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QP advances in LNG and oil

Further North Field expansion tenders are out, as Qatar sends strong signals to potential partners that it can go alone

Qatar Petroleum (QP) floated a tender in mid-September for a third package of onshore work relating to the company's estimated $18bn North Field expansion (NFE) project. NFE will see development of reserves in the south of the supergiant gas field and the construction of four new liquefaction trains at Ras Laffan port to increase LNG capacity from 77mn t/yr to 110mn t/yr.

NFE would restore Qatar's long-held position as the world's pre-eminent exporter of the fuelset to be seized shortly by Australia—although in the longer-term the US could eventually outstrip the Gulf state. And the accelerated tender programme may be a strong sign to potential partners of their disposability, at least on a technical level.   

The latest tender calls for engineering, procurement and construction (EPC) of additional liquid products storage facilities at the LNG hub. Bids are due in October for a far-larger EPC package covering new storage, loading and export capacityencompassing three new tanks and two new berths, and valued at some $2bn. The main onshore contract, for the new 7.8mn-t/yr LNG trains, was tendered in April to a shortlist of three consortia—Japan's Chiyoda with UK-headquartered TechnipFMC; JGC, another Japanese firm, with South Korea's Hyundai; and Italy's Saipem with the US' McDermott. The Chiyoda/TechnipFMC team is considered the clear favourite by dint of having built Ras Laffan’s existing 'mega-trains'.

Offshore engineering, procurement, construction and installation (EPCI) contracting is likewise well-advanced, with McDermottlong the dominant player in Qatar's offshore sectorpicking up the bulk of the work. In May, it won the Feed package on the topsides for eight new wellhead platforms, having been selected to build the associated jackets two months previously. According to QP, all main contracts will be awarded by February 2020by which time FID should also have been taken.

Fierce competition

NFE is the first development to be sanctioned at the North Field since QP in April 2017 lifted a 12-year moratorium on further exploitation there; and the competition among the majors to partner the Qatari firm is intense. In early September, QP CEO Saad al-Kaabi said a shortlist had been drawn up in response to a request for initial proposals.

QP has the financial and technical means to proceed alone

But he also warned prospective investors that QP has the financial and technical means to proceed alone, should an attractive offer not be forthcoming. QP was looking at other ways in which potential partners could add value to the company, he said, hinting that the potential for a share of international assets could be a factor.

Aspirant investors have long been aware this criterion: Italy’s Eni, ExxonMobil, Shell and Total, considered the frontrunners, have over the past two years admitted the Qatari firm to consortia winning a host of upstream licences worldwide. QP has thereby acquired interests across Africa and the Americas.

Other forms of collaboration have also emerged: in mid-September September, QP and ShellQatar's second-largest foreign investor after ExxonMobilannounced the formation of an LNG bunkering partnership. While LNG projects are multiplying globallyto the extent that some fear another supply glut by the mid-2020sQatar can offer unbeatable economics, in part due to low production costs and in part due to the high liquids content of the gas.

110mn t/yr Qatargas LNG capacity after NFE completion

Beyond LNG, work is quietly progressing on a three-phase crude oil project, dubbed Gallaf, to maintain production capacity at Qatar's largest oil producer, the offshore Al-Shaheen field, where Total has been joint operator with QP since 2017. The Gallaf development aims in the first instance at sustaining output at the complex fieldcomprising a thin layer of highly-viscous oil above the North Fieldat around 300,000bl/d, equivalent to around half of total Qatari production.

Vietnam's PetroVietnam Technical Services Corporation (PTSC), a newcomer to Qatar, was the surprise winner of the first package of EPCI work, covering three of the eight planned new wellhead platforms; and contractor selection is expected imminently to install a further two, following submission of revised bids in August.

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