The state-owned enterprises Qatar Petroleum and China Petroleum and Chemical Corporation inked an agreement on March 22 that will see Qatar supplying China with 2 million metric tons of liquified natural gas a year from 2022 to 2032. Reports on the 2020 discussions that led to the landmark deal between Qatar Petroleum and its Chinese business partner, better known as “Sinopec,” indicated that China decided to move during a dip in the price of fossil fuels caused by COVID-19. Never before have the two companies concluded such an agreement.
The significance of the deal between Sinopec and Qatar Petroleum notwithstanding, the energy industry has bound officials in Beijing to their counterparts in Doha for some time. As the world’s biggest manufacturer and second-largest economy, China has become one of the Middle East’s most reliable customers for fossil fuels. The East Asian world power, which began buying liquified natural gas from Qatar in 2009, represented its fourth-largest trading partner in 2019.
Sinopec has built key infrastructure to facilitate the shipments from Qatar Petroleum. These investments include a terminal in the Chinese city of Tianjin capable of receiving Qatar’s Q-Max tankers—only the fourth such facility in China where the massive Qatari cargo ship has docked.
Sinopec has built key infrastructure to facilitate the shipments from Qatar Petroleum.
“We look forward to further cooperation with Qatar Petroleum in the future,” Zhang Yuzhuo, the chairman of Sinopec’s parent company, said at the signing of the agreement with Qatar. He added that the deal would help China achieve sustainable development, a major goal for the country.
The proponents of Sinopec’s recent Qatari venture might have taken a cue from other Chinese state-owned enterprises. In 2018, PetroChina Company Limited reached a deal with Qatargas, a subsidiary of Qatar Petroleum, to buy 3.4 million metric tons of liquified natural gas a year; PetroChina operates the three other terminals that have hosted Q-Max tankers, in Dalian, Jiangsu, and Tangshan.
Countries too are joining the competition for Qatari fossil fuels.
The Sinopec deal came on the heels of similar Qatari agreements with two other major Asian consumers. In February, Pakistan and Qatar concluded a ten-year deal that will reduce what it costs Pakistan to import liquified natural gas from Qatar by about 31 percent. That same month, Qatar Petroleum agreed to ship Bangladesh 1.25 million metric tons of liquified natural gas a year. Qatari Energy Minister Saad Sherida al-Kaabi, who doubles as Qatar Petroleum’s chief executive, pledged “to further contribute to meeting Bangladesh’s energy requirements.”
Al-Kaabi had comparable warm words for the Sinopec agreement, declaring that it would strengthen ties between China and Qatar. Nonetheless, the rapid pace of Qatar Petroleum’s deals to supply Bangladesh and Pakistan with liquified natural gas speaks to the competing needs of Asia’s most populous countries and their appetite for the Middle East’s fossil fuels.
India, Japan, and South Korea — Chinese rivals with sizable diplomatic and financial firepower of their own— all import more goods from Qatar than China does.
India, Japan, and South Korea — Chinese rivals with sizable diplomatic and financial firepower of their own — all import more goods from Qatar than China does. The trio of Asian countries accounted for 46.3 percent of the peninsular monarchy’s exports in 2019. As India, Japan, and South Korea race to jumpstart their economies in the wake of the pandemic, the three world powers may seek to press their advantage over China when it comes to purchases of Qatari fossil fuels. Qatar has a limited supply of natural resources but a long list of customers.
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In a few cases, China’s competitors enjoy a deeper, more balanced relationship with Qatar, trading their services for the Middle Eastern monarchy’s goods. Last year, Qatar Petroleum signed a contract worth US$19 billion with three South Korean companies to build over 100 tankers capable of transporting liquified natural gas. This year, the Japanese firm Chiyoda Corporation won a US$13 billion bid to construct four of Qatar Petroleum’s plants for liquified natural gas.
The Japanese and South Korean deals will benefit China’s competition for Qatari natural gas in the immediate future and down the road. In the near term, Qatar Petroleum has a major incentive to keep doing business with Japan and South Korea—since the company is depending on them to develop some of its key infrastructure. In the long term, the headline-grabbing Japanese and South Korean investments in Qatar Petroleum will enable the company to deliver that much more liquified natural gas to two of its top customers.
China has more to fear from Japan and South Korea than from India, one of Qatar’s most fickle clients. In early 2020, Indian Petroleum and Natural Gas Minister Dharmendra Pradhan engaged in a public spat with al-Kaabi, the Qatari energy minister and Qatar Petroleum head, after a dispute over an agreement on liquified natural gas. India’s political proximity to the United Arab Emirates, a longtime critic of Qatari foreign policy, may fray ties further.
Whoever secures the biggest stake in the Qatari energy market, leaders in Doha stand to gain.
Whoever secures the biggest stake in the Qatari energy market, leaders in Doha stand to gain. The more Asia’s regional and world powers compete for fossil fuels and liquified natural gas in particular, the higher the prices will go—a boon to Qatar. As the international community’s move toward renewable energy threatens the future of the Middle East’s energy superpowers, Qatar’s deals with Bangladesh, China, and Pakistan will guarantee the peninsular monarchy an income for the next decade. Indeed, even more agreements may follow in the coming years.
In addition to the economic benefits to Qatar, competition between China and other consumers of Middle Eastern fossil fuels will ensure that they continue to shower attention on the energy superpower. China, India, Japan, and South Korea can draw on their diplomatic weight to woo Qatar with geopolitical favors and pull it into their spheres of influence. For its part, Qatar has much to offer its Asian customers—and little to lose from pitting them against one another.