Qatar opens the door to the world's largest gas field to Western multinationals

Qatar has chosen TotalEnergies, the leading French energy multinational, as the first partner in the development of the North Field East project, in a move that could alleviate the European Union's natural gas diversification needs in the wake of Russia's invasion of Ukraine.

"I am delighted to announce that Total has been selected as the first partner in the North Field East project," Qatari Energy Minister Saad bin Sherida al-Kaabi announced. "We had to choose our partners from international energy companies, which was done through a competitive process that started in 2019," the minister continued.

"Thanks to the economic competitiveness, financial flexibility and unique environmental advantages of the project, during the bidding process we received bids for double the offered share," the Qatari politician said, referring to the large number of companies that would have participated in negotiations that began in 2019.

Total will take a 6.25% stake in the project, which aims to increase the country's Liquefied Natural Gas (LNG) production by 60% by 2027. The project will be located in the North Field gas field, which accounts for about 10% of the world's total reserves. The partnership will last until 2054, allowing the French company to gain a significant presence in the sector.

In addition, Saad Sherida al-Kaabi announced that Doha has also reached agreements with other energy multinationals, to be announced in the "near future", albeit with smaller stakes than Total. "We have completed the selection process and the agreements have already been signed," the Qatari minister concluded. 

AFP said, citing informed sources, that US-based ExxonMobil and ConocoPhilips and Britain's Shell were among the candidates. Meanwhile, Reuters said Italy's ENI was among the candidates. With this move, Doha, which aims to cede up to 25% of the project to foreign hands, is seeking the participation of several multinationals, thus avoiding excessive dependence on just one of them.

This agreement comes in the context of Russia's invasion of Ukraine, which has led the EU to seek to reduce its dependence on Russian natural gas imports, which in 2021 accounted for up to 40% of the Union's total. Under plans announced by Commission president Ursula von der Leyen, Brussels aims to reduce them by up to two-thirds by the end of 2022, and completely by 2027.

Qatar is one of the world's leading gas producers and, along with Australia and the United States, the world's largest exporter of LNG. Although its main customers are in Asia, there is some hope in European capitals that the Arab country can help offset the reduction of Russian gas. In this regard, Doha has signed an energy partnership agreement with Germany, and is already a major supplier to several European countries, including Spain.

But Patrick Pouyanné, CEO of Total, points out that this agreement will not be able to alleviate European needs immediately. "The new natural gas complex in Qatar will not be ready until the end of 2025 or the beginning of 2026," he said.

"In the short term, [Qatar] is doing what it can, but most of its LNG is already under contract, mainly with Asian customers, so it can only divert volumes to Europe with their consent," reminds us Justin Alexander, director of the consultancy Khalij Economics.

For Alexander, Doha "would be exporting more [LNG] to Europe had it not been for [the European Commission's] lack of interest and its refusal to sign long-term LNG contracts". In this way, European countries will have to wait for Qatar to carry out the expansion of the North Field, which, from 2025, will provide the Emirate with additional production that it will be able to direct to the old continent.

But this contract may serve to offset the losses incurred by Total as a result of the invasion. This French company is one of the main foreign investors in the Russian oil and gas sector, with a notable presence in the Eurasian power's LNG projects.

However, the multinational has announced that it will not make any new investments in the country and has stopped buying Russian oil. Now, this contract with Qatar Energy can compensate for the loss of this sector. "It [the deal] comes at the right time. Some people were wondering what TotalEnergies will do instead of Russia. This is the answer," Pouyanné said.