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Oil Majors Race To Get A Piece Of The Qatari LNG Market

Six large Western energy companies are bidding for a stake in Qatar’s North Field expansion project aimed at boosting the country’s LNG export capacity.

Four of the six are already partners of Qatar in the development of its massive natural gas reserves: Exxon, Shell, TotalEnergies—formerly just Total—and ConocoPhillips. Now, Italy’s Eni and Chevron have also joined the bidding, Reuters reported, citing unnamed industry sources.

According to one of the sources, Qatar Petroleum, the state-owned oil and gas company, does not need partners in terms of expertise. What it needs are long-term commitments of LNG purchases.

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“I don’t think QP need the IOCs expertise in the upstream or midstream construction of the project but they will be glad to see someone take some LNG volumes off their hands,” the source, who is with one of the bidders, told Reuters.

Qatar Petroleum sanctioned the North Field East Project this February. The expansion is set to raise Qatar’s LNG production capacity from 77 million tons per annum to 110 mmtpa. The project, expected to start production in the fourth quarter of 2025, will cost US$28.75 billion, which would make it one of the industry’s largest investments in recent years. It would also cement Qatar’s place as the world’s number-one LNG exporter while LNG projects elsewhere are being delayed or shelved because of the supply and demand dynamics of the natural gas market.

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Qatar also plans another expansion phase at the North Field, the world’s largest natural gas field which it shares with Iran. The second expansion phase will be the North Field South Project, set to further increase Qatar’s LNG production capacity from 110 mmtpa to 126 mmtpa, with an expected production start date in 2027.

“At a long-term breakeven price of just over $4 per million British thermal units, it’s right at the bottom of the global LNG cost curve, alongside Arctic Russian projects,” Wood Mackenzie research director Giles Farrer said in February, commenting on Qatar’s LNG expansion project.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on June 14 2021 said:
    With its plans to expand its LNG production capacity, Qatar will be focusing on two important considerations: securing markets for its LNG and reducing the risk of its huge investments to itself.

    That is why Qatar has been targeting China as its biggest LNG market and has also been in talks with Chinese companies to take them on as partners in its LNG production expansion project. China is projected to overtake Japan as the largest LNG importer by the end of this year.

    But Qatar also wants to reduce the risks from its huge expansion to itself. That is why it will partner a few major oil companies with whom it has cooperated in the past.

    Qatar which is the world’s largest producer and exporter of LNG and the cheapest producer is expected to boost its annual LNG production capacity from 77 million tons currently to 110 million tons—a 40-percent capacity increase by 2025. A further expansion to 126 million tons is expected to be ready by 2027.

    At a long-term breakeven price of just over $3 per million British thermal units, Qatar LNG will be the cheapest in the world matched only by Russia’s Novateck LNG.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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