China’s Sinopec acquires stake in Qatar gas project

Chinese energy firms are increasingly cooperating with their Qatari and Saudi counterparts as the People’s Republic makes further inroads into the region.

The Chinese oil giant Sinopec acquired a stake in a field owned by Qatar’s state-owned energy firm on Wednesday as Beijing increases its influence in the region.

The official Qatar News Agency reported that QatarEnergy will transfer a 5% stake in its North Field East. The stake has a capacity of eight million tons per year, according to the agency.

Background: QatarEnergy, formerly Qatar Petroleum, is majority owned by the government of Qatar. Part of the company is also listed on the Qatar Stock Exchange. In 2018, QatarEnergy announced that foreign investors could hold up to 49% of the shares of QatarEnergy subsidiaries that are listed on the exchange.

QatarEnergy’s North Field East Ras Laffan on Qatar’s Gulf coast is a liquified natural gas (LNG) field.

Why it matters: China is rapidly making inroads into the Middle East. In March, China brokered the agreement for Iran and Saudi Arabia to resume relations. Also last month, the Chinese firm Xinxing Ductile Iron Pipes Corporation signed an agreement to build a $2 billion steel factory in Egypt’s Suez Canal.

China is especially interested in developing its energy relations with Middle Eastern countries, including Qatar. In November, QatarEnergy signed a deal with Sinopec to provide the Chinese firm with four million tons of liquified natural gas per year over 27 years.

Chinese President Xi Jinping also visited Saudi Arabia in December for summits with Saudi as well as other Gulf leaders. Saudi Aramco and China’s Shandong Energy Group signed a memorandum of understanding on renewable energy cooperation during Xi’s visit, among numerous other deals.

China has relatively little oil and gas of its own, prompting the People’s Republic to increasingly turn to Qatar and Saudi Arabia as it continues to develop and grow economically.

Owning a stake in QatarEnergy is significant due to the company’s size and stature. QatarEnergy’s total assets were worth $116 billion 2020, the last year for which data was available. Qatar as a whole is consistently in the top five liquefied natural gas exporters in the world.

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