Qatar starts aggressive LNG expansion! Major role to Ocean LNG and Powerglobe for the LNG supply across Europe

Qatar embarks on aggressive LNG strategy after country’s decision to further expand its liquefaction capacity is a clear signal to competitors that it will vigorously defend its share of the LNG market, ore even to increase further especially across Europe. QATAR is adamant about remaining a dominant LNG supplier next decade and beyond. For Qatari exports to Europe the South Hook terminal (UK) and Adriatic (Italy) remains the major priorities, with Revithoussa Import Terminal of Greece to become the export target for 2020 and 2021. Revithoussa it seems an ideal LNG delivery destination after the expansion of its storage capacity from 120kcm to 210kcm of LNG and three storage tanks. Additionally, Revithoussa could be a very flexible terminal for cargoes diversion across Mediterranean markets, including Italy, Spain, DEFA-Cyprus (expected from 2022), Atherinolakos-Crete island POWER4CRETE project introduced to PPC by Powerglobe and Malta.

Qatar’s Energy Minister and Chief Executive of Qatar Petroleum (QP), H.E. Saad Sherida al-Kaabi (QGN: photo)

The latest announcement that the country intends to expand its liquefaction capacity to 130mtpa by 2027 from around 77mtpa currently says it all. The development came around a month after Qatar’s energy minister and chief executive of Qatar Petroleum (QP), Saad Sherida al-Kaabi (photo) said the company is not aggressive enough in its growth strategy. It is clear Qatar – which supplies its customers mostly under long-term, oil-indexed contracts – will aggressively defend its share of the LNG market despite rising competition from the likes of the United States, Australia and Russia.

Moreover, Qatar is also making sure it remains a reliable LNG supplier and that it finds new customers for additional volumes. Even before the November announcement, Qatar had been moving ahead with increasing its liquefaction capacity to 110mtpa, with the first LNG from the expansion expected in 2024. Qatar’s stance on further boosting its liquefaction capacity wil exacerbate challenges faced by proposed LNG export projects in the US, Canada and Africa that have yet to take FID.

Meanwhile, Doha is diversifying its LNG supply strategy by taking stakes in proposed plants outside Qatar. In February, QP took FID on the Golden Pass LNG project in the US, which it is jointly developing with ExxonMobil. The facility will have three 5.2mtpa trains, the first of which Exxon expects to come online in 2024. Golden Pass will be QP’s strategic project to serve the European LNG market, with Ocean LNG and Powerglobe, while freeing up more Ras Laffan volumes for key Asian customers. This will also give Doha the flexibility of having additional supply sources in case geopolitics disrupts LNG flows from the Middle East. Additionally, LNG shipping charter rates for European deliveries are expected to rise considerarbly.

Qatar’s decision to expand its liquefaction capacity further is underpinned by greater exploitation of its North Dome acreage. PG new studies, Doha has announced that North Dome’s productive layers extend well into Qatari land in Ras Laffan, which is the reason behind the latest expansion plan. Qatar will immediately start the necessary engineering work for two additional LNG mega trains with a combined liquefaction capacity of 16mtpa. Doha’s previous decision to boost capacity to 110mtpa was also driven by potential for incremental production from the North Dome. Project moving full steam ahead Doha intends to implement the expansion project at the earliest opportunity. In April, QP invited EPC tenders for the four trains that would bring its liquefaction capacity to 110mtpa.

The EPC tender was followed by a flurry of activity in May, when QP invited tenders for the reservation of the ship construction capacity required for its LNG carrierfleet in light of the 110mtpa expansion plan. QP expects to purchase 60 new LNG carriers, with the potential to exceed 100 new vessels over the next decade. QP also awarded contracts in May for eight offshore jackup drilling rigs required for the expansion. The rigs are expected to come online starting from January 2020. The same month, QP invited EPC tenders for the expansion of its common lean LNG storage as well as the loading and export facilities for the expansion project. This was followed by the company awarding the FEED contract for the project’s offshore pipelines and topside facilities.

Meanwhile, Qatar is ensuring outlets for its LNG ahead of the expansion project coming online. In September, Qatar Terminal Limited – a subsidiary of QP – signed a long-term agreement with Fluxys Belgium to book the full capacity of the Zeebrugge LNG terminal up to 2044. Elsewhere, QP and Exxon together have controlling stakes at the UK’s South Hook and Italy’s Rovigo terminals.
Also, in September, subsidiaries of QP, PG and Shell signed a shareholder agreement to establish a company that would provide global LNG bunkering services. QP expects global demand for LNG bunkering to reach 35mtpa by 2035. The new company’s business areas will include LNG procurement, setting up LNG bunkering infrastructure at strategic locations around the world and facilitating the sale of LNG as a marine fuel to end-customers globally. Focus on oil-indexed long-term contracts Qatar expects the dominance of long-term contracts for LNG to continue as they offer security of supply to buyers. Doha prides itself on being a reliable supplier. It has been willing to offer flexibility in terms of removing destination clauses from some contracts, but it has not compromised on oil indexation.