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Qatar's LNG ambitions expand anew

A recent North Field find will feed yet more LNG capacity while efforts to secure future markets are intensifying

Expansion of the Qatargas LNG liquefaction complex will get more ambitious again, the CEO of state-owned Qatar Petroleum (QP) Saad al-Kaabi confirmed in late November—the third time since a moratorium on upstream gas development at the supergiant North Field was lifted some two and a half years ago that the scope of new capacity has been revised upwards.

In July 2017, following successful exploration in the field's southern sector, proposals merely to debottleneck some of the existing 14 LNG trains at the Ras Laffan gas processing hub were replaced by the North Field expansion (NFE) project. This was then expanded in September 2018 to comprise four new 7.8mn-t/yr LNG trains, intended to lift total exports from 77mn t/yr to around 110mn t/yr by 2024.

Now, exploration has confirmed the onshore extension of the field into the country's north-east and a decision has been taken to use the fresh resources to feed two further LNG trains, raising output to 126mn t/yr by 2027, says Kaabi. Engineering work on the new trains has already begun—and is assumed to involve Japan's Chiyoda Corporation, as the front-end engineering and design (Feed) contractor on the NFE project and builder of the six existing mega-trains.

Contracting on the estimated $18bn NFE scheme is well under way, albeit with modest delays. Bid submission for the main onshore engineering, procurement and construction (EPC) package covering the new liquefaction trains has been delayed from October to Q1 2020, making fulfilment of an earlier promise to award all the major construction contracts by the end of March improbable. Those invited to bid were Chiyoda with UK-based Technip FMC, Japan’s JGC Corporation with Italy’s Saipem and US engineer McDermott (US) with Taiwan’s CTCI. Offshore work is further advanced, and on the same day the new find was unveiled, QP also announced that McDermott had completed the first two jackets for the project. The US company won in May the Feed contract for the associated topsides and pipeline.

Crowded field

International oil companies (IOCs) have been salivating at the first opportunity for more than a decade to grab a slice of Qatar's gas bounty, rewarding QP with access to international upstream equity to improve their chances of a shareholding. In October, Kaabi confirmed that US independent ConocoPhillips, ExxonMobil, Shell and Total were among those invited to bid for a stake, with Chevron and Italy’s Eni also believed to be on the shortlist. A decision is due in the first quarter of next year. QP has frequently asserted its ability and willingness to proceed without a foreign partner. But this is unlikely to happen, with the majors' LNG marketing reach and expertise deemed invaluable, given the huge changes in the industry since QP last brought new supply on stream. 

IOCs have been salivating at the opportunity for more than a decade to grab a slice of Qatar's gas bounty

Renewed North Field expansion is designed to restore Qatar’s long-held position as the leading LNG exporter, amid growing competition from Australia, Russia, the US and a proliferation of aspirant new producers. With gas in vogue to replace dirtier fossil fuels, and LNG projects typically having a lead time of some five years, an ever-growing number of schemes are in the early stages of implementation worldwide to meet the current thirst, leading to fears of another supply glut by the mid-2020s.

Forecasts of future demand are widely divergent. QP consistently professes unconcern, pointing to the competitive advantage gained from Qatar’s ultra-low upstream production costs and the huge profitability of the North Field’s associated liquids output—the latter helping to deliver full costs payback on previous train that were measured in years rather than decades. However, the firm is already looking to a future beyond long-term take-or-pay contracts with major Asian buyers, which have formed the bedrock of previous sales. Recent focus has turned to bolstering the Qatar’s existing position in Europe, where countries are to varying degrees looking to reduce dependence on piped Russian gas.

In September 2019, QP signed an agreement with Belgian infrastructure firm Fluxys, reserving until 2044 the entire LNG unloading capacity at its Zeebrugge import terminal—around 6.6mn t/yr—and in early December, the German state of Lower Saxony said that “deep and concrete” talks were under way for the company to supply LNG to the floating storage and regasification unit (FSRU) planned at Wilhelmshaven deep-water port. The proposed terminal is targeting capacity of roughly 7.4mn t/yr and a start-up date of 2023.

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