QP Goes Solo On Qatargas-1

A new era beckons for Qatar’s LNG sector, with Qatar Petroleum taking over 100% on its 10 million ton per year Qatargas-1 when its joint venture expires at the end of the year, state-owned QP announced on Tuesday Qatargas-1 launched Qatar as an LNG superpower, with the first of its three trains starting up back in 1996. Partners Exxon Mobil (10%), Total (10%), Marubeni (7.5%), and Mitsui (7.5%), will lose their shares in what multiple sources say has been a highly successful and profitable project. This will mark the first time QP has taken over one of its projects 100%. So what does this decision mean for renewals of its other joint ventures, and for partnership selection for its looming 32 million ton/yr North Field expansion? QP has repeatedly said that if offers are not sufficiently attractive, it is prepared to go it alone on the $29 billion LNG expansion. The six-train project is the biggest oil and gas investment to move forward this year, and partnership choices will shape regional international oil company investment fortunes for years to come (LNGI Feb.8'21). QP is expected to take a pragmatic approach, with long-term strategic and economic benefits being the key drivers of both joint venture renewal decisions and expansion partnership selection. Partnership Renewals and Sales Contracts For renewals, it is simply too early to tell as the majority of them fall in the late 2020s-early 2030s, with the exception of Rasgas-1 (see table). Certainly, 25 years of experience of operating its existing trains means QP is shouldering minimal technical risk by going solo as far as the renewals. Nevertheless, with up to 19 million tons/yr of sales contracts on its existing capacity expiring in 2021-25, QP faces a formidable marketing challenge -- with potential need for partners. However, with 8 million tons/yr of long-term contracts signed since November, QP may find the challenge manageable (LNGI Mar.22'21). North Field Expansion No doubt the Qatargas-1 decision sends a strong message to international prospective partners in the North Field expansion -- bid aggressively or lose out. Firms are due to submit offers to take up to a 30% stake in the expansion by end-May, with selection to take place, possibly staggered, by year's end. "This is a momentous event that highlights Qatar Petroleum’s efforts to further enhance the utilization of our natural resources for the benefit of our country," said Qatari Energy Minister Saad al-Kaabi, who is also QP's CEO. Shortlisted firms are the dominant Qatar investor Exxon Mobil, as well as Royal Dutch Shell, ConocoPhillips, Total, Eni, and Chevron. But partnership discussions have also taken place with Asian customers. Ostensibly, Exxon Mobil and Total’s loss of existing capacity would give them additional incentive to pursue investment in the upcoming expansion. Exxon and Qatar For dominant Qatar LNG investor Exxon, the expansion is of particular importance. Including Qatargas-1, the US supermajor has stakes in 12 out of 14 Qatari LNG trains. And while net Qatar output has fallen by over 1 billion cubic feet per day since its 4.26 Bcf/d 2011 peak, Qatar is overwhelmingly the reason why Exxon retains the biggest regional footprint of all the majors. Net Exxon output for 2019 in the Middle East and North Africa stood at 902,000 barrels of oil equivalent per day, some 200,0000 boe/d greater than the next biggest among its peer group, Total. Qatar for its part will want international partners, as much for geopolitical and as commercial risk-sharing reasons, according to the Energy Intelligence Research & Advisory Division. Doha has only just emerged from a 42-month blockade imposed by its neighbors, and the emirate is likely to avoid getting internationally isolated (LNGI Jan.12'21). Rafiq Latta, Nicosia, and Yousra Samaha, Dubai Partners in Qatar's LNG Trains Project Capacity