QATAR CHIPS AWAY AT RUSSIAN DOMINANCE IN THE

C O N F I D E N T I A L SECTION 01 OF 03 DOHA 000473 SIPDIS E.O. 12958: DECL: 07/28/2019 TAGS: ENRG EPET ECON PREL EINV TRGY RU IR QA BE HU, SP, BU, PL, HR, RS, KS, NL SUBJECT: QATAR CHIPS AWAY AT RUSSIAN DOMINANCE IN THE EUROPEAN GAS MARKET DOHA 00000473 001.2 OF 003 ZFR - ZFR - ZFR MESSAGE WILL BE RETRANSMITTED UNDER NEW MCNS. DOHA 00000473 002 OF 003 network and might eventually acquire the capacity to supply Central European and Russian markets. Initially, however, PGNiG (the Polish importer) plans to sell all of the LNG aquired from Qatar to Polish industrial concerns (primarily petrochemical). -------------- QATAR'S DRIVE TO BE THE SWING PRODUCER -------------- ¶5. (SBU) Qatar is seeking ways to solidify its position as both a constant source and spot shipment supplier. Long term contracts allow for stability in the market while spot shipments are utilized to lower prices, combat unexpected demand, and ward off possible supply cuts. Qatar's primary focus on LNG and ship born transportation provide for an agile method for matching their supply with customer demand. ¶6. (C) As it seeks diversity of supply, Europe is an ideal market for Qatar's LNG shipments due to the lack of multiple pipeline routes and dependence on Russian production. The recent focus on energy security and risin fears over Moscow's willingness to use energy as a foreign policy tool have brought more attention to the role that Qatar can play. ¶7. (SBU) The creation of the Nabucco gas pipeline through Turkey allows for a new transit route of Iranian and Russian natural gas to Europe. However, it can also provide an access point for Qatari LNG if an LNG facility were established in Turkey. -------------- QATAR'S GROWING CUSTOMER BASE -------------- ¶8. (SBU) Qatar's primary customers have been South Korea, Japan, and India, accounting for almost 77% of total exports in 2008. Long-term contracts have tied up most of Qatar's current production, pushing them to increase production as they look to expand their market penetration. Recent controversies surrounding gas supplies in Europe have highlighted the need for diversification and have increased Qatar's ability to penetrate the European gas market. ¶9. (SBU) By investing in foreign infrastructure projects, Qatar is ensuring a steady and reliable consumer base for its LNG market while building stronger international ties that can aid in diversifying their domestic economy. Qatar has managed to build a strong consumer base in Asia and is now adding Europe to their focus. ¶10. (SBU) Belgium is a current consumer of Qatari LNG, purchasing 1.96 million tons in 2008 alone. However, Belgium's LNG facility is not simply a receiving station as it also exports LNG by reprocessing inbound shipments for outbaound transport to Portugal, Spain, India, and South Korea. ¶11. (SBU) Spain purchased 3.79 million tons of LNG from Qatar in 2008, making it the country's 4th largest customer. ¶12. (SBU) Croatia has been engaged in talks with Qatar for direct investment in an LNG terminal with support from neighboring countries who are also interested in diversifying their natural gas supply. Talks with Croatia have stalled due to a lack of sustained interest by the Croatian government and by Qatar's position that it could not provide LNG to Croatia until 2012, and that it would make no direct investment in the construction of an LNG facility. ¶13. (C) Hungary has been following developments in Croatia closly as it has a vested interested in the development of an LNG terminal on the Croatian island of Krk. Hungary has expressed interest in helping to fund a facility that would be connected to Hungary's gas pipleline network. They have also mentioned their desire to purchase Qatari LNG if there DOHA 00000473 003 OF 003 was a reliable pathway for access. ¶14. (SBU) Bulgaria and Qatar have begun talks concerning the possibility of future LNG shipments. Qatar engaged in talks with Bulgaria as discussions with Croatia stalled. -------------- OUTREACH -------------- ¶15. (SBU) Qatar's outreach to Europe has also been demonstrated by the Amir's recent visits to the United Kingdom, France, Croatia, and Bulgaria. Talks generally centered on current and future trade relations, direct investment opportunities, LNG options, and increased cooperation. LeBaron