Qatar looks to bolster Spain’s EU-funded COVID recovery projects, supply more LNG

MADRID (Reuters) – Qatar’s $300 billion sovereign wealth fund plans to invest in Spanish projects funded by European Union COVID recovery funds under a deal due to be signed during the Gulf state ruler’s visit to Madrid this week, Spanish government sources said on Tuesday.

The bilateral deal represents the first major agreement between a European nation and a non-EU country aimed at leveraging the reach of the EU’s Next Generation programme, from which Spain will receive €70 billion euros ($73.33 billion).

It is expected to be signed on Wednesday between the Qatar Investment Authority (QIA) and Spain’s investment agency Cofides during Emir Shekih Tamim bin Hamad Al-Thani’s visit to the Spanish capital, one of the sources said. The investments in sustainability and digitalisation projects are due to be implemented within two to three years, according to that person.

“QIA has a budget that is practically 40% of Spain’s GDP… their investments are very concentrated in Asia and they want to invest more in Europe,” said the source, without providing specific figures.

Energy hub ambitions

Spain wants to increase Liquefied Natural Gas (LNG) imports from Qatar in order to guarantee the gas supply, the source said. The Mediterranean nation has spare LNG terminal capacity and the most LNG regasification plants in Europe and aims to position itself as a gas supply hub for EU nations seeking to reduce their energy dependence on Russia.

In 2019, before the COVID-19 pandemic upended supply and demand worldwide, LNG from Qatar – currently the world’s biggest exporter – accounted for 11% of Spain’s gas imports. Since then Algerian, Nigerian, Russian and American exports have taken a bigger role, according to Spain’s oil and gas agency CORES.

Spain’s main gas company Naturgy currently has two contracts with Qatargas, a subsidiary of Qatar Energy, each with an annual contract quantity of 0.75 million tonnes per annum. One runs until 2024 and the other through 2025. A company source told Reuters it had no immediate plans to extend or broaden its agreements.

Repsol, Spain’s other leading gas company, declined to comment on a possible deal to buy Qatari gas.

Qatar currently exports 77 million tonnes of LNG per year but aims to reach 126 million tonnes by 2027.

The Spanish government source declined to say how much of the increased capacity could be destined for Spain, and acknowledged that Spain’s hub ambitions were constrained by its lack of re-export capacity towards the north.

“For now, our export capacity is low but it is in our interest to guarantee gas supply”, he said.

The Qatari Emir landed in Madrid on Tuesday and met the King and Queen of Spain. Other agreements with Spanish companies are expected to be announced during his visit, including potentially with Spanish utility Iberdrola, of which Qatar’s sovereign fund is the main shareholder.

($1 = 0.9546 euros)

(This story refiles to correct paragraph seven to show Naturgy’s Qatari contracts are for 0.75 mtpa each, not a combined 1.5 mtpa and to show source said company had no immediate plans to extend contracts)

(Reporting by Belén Carreño and Isla Binnie, additional reporting Andrew Mills from Doha; editing by Aislinn Laing and Tomasz Janowski)