China Partners with Qatar on Largest Ever LNG Project

The Lede: QatarEnergy has announced the signing of a definitive partnership agreement with China Petrochemical Corporation (Sinopec) for the North Field East (NFE) expansion project, the largest project in the history of the Liquefied Natural Gas (LNG) industry.

What We Know:

• Sinopec has become the first Chinese firm to acquire a stake in Qatar's North Field East expansion project. QatarEnergy transferred the equivalent of 5% interest with a capacity of 8 million tons per annum to Sinopec.
• The agreement was signed by Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs and the President and CEO of QatarEnergy, and Ma Yong-Sheng, the Chairman of Sinopec at a signing ceremony held at QatarEnergy’s headquarters attended by senior executives from both companies.
• The company noted that the agreement will not affect the participating interests of any other shareholders including France's TotalEnergies, Britain's Shell, Italy's ENI, and the United States' ConocoPhillips, which all have significantly greater shares in NFE.

The Background: The North Field contains the world's biggest natural gas reserves and extends under the Gulf into Iranian territory. China is the biggest customer for Qatari LNG and one of the world's top LNG importers. In November 2022, Sinopec signed a 27-year supply deal with QatarEnergy, which the company noted has been the longest deal in its history.

Likely Outcomes:

• This marks another step in China’s increasing strides in the Middle East. China has seen high-level meetings with other regional players ranging from brokering the resumption of relations between Saudi Arabia and Iran, the agreement to build a steel factory in Egypt’s Suez Canal, and cooperation with Saudi Arabia on renewable energy. Chinese companies are likely to continue to make progress in the region as China steps in as a rising player in the region. However, the influence of established and long-standing western energy companies will likely remain intact for the foreseeable future.
  
• As a country with limited oil and gas resources at hand, China will continue to work on increased political and economic cooperation with countries in the region. While the U.S. continues its trend of shifting focus away from the Middle East—especially the Arabian Peninsula—to other world regions, China will increasingly try to extend its hand. However, the U.S. has put greater emphasis on the Indo-Pacific, particularly on the South China Sea. American pressure may be exerted on countries and sea lanes around the South China Sea rather than influencing Gulf countries with respect to the delivery of oil and gas to China.
  
• China also is likely to increasingly offer transaction settlements in yuan following the example of its first yuan-settled trade for LNG transferred from the UAE recently.

Quotables:

“Today’s event underscores QatarEnergy’s commitment to deepening its relationships with key LNG consumers, while prioritizing long-term strategic partnerships and alignment with world class partners from China, represented by Sinopec here today.” - Saad Sherida Al-Kaabi, Qatari Minister of State for Energy Affairs

“The cooperation with QatarEnergy will help Sinopec further optimize China's energy consumption structure and enhance the security, stability, and reliability of clean energy supply. I hope that the two companies will continue to explore new LNG cooperation opportunities based on the solid foundation we have laid together and will further expand cooperation areas to achieve mutual benefit and win-win results.” - Ma Yong-Sheng, Chairman of Sinopec

Good Reads:

QATARENERGY SELECTS SINOPEC AS NORTH FIELD EAST (NFE) EXPANSION PARTNER (Qatar Energy)

QatarEnergy transferring 5% of its stake in NFE to China’s Sinopec (Offshore Energy)