Brussels ghost looms over Doha gas gathering

There was a ghost in the room at a major event in Doha this week on liquefied natural gas – and the ghost was the European Union.

EU diplomats may have said they want the 27-member bloc to strengthen energy security by building ties with the Gulf Cooperation Council, but no officials at the conference spoke to address concerns among the hosts, Qatar, US oil executives and global commodity traders over the burden of laws coming out of Brussels.

At least three directives – the corporate sustainability due diligence directive (CSDDD), the methane regulation, and the corporate sustainability and reporting directive (CSRD) – act as disincentives for cheap LNG supplies into Europe. A fourth regulation, the carbon border adjustment mechanism (CBAM), which obliges industrial producers to account for carbon emissions, weighs on companies such as the Gulf’s aluminium smelters.

Speakers including Qatari energy minister Saad al-Kaabi, Darren Woods, the chief executive of ExxonMobil, and Ryan Lane, the boss of ConocoPhillips, struggled to maintain decorum.

But Richard Holtum, chief executive of Trafigura, the Switzerland-based commodity giant, was more outspoken. He pointed out that a “rapidly deindustrialising” Europe can impose fines of up to 20 percent of turnover on transgressors of the methane rules.

“The methane regulation … is one of the most ludicrous and bad pieces of regulation or legislation to come out of Brussels – and there’s some competition there. It fundamentally does not work in the real world. It is asking for wellhead data that simply doesn’t exist,” Holtum said.

Under the CSDDD, which was watered down late last year and its implementation delayed, companies that generate more than €1.5 billion ($1.8 billion) of revenue in the EU will have to report on the negative environmental and social impact of their direct suppliers every five years. Penalties run at up to 3 percent of revenue.

“The delay in CSDDD has been very welcome by the industry. There is a feeling that this might be the final nail in the coffin. If that is the case, let’s have clarity,” Holtum said.

Such considerations matter in the Arabian Gulf. Qatar, along with the US and Australia, is one of the world’s largest LNG exporters. Doha is expanding capacity from the North Field from 77 million tonnes per annum currently to 126 mpta. First-phase production is due later this year. The wealthy emirate has traditionally sold gas to Asia but also covers up to 14 percent of European demand.

And LNG, which unlike piped gas is easily transported, matters increasingly to Europe. Around 35 percent of EU energy supplies now come in the form of LNG, replacing Russian gas. Over three-quarters of the LNG emanates from the US – led by one President Donald J Trump – which has stepped up to fill the gap.

Further reading:

• Qatar has built prosperity. What comes next?
• QatarEnergy strikes LNG deals with Japan and Malaysia
• LNG from QatarEnergy North Field expansion to arrive in H2 2026

EU imports of Russian LNG are due to be phased out only by the end of this year – which would be nearly five years after Russia’s invasion of Ukraine – while those of piped gas should finish by September 2027. In the meantime, European states continue to fund Russia’s war against Ukraine. Alternative suppliers are at hand but Qatar has repeatedly threatened to cut gas supplies to Europe over the extraterritoriality of EU laws.

“Right now I think that to foreign and to other countries things like this [the methane and other regulations] look like non-tariff barriers,” Holtum said. “I think Europe needs to be very, very cognisant of how it looks from the outside. Why is Europe trying to set itself up as a regulatory superpower?”.