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“Where are the feasts we were promised? Where is the wine, the new wine, dying on the vine.” – Jim Morrison
How much gas will the world need in 27 years’ time? This question matters not just because it takes us to the feted mid-century point by which many countries have pledged to achieve ‘net zero’ emissions. For Shell and TotalEnergies, the answer will determine whether their latest bold bets on liquefied natural gas pay off.
The European oil companies have each signed separate 27-year sales and purchase agreements (SPAs) with QatarEnergy for 3.5 million tonnes per annum of LNG, to be supplied from Qatar’s North Field East and South expansion projects in the Persian Gulf. These deals follow similar 27-year contracts signed by China’s Sinopec and CNPC to buy even larger volumes from Qatar’s mega-expansion (4 mtpa apiece). These are the longest LNG SPAs ever signed, and they boggle the mind.
Going so very long on the most expensive form of gas at this point in the energy transition says a lot about the companies involved. For the Chinese state-owned giants, the Qatari volumes fit into Beijing’s ongoing efforts to improve air quality and achieve peak carbon emissions by 2030. China burns so much coal, and is expanding its coal-fired generation stack at such a clip, that there will almost certainly be an enduring need for alternative fuels well into the latter part of the century.
For the European IOCs, however, it is slightly different. These companies are the middlemen and they excel at trading and optimisation. But at the end of the day, they will need firm access to profitable growth markets where they can sell their regasified Qatari LNG into downstream demand centres that recompense them reliably and consistently. Given that roughly 7 billion people still lack proper access to energy, holding vast amounts of LNG on your books even as the ‘net zero’ year looms into view is a failsafe strategy – or so the thinking goes.
On the face of it, this is a reasonable assumption. It is highly likely that there will still be unmet latent global energy demand in 2050. Satisfying all the pent-up demand in countries that are itching to industrialise and improve living standards would be a herculean task without natural gas, even in times of energy abundance, cheap money and relative global stability. Doing so in a permacrisis era punctuated by geopolitical shocks, high interest rates and stuttering economic growth is nigh impossible.
But opening new markets is difficult. The depressing fact that half the world can barely keep the lights on does not make it any easier to secure investment in new gas infrastructure to serve these populations. Certainty of demand is one thing, but crafting tariff and remuneration structures, finding creditworthy counterparties, corralling investors, satisfying lenders and mollifying regulators is quite another.
And besides, demand is by no means certain to materialise. The International Gas Union warned in its latest annual report, released last week, that the “unprecedented uncertainty” around demand forecasts out to 2030 and beyond is sowing the seeds of future extreme market imbalances and successive price shocks. It added:
“This would in turn cause disruptions in economic development and environmental consequences – especially in the developing world, where demand for natural gas could fail to be met, and greater use of coal, oil, and biomass use may occur.”

Fear of demand growth failing to materialise is, in a sense, a self-fulfilling prophecy. If enough investors question the robustness of demand underpinning a new LNG import terminal or pipeline network with a 10- or 15-year payback, the capital simply won’t be mobilised. Those would-be gas consumers at the other end will need to find alternative energy sources, or go without.
If LNG offered price stability to end-users, perhaps indexed to the cost of production, liquefaction and shipping plus a flat inflation-adjusted margin, these fears would be immaterial. But arbitrary oil indexation and (latterly) commodification of the fuel both detract from its appeal. The volatility of 2022 and potential for ongoing price swings makes LNG a tough sell in price-sensitive emerging markets – the ones that, incidentally, are expected to drive post-2030 global gas demand growth.
For some time, Shell has been counting on south-east Asia to provide more than one-third of additional global LNG consumption between now and 2040 from an almost standing start. Shell said in 2019 that LNG imports into China would more or less double by 2040. In South Asia, it would increase three-fold. This is conceivable. But demand for LNG in the ‘Rest of Asia’ – think Vietnam, the Philippines, Thailand and regional neighbours – would leap by 10x or more. This is beyond heroic.

Shell has not updated its Rest of Asia demand outlook since 2019 so their view might have changed somewhat with everything the world has been through. Even if those optimistic assumptions have been dialled back, it is hard to see any other region taking up much slack. LNG demand in North Asia (Japan, Korea, Taiwan) is flatlining, while China is maturing from a growth market into a balancing market, mopping up spare cargoes when the price is right and diverting to Europe during periods of scarcity pricing.
Europe is now a premium gas market that drives global prices, yet its decarbonisation targets mean it cannot commit meaningfully to LNG, making it fickle. (Shell says its Qatari LNG cargoes will go to the Netherlands, which is hard to believe for 100% of the time.)
The EU is building a new wave of LNG terminals that will connect with a European market that even Shell acknowledges is in terminal decline (albeit one with a widening supply gap). New regasification capacity is needed for European energy security; LNG will be either an expensive bridge, or an unaffordable destination.

Quite where that black dotted line above will be in 2050 is anyone’s guess. Who knows how many more black swans will hatch over the next 27 years? So far this decade it’s been one every 12 months or so.
The tail risk on deals of multi-decadal length is hard to contemplate, let alone quantify. The energy world will have been through 27 more years of unrelenting growth in renewables, EVs, heat pumps, demand-side response, green policymaking, digitalisation and artificial intelligence.
By committing to 27-year SPAs, could it be that Qatar’s newest customers are creating their very own ill-fated ‘27 Club’ — one of overly bullish LNG buyers, rather than generation-defining musicians who died far too young?
Unlike Jim Morrison, global gas demand won’t suddenly drop dead in 2050. LNG supply chains have proven remarkably resilient in the face of successive exogenous shocks. But this resilience was achieved by pushing price pain onto end-users, and there is only so much wild price hedonism at consumers’ expense that politicians can take.
Alarm bells have been ringing for some time on the shortcomings of energy policymaking around the world, particularly in the realm of energy security. With endless war raging in Ukraine, the Middle East on the brink of utter catastrophe and tensions again brewing in the Balkans, we can add to this the dawn of a scary new multi-polar world – one of failed politics, in which cross-border disputes are settled by armed force.
If both energy and national security have been taken for granted for too long, then what about climate security? The three are related, as extreme heat, droughts and flooding trigger big shifts in energy production, consumption and migratory patterns. With this in mind, just how firm is the ‘bullish energy’ thesis that rests on a future vision of a world short on basic fuels and long on youthful developing economies hungry for progress?
The LNG middlemen are smart. Shell and TotalEnergies will no doubt make mountains of cash on their Qatari LNG bets for many years, with periodic bouts of blood-letting when markets inevitably turn sour. Shareholders will be rewarded and occasionally burnt along the way. Maybe having boat-loads of oil-indexed LNG on your books will be a boon in the unknowable energy market of 2050. If not, it might be that the world has much bigger problems to contemplate.
Seb Kennedy | Energy Flux | 23 October 2023
The 27 Club
And just as I hit the send button on this post, this happens:
QATARENERGY, ENI SIGN 27-YEAR LNG SUPPLY AGREEMENT FOR UP TO 1 MTPA TO ITALY
https://www.qatarenergy.qa/en/MediaCenter/Pages/newsdetails.aspx?ItemId=3777
The European IOCs are all piling in now. Is this a case of FOMO? If so, they should all know exactly where that road leads - and it's almost certainly not double-digit annualised returns over three decades. Spoiler alert: portfolio risk management is going to become the single most important business function at all the big European energy companies.
For South East Asia, the growth is probably partially to replace depleting regional supplies, and the assumption of coal-to-gas switching. I do have my doubt about the latter assumption.