Page 6 - MEOG Week 09 2021

MEOG COMMENTARY MEOG

Qatari deals come amid

push for LNG dominance

Two separate LNG-related deals were announced last week,
involving Qatargas and its parent company, Qatar Petroleum.

QATAR TWO separate LNG-related deals have been condensate, liquefied petroleum gas (LPG),
announced last week, involving Qatargas and its ethane, sulphur and helium.
parent company, Qatar Petroleum (QP). Its combined output will be 1.4mn barrels
WHAT: On February 22, Italy’s Saipem said it had of oil equivalent per day (boepd). The project
Two separate LNG-related received a contract worth around $1.7bn from is anticipated to begin production in the fourth
deals involving state- Qatargas for engineering, procurement, con- quarter of 2025, ramping up to full capacity by
owned Qatari firms have struction and installation (EPCI) of various late 2026 or early 2027, and QP has estimated
been announced. offshore facilities at Qatar’s North Field. The the expansion’s total cost at $28.75bn. Wood
facilities, for the extraction and transportation Mackenzie has suggested that this is likely to be
WHY: of natural gas, will be installed as part of Qatar’s the largest project sanctioned across the global
Qatar is on a push to project to expand its LNG production capacity to upstream sector this year.
maintain and expand its 110mn tonnes per year from 77mn tpy currently. In addition to the offshore EPCI contract,
LNG dominance. Separately, QP has struck a long-term deal Saipem appears to be set to be awarded another.
to supply 1.25mn tpy of LNG to commodity The Italian company said it had received a letter
WHAT NEXT: trader Vitol for delivery to the latter’s customers of intent (LoI) from Qatargas covering the con-
The country’s NFE project in Bangladesh. Deliveries are set to begin later tractual package for offshore export pipelines
to expand LNG capacity is this year, from Qatar’s existing LNG production. and related onshore work for the North Field
expected to enter service This comes as Bangladesh is facing growing expansion project. The award is subject to the
by the end of 2025. demand for gas from various sectors, including finalisation of contractual details and Qatargas’
industry, power plants and fertiliser plants. final approval.
Capacity push Bangladeshi deal
Both deals follow QP’s final investment decision In the meantime, QP continues its efforts to con-
(FID) on its North Field East (NFE) expansion tract out current and future LNG production, as
project, announced earlier this month. illustrated by the Bangladesh deal it struck with
At the same time, the company awarded the Vitol.
onshore EPC contract for the four LNG mega- Qatar has touted the low cost of its LNG, and
trains included in the scheme to a joint venture says that the NFE expansion would be “the most
between Chiyoda and Technip Energies. The competitive LNG project in the world”. Even
expansion is the largest single LNG project ahead of output from the expansion entering the
ever to be sanctioned, according to consultancy market, though, the country has shown a will-
Wood Mackenzie. Another consultancy, Rystad ingness to offer LNG offtake at low prices, in the
Energy, has said the expansion puts Qatar on hopes that this will give it a competitive edge in
track to return as the world’s largest LNG pro- the global market.
ducer by 2030, having recently been edged out by In September 2020, Qatargas won a 10-year
Australia. When Qatar reaches full LNG produc- tender to supply China’s Sinopec with 1mn tpy of
tion capacity of 110mn tpy, Rystad estimates this LNG from 2020. Media at the time cited sources
will account for 18% of the global total, which it familiar with the matter as saying Sinopec had
currently puts at 600mn tpy by 2030. However, agreed to pay at a slope of 10.00-10.19% to Brent
additional capacity could be sanctioned early crude. Market intelligence firm ICIS compared
this decade that would come online by then, and this to historic LNG contracts that were typically
the consultancy has also noted that utilisation agreed at slopes of 14-15%, noting the downward
rates do not necessarily match capacity. Indeed, pressure on LNG prices that was particularly
it expects Qatar’s actual production in 2030 to evident last year. Only a handful of LNG supply
reach 107mn tpy, though this would be a higher deals have been reported at lower levels than the
utilisation rate than it anticipates by that year Qatargas-Sinopec deal, according to ICIS.
from the US, with 91%, or Australia, with 86%. Separately, Qatar has been preparing to ramp
Aside from gas for liquefaction, the upstream up shipments to the UK – where it is already the
component of the NFE project will produce largest supplier of LNG by far. In October, QP

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