boost its energy security, the person added.

The discussions between the EU and major suppliers go to the core of EU’s gas market liberalisation.

The EU sees free trade of gas as essential to energy security but major producers and some gas consumers say the reforms of the past two decades have often wreaked havoc and led to higher prices.

The United States is concerned that Russia is preparing to invade Ukraine and has in recent weeks asked Qatar and other major gas producers to study if they can supply extra gas to Europe if Russian flows are disrupted.

Moscow, which has amassed some 120,000 troops near its neighbour, denies plans to invade Ukraine and accuses the West of ratcheting up tensions.

Russia supplies around a third of Europe’s gas and any interruption would worsen an existing energy crisis caused by a global shortage of oil and gas.

Although Qatar lacks enough spare gas, it has signalled it would be willing to divert some volumes from Asia with mediation from the United States.

Doha has not yet made such a request to divert shipments, according to the source and another person briefed on such talks. The European Commission said on Monday it would not comment on the details of discussions with international partners on gas supplies.

Long-term contracts

Possible emergency supplies for Europe will be discussed at talks in Washington this week between the Emir of Qatar Sheikh Tamim bin Hamad al-Thani and US President Joe Biden.

Over the past week, the Emir has also spoken to the president of the European Commission Ursula von der Leyen.

The Commission had said Qatar’s long-term deals might be inhibiting the free flows of gas in Europe while Doha believes they boost security of supply.

“That will ensure the EU can enter into long-term contracts with Qatar and others instead of more costly spot contracts or searching for short-term solutions during crisis,” the source said.

Doha also would like to see EU guarantees that member states will divert any surplus LNG only inside the EU.

“If not implemented, emergency shipments to the EU could be resold as spot-shipments for a profit out of the EU, basically prolonging the energy shortage in the EU,” the source said.

Three Qatari and European industry sources said that traders in some EU countries have been reselling Qatari gas outside of the EU since the price rally began last year.

A flow of emergency cargoes to Europe would further lift prices and ignite a price war as Asian buyers compete to attract cargoes.

Global gas prices are trading about seven times higher than the U.S. gas benchmark, with European futures at more than $30 per million British thermal unit (mmBtu), compared with just $4 in the United States.

Asian futures are trading around $27 per mmBtu.

[Reuters]