Britain asks Qatar to become a ‘supplier of last resort’ for gas – News Couple

Britain asks Qatar to become a ‘supplier of last resort’ for gas

The British government has reached out to Qatar about the Gulf state’s support for its gas supplies, as shortages in Europe push prices to record levels and raise fears of a winter fuel crisis.

British ministers and their counterparts from the world’s largest exporter of liquefied natural gas have held talks about a long-term arrangement where Qatar becomes a “supplier of last resort,” according to people briefed on the discussions. This will ensure a stable source of LNG from Qatar even when global supplies are tight.

Qatar has also rerouted four large tankers to the UK in the past two weeks. A person familiar with the talks said the shipments came after Boris Johnson, the UK’s prime minister, asked Sheikh Tamim bin Hamad Al Thani, the emir of Qatar, at a recent meeting for help.

Downing Street insisted that the UK had not “requested or secured any additional shipments from the Qatari government” and that energy supplies had remained safe throughout the winter. Doha declined to comment.

The two leaders met at the United Nations General Assembly in September and agreed to “deepen” relations between the two countries, which already have strong commercial, diplomatic and military ties. The pair met again on the sidelines of the COP26 summit in Glasgow this week. Johnson also spoke to Saad Al Kaabi, Qatar’s energy minister, on the sidelines of the UK’s Global Investment Summit last month.

Shortages in gas supplies around the world have caused prices to soar in recent months, leaving energy-intensive industries and suppliers in the UK to struggle and many consumers facing skyrocketing home bills.

People briefed on the discussions confirmed that London is seeking a potential long-term deal given concerns about increased competition for LNG supplies with Asia.

A British government insider said: “The Qataris have indicated their willingness to agree on long-term supply deals to deliver . . . gas to the UK in an emergency scenario – a kind of ‘supplier of last resort’ arrangement.”

Another person briefed on the discussions said: “The UK understands that it needs a long-term deal to get energy supplies so stable that it becomes carbon neutral, but it is not yet clear how this can be done.”

The recent gas shortage was caused by increased demand as economies recovered from the pandemic, and Russia restricted gas exports to Western Europe.

Liz Truss, Britain’s foreign secretary, held talks with Qatari leaders in Doha this month about improving the UK’s energy security, as part of a “strategic dialogue” to be launched in early 2022 that also covers trade and defence. Kwasi Kwarting, Minister of Business, also took part in the talks.

A government spokesman said the UK had “regular discussions” with its “key energy partners around the world ahead of winter”.

Gas makes up about 40 per cent of UK electricity generation and heats the majority of homes. It is expected to remain a major fuel even though the country is striving to achieve a net zero target by 2050.

Boris Johnson, UK Prime Minister, meets with Sheikh Tamim bin Hamad Al Thani, Emir of Qatar, at COP26 in Glasgow this week © Christopher Furlong/AP

With production from the North Sea declining, the UK has pursued a market-based import strategy – now responsible for meeting half of total demand – dependent on the availability of LNG shipments to supplement pipelines from Norway and the European Union.

The government has been warned that leaving the UK dependent on the LNG market for up to a fifth of its gas supplies could leave buyers struggling to secure enough during a supply crunch.

Unlike many of its peers, the UK has minimal storage capacity, with the equivalent of only a few days of peak winter gas demand.

The number of LNG carriers coming into the UK has decreased this year. Most of the shipments are headed to Asia, including those from Qatar, which has fixed long-term contracts with countries in the region. The Gulf state, which has significant investments in the UK, fell this year from the British government’s list of major gas suppliers.

The significance of four shipments from Qatar to the UK in the past two weeks is evident. One of the people briefed on the talks said that after a request from Johnson, Qatar was “able to redirect some LNG that was not previously destined for the UK”.

While prices in the UK are close to record levels, they are only marginally lower than in Asia. The UK government did not pay for the shipments. Instead, Qatar will sell gas in the UK market as usual.

The person added that Qatar did not respond to similar requests from the European Union due to the European Commission’s 2018 investigation into contracts for the state-owned company QatarEnergy, which Doha described as unfounded.

In the United Kingdom, Qatar is the largest owner of the South Hook LNG terminal in Wales. The first of four tankers, the Amiriyah, arrived at South Hook on October 29. Other carriers, Moza, arrived on Wednesday with Bahia and Samaritans arriving in the coming days.

Together, they own nearly a third of the UK’s average monthly gas imports. Satellite tracking shows that three of the ships’ destinations changed to the UK in late October.

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