Qatar signs 15-year LNG supply deal with Kuwait as domestic gas demand rises

(Bloomberg) – Qatar signed a new 15-year deal with Kuwait to supply liquefied natural gas (LNG), it’s second supply contract that will help ease the strain on power plants that have already been forced to cut output this summer.

Kuwait was forced to start power supply cuts in June in a rare occurrence for the Middle Eastern petrostate as brutal summer heat increased demand, and gas supply wasn’t able to keep up. The Ministry of Electricity, Water and Renewable Energy has warned controlled outages could be enforced in some areas throughout the hot months. 

Qatar, which is already Kuwait’s biggest supplier with an existing contract running to 2035 to supply as much as 3 MMtpa, will start shipments from the new deal in January.

“The two contracts combined will eventually take the quantity of LNG we can import from Qatar to as much as 5 million” tons, Kuwait Petroleum Corp.’s Managing Director for International Marketing, Sheikh Khaled Al-Malik Al-Sabah, said after the deal was signed on Monday.

The latest deal will add to Qatar’s agreements with companies including TotalEnergies SE, Shell Plc, China Petroleum & Chemical Corp. and Taiwan’s CPC Corp., as it further expands its massive LNG projects. Still, it’s yet to tie up customers for all of the extra volume that will come from bolstering production capacity by 64% to 126 million tons a year. Doha is planning to push capability even further to 142 million tons by the end of the decade.

The agreement embodies KPC’s commitment to securing “reliable and sustainable energy supplies,” Chief Executive Officer Sheikh Nawaf Al-Sabah said. It also seeks to meet the country’s needs for clean energy to generate electricity in particular, said Sheikh Nawaf, who signed the deal with Qatar’s Energy Minister Saad Al-Kaabi.

Kuwait outages. In Kuwait, the electricity ministry earlier this month said that gas processing units at Kuwait National Petroleum Co. came to a complete halt, impacting supplies to turbines at two power plants and water desalination facilities. The ministry said it was forced to halt some generation units at Subiya and West Doha plants.

The increase in gas demand also comes after Kuwait decided to phase out burning oil to produce electricity. It boosted consumption far beyond its domestic production. The country imported 6.3 million tons of LNG in 2023, including spot cargoes, according to ship-tracking data monitored by Bloomberg.

Kuwait forecasts demand of 14 million tons per annum by 2035, as suggested by the scale of its importing infrastructure. It opened a 22 million ton-a-year terminal in 2021, the first permanent facility for receiving LNG on the Persian Gulf.