Germany's begging for Gulf gas Does it bring warmth to Europe?

The importance of German Chancellor Olaf Schultz's tour to three Gulf countries, is not in its success or failure by the standards of an "oil and gas shopping tour", but in that it included acknowledging and reversing the failure of German energy policy.

The importance of German Chancellor Olaf Schultz's tour to three Gulf countries, is not in its success or failure by the standards of an "oil and gas shopping tour", but in that it included acknowledging and reversing the failure of German energy policy. And the prelude to admitting the failure of foreign policy in the issues of Iran and Yemen, and perhaps reversing it.

This conclusion is based on the quiet reading between the lines of statements and the signed agreements that show Germany's retreat from the energy policy adopted several years ago. This policy is based on two pillars, the first is the development of clean energy and the fight against fossil fuels. The second is to rely on importing gas from Russia in the first place and from America to a lesser extent as a transitional stage, away from the oil and gas of the Gulf. This is evident, without a long explanation, from the pipeline network with Russia, the latest of which is Nord Stream 2, the closure of nuclear power plants, and the dispute with the State of Qatar, which reached a court over gas contracts.

UAE long-term agreements

It is clear from the review of the agreements signed with ADNOC that they have two dimensions, short and long term. It is related to providing the urgent needs of gas and diesel and within the import capacity in Germany. It requires the export of about 137,000 cubic meters of gas for the trial operation of a floating station that will be ready for operation in December.

This amount is roughly equivalent to Germany's monthly imports from Russia via the Nordstream 1 pipeline before the war. The agreement also included ADNOC's commitment to provide adequate supplies of gas in the year 2023. It is known that Germany and Europe in general have passed the stage of serious winter danger, as the storage rate has reached more than 90%, according to German Economy Minister Robert Habeck.

The gradation in the volume of exports comes within the framework of the limited absorptive capacity of European countries to receive liquefied gas, and the absence of all gasification stations (returning gas to its gaseous state), as a result of the excessive dependence on importing gas through pipelines.

Currently, this problem is solved by building several stations, the first of which will be ready in 2026. Therefore, Germany has resorted to renting 4 floating gasification stations, and the number of these stations cannot easily be increased, as there are only 48 ships in the world that are leased under long-term contracts, which raises the The cost of renting is about 200,000 euros per day, knowing that the four ships do not solve the problem because the capacity of one ship is 5 billion cubic meters annually, while Germany imports through the Nord Stream 1 line, for example, 60 billion cubic meters.

One of the politically significant indicators of the signed agreement is that the UAE does not possess large reserves of gas, and it imports a third of its gas needs from Qatar, which allows the conclusion that part of its commitments to export gas to Europe will be secured from Qatari imports.

This applies to the diesel side of the agreement, as ADNOC will export about 250 thousand tons per month during 2023, from its production as well as from other companies and refineries in the region, an amount sufficient to compensate for Russian diesel imports.

In the course of European-Gulf relations, an important development, coinciding with Schultz's tour, is the exchange of investments in oil companies, as BP owned 10% of the shares of the Abu Dhabi Company for Onshore Petroleum Operations (ADCO), which produces the bulk of the oil. . In return for Abu Dhabi acquiring a 2 percent stake in BP. The value of the deal is estimated at about two billion pounds, and thus the Abu Dhabi government becomes one of the company's 10 largest shareholders.

Qatar investments and agreements

The talks in Qatar between Shultz and Prince Tamim bin Hamad constituted a great impetus for the path of rapprochement and the resolution of outstanding problems between Qatar and European countries.

Total Energy announced the signing of an agreement with Qatar Energy Company to pump $1.5 billion to own a 9.4 percent stake in the international partners' 25 percent stake in the North South Field, the largest gas field in Qatar.

This is “with the aim of enhancing the field’s production capacity and increasing supplies to European markets,” said Patrick Pouyanne, CEO of Total. He added, "The world will need a lot of gas in the coming period, and if Qatar offered more opportunities, we would have prepared to pump more investments."

It is noteworthy here that the complete plan to expand the North Field will increase the natural gas production capacity from 77 million tons annually to 126 million tons by 2027.

This agreement is important given the frequency of information, the latest of which was news to Reuters, that the German companies RWE and Uniper are close to concluding long-term agreements to purchase liquefied natural gas from Qatar.

This information was reinforced by what was hinted by the CEO of Qatar Energy Company Saad Al-Kaabi, who usually refuses to talk about contracts, saying that "the equation for distributing gas exports equally between East and West may change to 60-40 percent according to market needs."

To clarify the importance of these developments, we note that Qatar has not yet responded to all the pressures that were put on it to increase its gas exports to Europe, even when the US President asked the Emir of Qatar during their meeting at the White House following the outbreak of the Russian-Ukrainian war.

This is due to Europe's rejection of Qatar's policy of concluding long-term contracts and its insistence on buying at spot market prices. This dispute reached the point where the European Union filed lawsuits against Qatar Energy Company under the pretext of monopoly.

Saudi Arabia breaking the political ice

The German chancellor's visit to Saudi Arabia and the meeting with Prince Mohammed bin Salman contributed to breaking the ice between the two countries resulting from political differences in many files, such as the position on Iran, the Yemen war, and Germany's refusal to supply Saudi Arabia with weapons.

The visit paved the way for Germany and many European countries to reconsider their foreign policy, especially those related to the countries of the Middle East, in light of the deep geopolitical repercussions of the Russian-Ukrainian war.

This was expressed by the German chancellor by declaring his intention to strengthen political cooperation with regional powers to prevent their rapprochement with Russia and China.

In addition, of course, the repercussions of the war on the security of energy supplies, as the Gulf states are considered a ready and capable alternative to compensate for Russian oil and gas.

It was remarkable in this context that the Head of the Political Department for the Middle East at the German Foreign Ministry said: "We are currently reviewing the armament policy," and said that her country "has not previously given the necessary importance to the issue of arms exports and to the sensitivity of the challenges facing Saudi Arabia in the region."

This was stated explicitly by a German government official hours before Schulz's visit to Saudi Arabia, saying that "the discussions will include the Iranian nuclear file." This was confirmed by the Emir of Qatar, Sheikh Tamim bin Hamad, saying: "It was agreed with the German chancellor on the need to support efforts to reach an agreement with Iran on its nuclear program, which contributes to maintaining security and stability in the region."

As for the energy file, which is the most important for Germany at this stage, it seems clear that the two countries agree to enhance cooperation in the fields of renewable energy, especially hydrogen fuel, which was emphasized by Schultz that "the partnership must go beyond the limits of fossil fuels to include hydrogen and renewable energies." ".

The focus on renewable energy is based on data related to the limited ability of Saudi Arabia to export gas, despite it having the fourth largest proven reserves in the world, but it allocates the majority of production locally to generate electricity, water desalination and industrial production, and Saudi Arabia, in turn, has great potential for the production of blue and green hydrogen. It is noteworthy here that Saudi Arabia and the UAE have started producing hydrogen and blue ammonia, and the first trial shipment of blue ammonia has already been exported from Abu Dhabi to Germany early this month.

Writer

Yasser Hilal

Researcher and journalist in energy and economics