Marwa Rahhad, Andrew Mills, and Christoph Steitz

LONDON (Reuters – Germany, Qatar and other countries have had difficulties in negotiations over LNG supply contracts. There are differences about key terms, such as the length of the contract. Three people who were familiar with the talks told Reuters.

According to people, Germany’s goal to decrease its carbon emissions by 88% in 2040 is not to be bound to Qatari conditions for signing deals over at least 20years to get the large LNG volumes that it requires to lessen its dependence on Russian natural gas.

Qatar is the largest LNG supplier in the world. They are also setting terms like a destination clause to prevent Berlin from routing the gas to Europe. This condition the European Union strongly opposes.

As the German government struggle to strike a deal to reduce its carbon emissions, the tough negotiations between Qatar Energy (German utilities) highlight the difficulties the EU has to face in diversifying away from Russian gaz.

Germany is estimated to consume around 100 billion cubic metres (bcm), of natural gas each year. About 55% of this comes from Russia. Smaller volumes are piped from Norway and the Netherlands.

As a temporary measure, it has supported the construction of two LNG terminals. It also rented four floating storage units and regasification (FSRUs), as an interim.

It needs the actual LNG now.

The issue of LNG contract duration potentially putting Germany’s targets for decarbonisation at risk is part the ongoing conversations with Qatar,” one person stated. They added that Germany was competing against other countries to obtain LNG from Qatar.

According to another source, securing LNG supplies from Qatar is “not expected to occur soon”.

The Qatari government communications office refused to comment on the ongoing negotiations. Germany’s Economy Minister wasn’t immediately available to comment.

Qatar also insists on oil indexation. It links contracts to crude oil price. The pricing structure of alternative sales into Asia is represented by the Qatari oil market. Germans want linkage with the Dutch TTF benchmark. Felix Booth (head of LNG, energy intelligence company Vortexa) said.

Booth explained that Qatar has a leading role in these discussions with an ongoing project, strong interest and volumes, and having a history of being a reliable supplier.

It is anticipated that the German team would accept an oil-linked pricing structure to secure their supply. This would provide the European buyer with significant exposure to financial costs compared to European hub price,” he said.

QUID PRO-QUO

In March, Robert Habeck, the German Economy Minister, visited Qatar with representatives from RWE and Uniper to talk about additional volumes. However, no agreement has been reached.

RWE was Germany’s most powerful power producer in 2016. In 2016 RWE signed a deal for Qatargas (a Qatar Energy unit) under which approximately 1.1 million tonnes liquefied natural gases will be delivered annually to Northwestern Europe (NASDAQ;) by 2023.

RWE did not comment on the discussions. Uniper, too declined comment. It stated that its relations with Qatar date back many years and it hopes to strengthen those ties.

Two people who are familiar with the matter said that German gas companies would be returning to Qatar in May for talks.

According to them, the Emir of Qatar Sheikh Tamim Bin Hamad Al Thani will travel to Germany during the second half May in order sign a partnership accord between the two nations.

But, the partners said that it does not necessarily mean long-term LNG contracts will be signed. The partnership is meant to facilitate a significant increase in Qatari LNG delivery to Germany.

Qatar’s sovereign wealth funds, QIA and Volkswagen have invested around $20 Billion in Germany. Deutsche Bank (ETR:).

Germany wants to establish a partnership with Qatar. German companies, such as Siemens Energy, could assist Doha in its efforts to implement the sustainability plan it started late last year.

A German source said that “there needs to be an informal agreement between Qataris companies and German corporations, that LNG shouldn’t only be the initial step in a much longer collaboration between these two countries,” one industry source stated.