US-Qatar oil & gas ties are ‘win-win’ but EU’s green agenda bound to cause exodus, QatarEnergy’s CEO warns

While contemplating the most recent events and moves within the shifting global energy landscape, the Chief Executive Officer (CEO) of Qatar’s state-owned giant QatarEnergy has pinpointed the potential detriments the EU’s new sustainability rules may bring, including energy security woes for the top global liquefied natural gas (LNG) import market, given the high penalties gas and LNG importing club members, like Qatar, would need to contend with to keep doing business in the region. Focusing on the Persian Gulf state’s relationship with the United States (U.S.), the firm’s CEO displayed no apparent concerns over a recent pledge to lift the LNG exports cap, which was made by the U.S. President-elect, Donald Trump.   

Moving beyond fossil fuels was never seen or envisioned as an easy task. As countries around the world embrace the shift to low-carbon and green sources of supply, the rules being set in place to accelerate the pivot to renewables are increasingly tightening the noose around the oil and gas industry in some regions such as Europe, where the latest sustainability blueprint aims to keep the European Union (EU) at the forefront of the energy transition endeavors.

Given the complexities involved in such an undertaking, energy experts advise caution to ensure people and the security of supply do not suffer in the wake of the new green roadmaps. With this in mind, the European Commission (EC) called on the EU countries to enhance their efforts toward achieving greenhouse gas (GHG) emissions cuts by setting clear visions and paths toward tackling climate change while preparing for the accelerated uptake of renewables and enhancing energy efficiency measures.

To this end, the European Council and Parliament reached a provisional agreement on a new law last year, which was envisioned to assist in preventing large companies from damaging the environment and threatening human rights after negotiators concluded the Corporate Sustainability Due Diligence Directive (CSDDD). The text was expected to be rubber-stamped by the European Council and Parliament in early 2024, giving Member States two years to transpose the directive into national legislation.

The agreement set the scope of the directive to apply to large companies with more than 500 employees and a global net turnover of over €150 million, with non-EU companies affected as well if their net turnover surpassed €150 million in the EU three years after the directive entered into force. Therefore, the EC’s task was to publish a list of non-EU companies that fall within the scope of the directive.

Given that many nations around the globe are prioritizing energy security over the transition to net zero, the potential risks that come with a swift pivot toward strict sustainability rules in a single region, especially if these apply to other nations with the rest of the world lagging behind, puts the region that takes on such a bet at the risk of becoming isolated, analysts argue. They also add that this has the potential to dry up foreign investments and eventually may even impact the region’s security of energy supply, especially if it does not secure the necessary infrastructure and energy flows beforehand to sustain its policies.

In a similar fashion, Saad Sherida Al-Kaabi, Qatar’s Minister of State for Energy Affairs and President and CEO of QatarEnergy, criticized the EU’s new directive but emphasized that Qatar was still supporting the concept of the European Union’s Corporate Sustainability Due Diligence Directive, and the desire to protect and uphold human rights, labor rights, and reduce environmental impact. The main issue for him is encapsulated in the way this is being pursued.

Al-Kaabi pointed out: “This directive affects any company that deals in Europe and makes more than €450 million generated in or from Europe. So, companies like QatarEnergy, Shell, or ExxonMobil and even car companies like Toyota or GM, will have to say they will abide by the Paris Accords. So, the company will have to commit to Net Zero. For us as QatarEnergy, and with all the expansions we are undertaking, I can assure you we cannot meet Net Zero as a company.

“The second thing is that we need to make sure we put a team of probably a thousand people in QatarEnergy whose dedicated job would be to go and look at all our subsidiaries and suppliers around the world, because if there is a nail or a screw that we buy from a contractor who has a subcontractor, we will be responsible for looking into their practices and would get penalized for that.”

Qatar’s Minister of State for Energy Affairs underlined that investment authorities, like Qatar Investment Authority (QIA), or any sovereign fund or fund manager around the world would worry about the companies they own or plan to own and whether they could be liable for such penalties, which would affect their investments and end up pulling out of the EU to protect their funds and look at investing in other countries. 

Al-Kaabi elaborated: “We are also asked to be responsible for tier emissions 1, 2, and 3 and be liable for a penalty of up to 5% of our total generated revenue worldwide. This makes absolutely no sense. So, my message to Europe and to the EU Commission is: Are you telling us that you don’t want our LNG into the EU? Because I sure am not going to supply the EU with LNG to support their energy requirements and then be penalized with our total revenue worldwide.

