ConocoPhillips ( COP Quick Quote COP - Free Report) signed two agreements to purchase liquefied natural gas (LNG) from QatarEnergy and supply it to Germany for at least 15 years.
This represents the first-ever long-term supply deal to deliver LNG to Germany, contributing to the largest European gas-consuming nation’s energy security.
Per the deal, ConocoPhillips would purchase 2 million tons (Mt) of LNG per year for 15 years, starting in 2026. COP will deliver it to an onshore receiving terminal, which is currently under construction in Brunsbuttel, northern Germany.
The LNG volumes will be obtained from Qatar’s North Field East (“NFE”) and North Field South (“NFS”) projects. Once online, the projects are expected to boost Qatar’s LNG export capacity to 126 Mt from the current 77 Mt. ConocoPhillips holds 3.125% and 6.25% interests in the NFE and NFS projects, respectively.
The agreements came as Europe looks to replace Russia gas supplies after sanctions were imposed against Russia. Germany, which is Europe’s biggest importer of Russia gas, has not received any LNG since August. LNG demand has become robust since Russia gas constitutes 40% of the continent’s imports.
As European countries supported Ukraine after Russia’s aggressive invasion, Moscow reduced natural gas supplies used for heating homes, generating electricity and powering industry. This led to an energy crisis, fueling inflation and increasing pressure on companies.
Germany is manufacturing five LNG terminals as part of plans to replace Russia supplies, with the first expected to become operational shortly. Most of Germany’s current gas supply comes from or through Norway, the Netherlands and Belgium.
The latest agreements will provide an attractive LNG offtake solution and reliable sources of LNG supplies into Europe.
Shares of COP have outperformed the
industry in the past six months. The stock has gained 10.5% against the industry’s 10.5% decline.
Image Source: Zacks Investment Research Zacks Rank & Stocks to Consider
ConocoPhillips currently carries a Zack Rank #3 (Hold).
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