Qatar usually stays in the middle of the U.S. and China, following a cautious diplomatic route. But in recent months, Qatar seems to be moving closer to China as the world’s energy needs have become more critical under the Russia-Ukraine war. That’s the view of Simon Watkins from Oilprice.com. 

The most recent example is the LNG supply contract between Qatar and China. Under the deal, worth more than $60 billion, QatarEnergy will give China’s oil giant Sinopec 4 million tons of LNG every year for 27 years, starting in 2026.

It is China’s most extended contract to buy LNG and one of the largest by volume. 

Saad Sherida al-Kaabi, President and CEO of Qatar Energy and Qatar Energy Minister, said this is the first publicly announced supply deal for the country’s North Field East project.

The North Field East project expands the North Field, the world’s biggest single natural gas field located off the coast of northeast Qatar, south of a giant natural gas field shared between Iran and Qatar.

Through the deal, the CEO of Qatar Energy affirmed the updated relationship between Qatar and China:

“We are very happy about this deal with Sinopec because we have had a long-term relationship in the past and this takes our relationship to new heights, as we have a sales and purchase agreement that will last into the 2050s.”

Simon Watkins from Oilprice.com said it looks like Qatar doesn’t see these as a pure business deal. Sandwiched between Saudi Arabia—a U.S. ally on one side, and Iran–a China ally on the other side, Qatar has been careful in the past not to take a clear side with either the U.S. and its partners or China and its supporters.

But the $60 billion super deal shows how much influence China has with Qatar. Senior Qatari and Chinese officials have also considered this super contract a key part of their North Field East project partnership. Sinopec has hinted that it might start talking about buying a stake in the large mine. Several local news sources have also said that China’s biggest oil companies are in deep talks with Qatar about investing further in North Field East.

Why is China interested in this deal? What is its ultimate ambition?

According to Oilprice.com, China might have predicted for a long time that the price of natural gas worldwide would go up during the Ukraine-Russia war, and oil contracts with Qatar and other countries will keep China safe in a lack of oil scenarios. 

That’s why this latest 60 billion dollar deal is not the first. It came after a series of similar deals in the past few months. 

Specifically, in March 2021, Sinopec and Qatar Petroleum signed a deal to buy 2 million tons of LNG annually for 10 years. In December 2021, Qatar Energy and Guangdong Energy Group Natural Gas Co made another ten-year deal to send 1 million tons of LNG annually from 2024 to 2034.

Simon Watkins for Oilprice.com points out that as part of its “One Belt, One Road” plan, China is building strategic assets on land and at sea along the old “Silk Road” routes.

Beijing will get much more control over the world’s largest gas reservoir by strengthening its presence in Qatar’s North Field East, as China has already held control of Iran’s South Pars field. Qatar’s North Field East and Iran’s South Pars field are the two halves of this large gas reservoir. To imagine how extensive this gas reservoir is, look at these numbers. 

Qatar is the largest LNG exporter in the world thanks to its North Field, which is 6,000 square kilometers in size. On the other hand, the 3,700 square kilometers of South Pars hold 40% of Iran’s gas reserves.

This combined gas field spanning 9,700 square kilometers has at least 50 billion barrels of condensate and 51 trillion cubic meters of natural gas.

It is on China’s wishlist right now.

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