Jun 12 2022
Qatar, one of the world's biggest exporters of liquefied natural gas, has chosen TotalEnergies as among partners to develop its massive offshore North Field East project, the country's energy minister said June 12 in the wake of growing demand for the fuel in Europe and around the world after Russia's invasion of Ukraine.
The value of the deal was not disclosed but it was the "biggest" between the French energy major and QatarEnergy, Saad al-Kaabi said. He didn't name other partners, but did say the selection process for other partners is finished and details will be announced later.
First liquefied gas production will begin in 2026, he said. Other partners are reportedly ExxonMobil, Shell and ConocoPhillips.
TotalEnergies will have a 25% interest in the North Field East project, equivalent to one LNG train with capacity of 8 million mt/year, the company said. QatarEnergy will have the remaining 75% stake in the project that will run for 25 years, Kaabi said.
The other partners will not have the same percentage stakes, he said. Qatar may do projects with TotalEnergies in other parts of the world, he added.
QatarEnergy is expanding capacity at the four-train North Field East Project to raise production capacity to 110 million mt/year from 77 million mt/year in the first phase.
The second phase expansion, which is also known as the North Field South Project, will raise the LNG production capacity to 126 million mt/year. The country is targeting a 2027 timeline for the completion of the two-phase project. In all, four trains for 32 million mt/year of capacity for North Field East will cost $28 billion, Kaabi said.
"The LNG market will need the extra volumes as there is very little coming until 2025 and there will be even more required to replace Russian pipeline gas into Europe," Robin Mills, CEO of Qamar Energy, said.
State-backed QatarEnergy awarded the engineering procurement and construction contract for the North Field East Project to a joint venture between Spain's Tecnicas Reunidas and China's Wison.
Qatar said in early 2021 that it would announce the international partners for the first phase of the project within a six-month timeframe.
Deciding on the partners has likely been delayed due to "high volatility in the LNG market [that] would have led to protracted negotiations," said Mehrun Etebari, associate director, global LNG, at S&P Global Commodity Insights.
The company's latest announcement comes amid the backdrop of Russia's invasion of Ukraine, which has forced the EU to consider cutting off supplies from Moscow.
"Market tightness and demand for new LNG volumes has only risen since Russia's invasion of Ukraine, so it is likely that QatarEnergy has aimed to take advantage of the current market conditions by securing more favorable terms in its negotiations with partners and offtakers," Etebari said.
The EU has pledged to reduce demand for Russian gas by two thirds by the end of 2022 through higher LNG supplies from the global market, increased biomethane production and energy efficiency.
Lower Russian pipeline gas flows have contributed to the recent European price strength, while Europe also faces competition from Asia for LNG cargoes.
Both European and Asian gas prices remain high, with the Dutch TTF day ahead price assessed by Platts from S&P Global Commodity Insights on June 10 at $24.452/MMBtu, more than double the price of a year earlier. The Platts JKM spot Asian LNG price, meanwhile, was assessed June 10 at $23.561/MMBtu, up almost double on the year.
"The announcement keeps Qatar on pace to complete the six-train North Field expansion on or close to its target of 2027," Etebari said.
Accelerating expansion at the North Field will allow the gas producer to overtake Australia, which has the lead in LNG export capacity, he said.
"The tight market is also boosting the prospects of proposed new liquefaction in the United States, and we forecast that US exports will remain just ahead of Qatari exports. However, Qatar has spoken of potentially expanding beyond six new trains, potentially adding one or more new trains to the North Field South phase, and the partnership selection at North Field East only helps its progress," Etebari added.
There is currently more demand for gas in Europe, Kaabi said. It is not clear if the Ukraine-Russia dispute will end in months or in years, but Kaabi said he didn't think Russia would be cut off forever.
"Our view is that approximately after we finish all of our gas investments, we will have about half of our markets in Asia and half in Europe. This is what we aspire to in the future.
"We aspire to distribute our gas to as many countries as possible," Kaabi said.