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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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U.S.-Qatar Energy Partnership Has Russia On Edge

It’s been well noted on my OilPrice.com posts over the past year that President Donald Trump isn’t happy with where and even how much of Europe procures its natural gas. It’s still been less than a year when Trump shocked media both at home and abroad with his tongue lashing of EU members and more poignantly Germany over its continued reliance on geopolitically charged Russian natural gas.

As a refresher, in early July Trump lashed out at long-time, strategic ally Germany for supporting the Russian-backed Nordstream 2 gas pipeline, stating that Berlin had become “a captive to Russia”, while he criticized German leaders for failing to raise defense spending more. In fact, Trump unashamedly jabbed Germany in front of an international audience and a host of media just before a NATO summit in Brussels, adding that it was “very inappropriate” that the U.S. was paying for European defense against Russia while Germany, the biggest European economy, was supporting gas deals with Moscow.

As usual, Trump’s lack of tact wasn't lost on media outlets that were aghast at his tongue lashing of a U.S. ally, but perhaps his message finally resonated in Germany nonetheless. In the ensuing months, Germany back-peddled, not on its commitment to the Nordstream 2 pipeline per se, but indicated it was interested in diversifying its energy mix, including building more LNG import terminals and signing deals for U.S.-sourced liquefied natural gas (LNG). Trump’s opponents and critics, especially in Europe, claimed that Trump’s security concerns were merely a ploy to promulgate U.S. gas interests. However, at the end of the day, Trump has a valid concern and one that was also shared by his predecessors, both Barack Obama and George W. Bush. To date, the U.S. still maintains that it could still sanction German companies over the Nord Stream 2 pipeline still under construction which will double Russia’s export capacity to Germany via the Baltic Sea.

Partners in gas and beyond

Now it appears, that the U.S. wants Qatar to also challenge Russian gas dominance in Europe, a U.S. administration official said on Monday. According to Reuters, Deputy U.S. Energy Secretary Dan Brouillette told the news agency that the U.S. is talking with Doha about supplying Europe with LNG as it wants Germany and other countries to import Qatari and U.S. gas rather than from Russia, which now accounts for 60 percent of German gas imports. Related: Another Crucial Canadian Pipeline Runs Into Trouble

Brouillette said he had discussed the issue with Qatar’s Minister of State for Energy Affairs Saad al-Kaabi, who is also chief executive of Qatar Petroleum, the Reuters report added. “We are talking to Minister Kaabi here about other markets, specifically Europe, to the extent that we can talk to the Qataris about supplying European markets with natural gas,” he said in the interview. “They are very much interested in that and so are we – it’s very connected to deliberations with others we have around Nord Stream 2.”

The disclosure also comes as former OPEC member Qatar, still largely ostracized by most of its Arab neighbors over allegations of terrorism funding, is also keen on investing up to $20 bn in the U.S. LNG sector, further connecting U.S. and Qatari energy interests. Closer ties between Qatar, which last month temporarily dropped to the second largest global LNG exporter behind Australia (but which will solidify that top spot as it ramps up more production within the next five years as it increases its liquefaction capacity from 77 mtpa to over 100 mtpa) and the U.S. which will be the third largest LNG exporter soon and even possibly vying with Qatar for the top spot by the mid part of the next decade, could form a partnership or understanding that could alter global gas markets. This could include presenting a united energy-geopolitical front and perhaps a cost-effective alternative to Russia’s decades-long gas monopoly in Europe. Yet, at this juncture, it's premature to see just if or how such cooperation could unfold, not to mention possible anti-trust allegations that would surely follow. Suffice it to say, just the thought of closer U.S.-Qatari energy ties should be enough to send shivers down Russian President Vladimir Putin’s spine in addition to leaving Moscow energy planners scrambling for a reply.

By Tim Daiss for Oilprice.com

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  • Mamdouh Salameh on January 15 2019 said:
    President Putin will not lose a single minute of sleep over the US-Qatar gas partnership and I will explain to you why.

    Neither US LNG nor Qatari LNG can match the price of Russian piped natural gas supplies to the European Union (EU) now or in the future.

    Another consideration is that Qatar is busy expanding its LNG production capacity so as to consolidate its rank as the world’s largest LNG producer and exporter and also to defend its market share in the Asia-Pacific region currently where it accounts for 80% of the LNG market.

    A third consideration is that Qatar earns far more revenues from its LNG exports to the Asia-Pacific region than to the EU since prices are much higher than in the EU.

    A fourth consideration is that Russia’s grip on the EU gas market is unshakeable and will become far more tighter once the Nord Stream 2 and the Turk Stream are completed by the end of this year.

    One last point is that you are again twisting the facts to suit your political agenda. Germany is quietly building up LNG importing facilities not only for diversification of energy sources but also because of fast-rising demand for gas in the country. Germany and the EU will only buy US LNG if its price matches the cheaper Russian piped gas.

    Moreover, the Europeans buy Russian gas not because it is imposed on them but because Russian gas supplies are reliable, efficient and cheap.

    Germany will never succumb to tongue-lashing and threats of sanctions from President Trump otherwise Angela Merkel wouldn’t have defied President Trump a few days after his tongue-lashing during the NATO meeting in Brussels in July last year and authorized the start of building its portion of Nord Stream 2. Both the Nord Stream 2 and the Turk Stream are unstoppable.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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