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Qatar's LNG drive in top gear

Qatar is pushing aside all other considerations to concentrate on the LNG-production race

When it comes to liquefied natural gas, Qatar doesn't like to do things by halves. After establishing itself as the world's largest producer (77m tonnes a year), it's taking steps to ensure that it remains dominant when rivals that might overtake it in the short run have likely fallen by the wayside.

The source of Qatar's wealth is the vast store of natural gas (the world's third-largest reserves) below the waters of the Gulf in the North Field—shared with Iran, which calls it South Pars. North Field gas was the catalyst for the boom in LNG development in the late 1990s and early years of this century.

In 2005, the Qatari authorities decided that the draw from the North Field was at risk of becoming excessive and imposed a moratorium on new development. In April 2017, however, that was lifted. Qatar Petroleum (QP) chief executive Saad al-Kaabi said the company had conducted "extensive studies" and exerted "exceptional efforts to assess the North Field". As a result, work would start on a 2bn cubic-feet-a-day expansion programme at a site in the southern part of the field.

The expectation was that debottlenecking of some of the existing 14 trains at Qatargas and RasGas LNG facilities at Ras Laffan would increase capacity sufficiently to accommodate the new volumes of gas. Indeed, Japan's Chiyoda was contracted to identify the modifications needed.

Foot on the gas

Then, out of the blue in July last year, QP announced that the North Field expansion programme was to be doubled to 4bn cf/d. This, it was assumed, would require not just debottlenecking, but the establishment of two more LNG trains, each with capacity of 7.5bn t/y.

But no. In March this year, Chiyoda was awarded the front-end engineering and design contract for three new liquefaction trains, with pre-investment to add a fourth in the future. The capacity of each new train will be 7.8m t/y, raising Qatargas capacity (Qatargas and RasGas have now merged) to 100m t/y. Kaabi said the award of the FEED contract represented "a significant milestone in our journey to produce the first LNG from this new project by the end of 2023".

Several factors could have influenced Qatar's decision to put all the extra North Sea capacity into LNG. Firstly, the only non-LNG export potential is via the Dolphin pipeline to the UAE. With the UAE government supporting the Saudi-led economic and diplomatic boycott of Qatar, there's no prospect of increased volumes being pumped in that direction. Secondly, Qatar might be concerned that Iran will increase its offtake from the shared field. But the third and most important issue is that the new LNG production will begin almost exactly when global supply is predicted to slip behind demand. Qatar alone will be bringing new gas to market.

This will enable Qatar to regain its position as the world's leading LNG producer-a position it will lose when Australia's Ichthys ramps up to its capacity of 80m t/y in 2019.

Above all, Qatar's aim seems to be to prove to the world that its spirit hasn't been crushed by the boycott. As Kaabi put it, "the addition of 23m t/y of LNG will not just enhance QP's position at the world's largest LNG producer and exporter, but also its international image as a reliable and trustworthy energy provider". Luiz Pinto of Brookings Doha—a think tank—told Petroleum Economist recently that the international oil companies operating in Qatar's gas sector and other key investors "will lobby for international support" for the country.

On the face of it, the latest announcements indicate that all the pieces are ready to be put in place for Qatar's new phase of LNG production. But, based on past experiences, one shouldn't rule out more surprises along the way.

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