Jun 19 2022
QatarEnergy said June 19 it signed up Italy's Eni as its second partner in the world's largest LNG expansion program after the Gulf state cemented its lead as the largest global exporter of the fuel, with buyers chasing to replace supplies from Russia.
QatarEnergy will own 75% of the shares of the joint venture, and Eni the remainder, for the North Field East project, QatarEnergy CEO Saad al-Kaabi said at a press conference in Doha, marking the first time the Italian company will be involved in Qatar LNG. The joint venture will own 12.5% of the LNG project, equal to half a train, he added.
Financial terms of the deal were not disclosed.
Qatar took over as the world's largest LNG exporter in April and remained top in May, beating the US and Australia, according to S&P Global Commodity Insights data. Qatar had lagged both countries in March deliveries and was behind the US in February.
QatarEnergy said on June 12 that TotalEnergies had become its first partner for the project, winning a 25% stake in a new joint venture company that will be 75% controlled by QatarEnergy. It is equal to one train for TotalEnergies, Kaabi said.
That JV will own a quarter of the entire North Field East project, which includes four LNG trains with a combined nameplate LNG capacity of 32 million mt/year. Asian buyers are expected to make up half the market for the project, and buyers in Europe the rest.
Kaabi declined to say if the partnerships include rights to sell some of the expanded LNG production.
"We're not worried about the market," he said.
Qatar enjoys some of the lowest production costs in the world, with an estimated long-run breakeven cost of new expansions at less than $5/MMBtu landed into Asia , according to S&P Global estimates.
Both European and Asian gas prices remain high, with the Dutch TTF first month price assessed by Platts from S&P Global Commodity Insights on June 17 at Eur118.50/MWh, up 82% since the end of 2021. The Platts JKM Asian LNG price for August, meanwhile, was assessed June 17 at $37.889/MMBtu, up 31.6% this year.
Prices have surged due to Russia's invasion of Ukraine, which has prompted many European buyers of Russian gas to seek alternatives, including from Qatar. Kaabi and other Qatari officials have held several talks with European and Asian counterparts in recent months, though analysts say the country's ability to boost exports in the short-term is largely limited, until the expansion projects come along.
The North Field Expansion includes six LNG trains that will ramp up Qatar's liquefaction capacity from 77 million mt/year to 126 million mt/year by 2027, consolidating its status as the world's largest exporter.
QatarEnergy is expanding capacity at the four-train North Field East Project to raise production capacity to 110 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 has said.
QatarEnergy will be announcing three gas deals and one in petrochemicals this week alone, is working on another solar project and plans a tender for a gas turbine power plant for electricity in the country, all involving some $80 billion to $100 billion of investment over the next seven years to 2030, Kaabi said.
"We're going to need the private sector," he said. "After all this construction, it will greatly enhance the GDP of the country and total revenue stream coming into the state."