“So, I think what the EU is doing is really surprising, and I think it will harm them. And for companies that will have to comply, will need to put an army of people to do all this diligence. If there is more cost on the company to do this diligence, who ends up paying for it? The customer. This will harm European companies first.”

According to the European Union Agency for the Cooperation of Energy Regulators (ACER), the EU’s LNG imports might be near their peak in 2024 thanks to reductions in structural gas demand driven by the EU’s ambitious decarbonization goals. The first ACER LNG Market Monitoring Report (MMR), which analyzed the European LNG market developments in 2023, highlighting how over 50 bcm of new LNG import infrastructure eased supply congestion since 2022 and helped narrow the price gap between European gas hubs and LNG spot prices.

As the EU is perceived to be the top global LNG importer, its Member States imported 134 bcm of LNG last year, making up 42% of total European Union gas imports, with France being the largest importer at 30 bcm. While the report shows that the EU imported 18 bcm of Russian LNG, mostly via long-term supply agreements signed before 2022, it also notes that at least 1 bcm of this LNG was re-exported to Asian markets through LNG reloads.

On the other hand, the targeted gas demand cut scenario of REPowerEU, if it materializes by 2030, could shift the EU’s reliance on the spot LNG market, turning a 49 bcm ‘under-contracted’ status in 2023 to an ‘over-contracted’ position of 30 to 40 bcm between 2027-2030. With floating storage and regasification units (FSRUs) making up around 75% of the new regasification capacity in the EU since 2022, this is believed to allow for the potential repurposing or relocation of this floating infrastructure should their utilization significantly decline.

While the global LNG export capacity trends show massive expansion with more than 200 million tonnes projected to be added by 2030, equivalent to approximately 50% of the current annual LNG trade volumes, ACER’s report indicates the EU remains more dependent on long-term rather than spot LNG contracts. On the other hand, Eurogas underscored a few months ago that energy security was a crucial theme for Europe, as the global LNG market remained tight with demand foreseen to increase at more than 5% per year during the 2024-2030 period.

The trade association for gaseous energies in Europe warned that the lack of additional LNG export capacities would risk increasing and prolonging the global market imbalance, inevitably impacting supplies in Europe with the consequent implications that would have for the economy and society.

“We believe that a stable and predictable regulatory framework is essential to attract investments in the energy sector and promote new LNG supply sources from the US, meeting the increasing LNG demand in Europe and globally,” underscored Eurogas in September 2024.

While commenting on relations with the incoming U.S. administration of President-elect Trump, Al-Kaabi stressed that the U.S.-Qatari friendship and energy bonds transcend administrations without showing any concerns over Trump’s recent statement about plans to lift the cap on LNG exports. Instead, QatarEnergy’s CEO openly stated that Qatar would handle the competition.

“The most important thing is that we have an excellent partnership between companies and between people, and that this is sustainable because it is good for business with mutual respect and mutual gain on both sides. It’s a win-win relationship. We have oil and gas projects that are multi-decade projects and can survive governments and administrations,” emphasized Al-Kaabi.

Within its remarks on the role of gas in the energy transition, the Persian Gulf state’s Minister of State for Energy Affairs noted it would play “a very big role,” citing intermittency issues when the sun is not shining to power solar panels, or the wind is not blowing to drive wind farms, or lower rain levels fail to boost hydropower, as the reason behind his belief.

“We need to have a sensible approach, particularly that we have one billion people today, as we speak, who do not have the basic electricity that we all enjoy. And we should make sure that everybody has ample supplies of energy for their growth and for them to live a good life,” Al-Kaabi added.

QatarEnergy’s CEO also touched upon his country’s LNG expansion projects that will double its production capacity to 142 million tons per annum, with 18 million tons also coming from the firm’s Golden Pass project in Texas, USA.

While pointing out the importance of preserving the environment, Al-Kaabi concluded: “We are big believers in making sure that we have clean air and clean water for everybody living in Qatar and around the world. A few years ago, we had zero renewables in Qatar. Today, 10% of the power that we are enjoying comes from solar.

“Next year, it will go up with another two plants that we are going to inaugurate in Mesaieed and Ras Laffan taking the total solar production to about 15% to 16%. With the addition of a fourth plant in Dukhan, we will increase our solar capacity making it 30% of our total power production.”