Qatar expands LNG capacity to become Europe’s emergency gas supplier | OilPrice.com

The emirate has now signed separate partnership deals with France’s TotalEnergies and Italy’s Eni, following the recent signing of a memorandum of understanding by Qatar on energy cooperation with Germany, which aims to become its main liquefied natural gas (LNG) supplier in the future North Field (or “Dome”) expansion of the world’s largest LNG project. According to Qatar’s Energy Minister Saad al-Kaabi, the French oil and gas supermajor will have a 25 percent stake in the project, with no other company having a higher stake and the partner selection process is now complete. The same terms have been announced for the Eni partnership agreement. Patrick Pouyanne, TotalEnergies Chief Executive Officer, added that the company’s 25% stake is earmarked for one “train” (liquefaction and purification plant) of the project. Al-Kaabi confirmed that as Qatar adopts a unified approach, considering all four trains as one entity, TotalEnergies’ 25 percent stake in a virtual train gives it around 6.25 percent stake in all four trains . Overall, the long-awaited expansion plan for the North Field includes six LNG trains aimed at increasing Qatar’s liquefaction capacity from 77 million tonnes per year (mtpy) to 110 mtpy, with the addition of four more trains from 2025 and then to 126 million tonnes per year year with the addition of two more trains by 2027. All other things being equal, this appears to be a perfectly achievable goal given that the oversized North Field natural gas field, along with the neighboring 3,700 square kilometer area of ‚Äč‚ÄčIran’s South Pars field, is by far the largest not associated natural gas field in the world. By conservative estimates, the entire 9,700 square kilometer site contains at least 1,800 trillion cubic feet (Tcf) of unassociated natural gas and at least 50 billion barrels of natural gas liquids. This abundant resource had allowed Qatar to be the world’s largest LNG exporter for many years, although at times it lost that spot to Australia. Qatar’s decline in standing was a result of the 2005 moratorium on further development of the North Dome site, which was lifted in the first quarter of 2017.

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That TotalEnergies and Eni were the first two international oil companies to be selected for key roles in this pivotal project perhaps reflects not only their undoubted capabilities as oil and gas companies, but also perhaps reflects the commitment Qatar is making to look after itself to be positioned as the emergency gas supplier for Europe given the energy supply constraints likely to result from the intended ban on Russian energy this year. Both companies are not only highly respected and popular European Union (EU) oil and gas companies, but are also considered “our own companies, particularly TotalEnergies,” according to a leading EU energy source exclusively OilPrice.com last week. “Germany is effectively the economic leader of the EU, but France could be called the ideological leader, having pushed for the ‘Treaty of Paris’ in 1951, which can be seen as a precursor to the European Economic Community and then the European Union itself,” said he. “TotalEnergies is viewed by some high-level members of the EU as fulfilling a role that cuts across both economic and political agendas, although this occurs at a different level than the company itself,” he told OilPrice.com. From the point of view of Germany and Qatar, TotalEnergies has also put itself in a very advantageous position by announcing early on that it would no longer invest in any new projects in Russia after the Russian invasion of Ukraine.

For Qatar, securing supply deals in Europe in preparation for losing at least some Russian oil (and gas) supplies in the future is a sound strategy to ensure it has the political will and financial backing for its North Field Expansion project remain in place for completion in 2027. For some five years before signing these new contracts with TotalEnergies and Eni, state-owned QatarEnergy waited to finalize various partnership agreements, although it had said it could self-finance the entire project if needed. Other international oil companies that have applied for inclusion on the four trains of the North Field East Expansion and/or the other two trains involved in the second phase of the North Field South Expansion project include ExxonMobil, Shell and ConocoPhillips EU -Energy source. Qatar sees an even split of buyers for the LNG volumes from the expansion projects, according to al-Kaabi, with Asian buyers expected to make up half of the market and buyers in Europe the remainder. With this in mind, QatarEnergy awarded the engineering procurement and construction contract for the North Field Expansion project to a joint venture between Spain’s Tecnicas Reunidas and China’s Wison Group.

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In the short term, it is planned that new LNG supplies from Qatar will come to Germany via existing import routes, complemented by new infrastructure approved by the German Bundestag on May 19. This includes the deployment of four floating LNG import facilities on the north shore and two permanent onshore terminals, which the EU energy source said are currently under development. These plans will run in parallel with plans for Qatar to also provide Germany with sizable LNG supplies from the Golden Pass terminal on the Texas Gulf Coast, but are expected to be completed significantly earlier. QatarEnergy has a 70 percent stake in the Golden Pass terminal project, with ExxonMobil holding the remainder. The estimated shipping capacity of the Golden Pass terminal will be around 18 million tonnes per year (mtpy) of LNG, and the facility is expected to be operational in 2024.

However, doubts remain as to the extent to which Qatar’s LNG can replace oil and gas, which has historically flowed into the EU from Russia. As highlighted by OilPrice.comLast year, Germany imported 142 billion cubic meters (billion cubic meters) of gas in 2021, down 6.4 percent from 2020, averaging about 12 billion cubic meters per month (although actual monthly consumption would not reflect this arithmetic mean due to differences in seasonal use) . As a guide, according to Independent Commodity Intelligence Services (ICIS) data for the month of December 2021, natural gas that came via pipelines from Russia accounted for 32 percent of Germany’s total imports that month, followed by shipments from Norway (20 percent of total) and the Netherlands (12 percent of the total). With this December percentage, Germany imported a good 45 billion cubic meters of natural gas from Russia for the year as a whole, which corresponds to almost 33 million tons of LNG or just over 40 million tons of oil equivalent. The 33 million tons of LNG for the year in Germany alone from Russia are compared to the total annual figure of the Golden Pass of 18 million tons of LNG per year.

By Simon Watkins for Oilprice.com

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