CNPC To Finalise Purchase of LNG From Qatar Energy

According to three people with knowledge of the matter, China National Petroleum Corp (CNPC) is close to finalising a deal to buy liquefied natural gas (LNG) from QatarEnergy over nearly 30 years from the Middle Eastern exporter's massive North Field expansion project.

If completed, this would be the second such agreement between Qatar, the world's largest LNG exporter, and China, the world's second largest LNG buyer, as Beijing seeks to increase gas supply and diversify its sources in an effort to replace coal and reduce carbon emissions.

The talks between CNPC and QatarEnergy follow a deal announced by China's Sinopec last November in which QatarEnergy agreed to supply 4 million tonnes of LNG annually for 27 years, the longest duration LNG supply contract ever signed by Qatar.

"CNPC has agreed on the major terms with Qatar in a deal that will be very similar to Sinopec's," said a Beijing-based state-oil official who declined to be named as he is not authorised to speak to the media.

"This is a good move for CNPC, securing additional long term supply from a reliable and well positioned partner. This will further insulate from market volatility, diversify supply while optimising between the state owned units," said Toby Copson, global head of trading at Trident LNG.

In November, Sinopec stated that the gas purchase agreement was part of a "integrated partnership," implying that the Chinese company may be considering acquiring a stake in Qatar's North Field expansion export facility.

The two firms have yet to announce a stake investment.

As relations between Beijing and Qatar's two main LNG export rivals, the United States and Australia, deteriorate, Chinese national energy firms increasingly see Qatar as a safer target for resource investment.

According to a second Beijing-based state gas official, Sinopec and CNPC would not choose such long-term supply contracts unless they also hoped to acquire small stakes in the North Field expansion export facility.

QatarEnergy has maintained a 75% stake in the North Field expansion, which will cost at least $30 billion, and may give up to 5% to some buyers, according to QatarEnergy Chief Executive Officer Saad al-Kaabi.

According to Kaabi, the state energy company is negotiating supply deals with numerous potential buyers, which will be announced once agreements are reached.

Last year, China's top gas importer, the state-controlled CNPC, increased gas imports from Russia via pipeline and tanker, capturing supply that was no longer going to Europe due to sanctions imposed by Moscow as part of its war on Ukraine.

According to Chinese customs data, the country's imports of Qatari LNG increased by 75% last year from 2021 to 15.7 million tonnes, accounting for a quarter of total imports, while China's total LNG imports decreased by nearly 20%.

Imports from Australia and the United States, on the other hand, fell 30% and 77%, respectively, from 2021 to 21.9 million tonnes and 2.09 million tonnes.

QatarEnergy signed five contracts with international majors last year for the North Field project, a two-phase expansion plan that will increase Qatar's liquefaction capacity to 126 million tonnes per year by 2027 from 77 million tonnes now.

Each of the five majors - TotalEnergies, ExxonMobil, ConocoPhillips, ENI and Shell - signed a joint-venture agreement with QatarEnergy that includes an equity investment in liquefaction export facilities.