Poland’s largest energy group, Orlen, has terminated one of its two long-term liquefied natural gas supply contracts with QatarEnergy, saying the Qatari producer has been unable to deliver because of a force majeure that has run since March.
The contract covered one million tonnes of LNG a year and was due to run until 2034. Orlen said it used its right to end the agreement on Tuesday “due to an ongoing force majeure resulting in an inability to meet contractual delivery obligations”. The deal will stay in force for 60 days after the notice.
It is the first known cancellation of a long-term QatarEnergy contract since the Iran war cut exports from the world’s second-largest LNG exporter. QatarEnergy did not immediately comment.
Force majeure since March
QatarEnergy declared force majeure in March after Iranian drone attacks damaged its LNG facilities at Ras Laffan, and tanker traffic through the Strait of Hormuz has been badly disrupted since. Orlen said last month that it expected Qatari deliveries to resume in mid-November.
That has not happened for every buyer. In late October, QatarEnergy told some of its Pakistani customers they would get no LNG from Qatar until the end of the year, after extending its force majeure notices to the end of December.
Supply ‘not affected’
“The decision to terminate the agreement does not affect the security of gas supplies. Gas production from the company’s own fields, together with its long-term gas supply agreements, ensures full coverage of Orlen Group’s gas requirements,” the company said.
Orlen also buys gas produced off Norway and in the United States, and will keep taking cargoes under its second long-term contract with QatarEnergy, which also runs to 2034. Earlier this month, Venture Global began commercial deliveries from the first phase of its Plaquemines export plant in Louisiana, where Orlen is a long-term customer.
An old price formula
The cancelled deal was signed in 2009 and priced on an oil-linked formula that market participants estimate at about 16% of the Brent crude price. Analysts put long-term US LNG contracts at about $6 to $7 per million British thermal units, less than half the cost of the Qatari deal.
Pakistan is also renegotiating oil-linked prices with Qatar. Its two long-term contracts are priced at 13.37% and 10.20% of Brent, and Qatar has offered to reprice both at 11.96% in exchange for fewer cargoes a year.
