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Qatar Petroleum accelerates overseas expansion drive

While international attention is focused on the Qatari state energy company’s flagship domestic LNG project, the firm is quickly building a worldwide portfolio

Government-owned Qatar Petroleum (QP) in late July built on ties with Eni and Total to acquire interests in five exploration blocks in Kenya and Guyana. This is the latest move in a two-year international upstream acquisition spree that has seen the traditionally domestically-focussed company build a substantial portfolio in Africa and the Americas, as well as within the GCC.

Global diversification is a long-stated QP aim—one appearing especially prudent in light of its two-year blockade by its GCC peers and rising US-Iranian friction. "QP's international expansion is being driven by corporate strategy," says Lynn Morris-Akinyemi, analyst at consultancy Wood Mackenzie. "It started this latest internationalisation push in mid-2016. However, the tensions in the Gulf have possibly served to strengthen the company's resolve to push ahead."

The recent surge in activity has also been enabled, to a large extent, by the majors jostling for favour to gain a role in the company's first domestic LNG development project for more than a decade at the supergiant North Field.

On 23 July, QP signed an agreement to take a 25pc stake in offshore blocks L11A, L11B and L12 in the Lamu Basin, off Kenya's north-east coast—joining Eni, the operator, with 41.2pc, and Total with the remainder. According to CEO Saad al-Kaabi, the move is consistent with a strategy calling for the acquisition of acreage in "frontier basins with significant hydrocarbon resource potential".

Six days later, the company purchased 40pc of Total's existing 25pc participating interests in Guyana's offshore Orinduik and Kanuku blocks—operated by the UK's Tullow Oil and Spain's Repsol respectively.

QP has stated its willingness to proceed alone should foreign partners be unwilling to invest on terms deemed acceptable

QP has concentrated on upstream rather than downstream international operations since restructuring in 2015. The advance in upstream accelerated last year—in the wake of both a sustained oil market recovery and the launch in late 2017 of the estimated $18bn North Field expansion project. QP has acquired exploration assets in Argentina, Brazil, Mexico, Morocco, Mozambique, Oman and South Africa in the form of minority stakes in consortia led by Chevron, Eni, ExxonMobil, Shell and Total.

The Italian giant has been a particularly-frequent co-investor—reflecting the company's lack of existing interests in Qatar's domestic energy sector coupled with a professed goal to enter the LNG industry. Other prospective international oil company partners participated in the original development of the Gulf state's now-pre-eminent LNG industry, which was halted in 2005 by a self-declared moratorium on further North Field development pending reservoir studies.

QP is expected to select a partner by year-end but has stated its willingness to proceed alone should foreign partners be unwilling to invest on terms deemed acceptable, which Kaabi's track record suggests will be demanding.

US footprint expands

The ability to call on deep, longstanding relationships with the majors is also evident in two landmark deals signed this year in the US, where the CEO spoke in December of investing $20bn over the next five years. In February, QP and ExxonMobil took the final investment decision on the estimated $10bn Golden Pass LNG project, which calls for the construction of a two-train 15.6mn-t/yr LNG export facility at the Sabine Pass in Texas, fed by the area's plentiful shale gas reserves. ExxonMobil is Qatar's largest foreign investor.

In early July, the bullish streak continued with the signature of an agreement with Chevron Phillips Chemical—a joint venture between Chevron and Phillips 66—to develop an ethane cracker and derivatives units at an undisclosed location on the US Gulf coast, at an estimated cost of $8bn, in what would be QP's first international petrochemicals investment.

The cracker would have capacity of 2mn t/yr—potentially the world's largest—and would feed two 1mn-t/yr high-density polyethylene units. Engineering, procurement and construction is scheduled to start in 2021, with completion slated for 2024. QP will take a 49pc stake.

Two weeks earlier, the two companies agreed to construct an ethane-based petrochemicals complex of similar size and configuration at Ras Laffan, the hub of Qatar's gas industry, building on ties created during the first wave of petchems development there over the course of last decade.

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