Qatar to dramatically expand liquefied natural gas production capacity

• DOI: http://doi.org/10.1111/oet.12752
• Date: 01 January 2020
• Published date: 01 January 2020

GAS AND POWER

Qatar to dramatically expand liquefied natural gas

production capacity

Qatar, the world's biggest liquefied natural gas (LNG)

exporter, plans to raise LNG liquefaction capacity by 64% to

126 mn mt/y by 2027, up from 77 mn mt/y now (Qatar is

already the biggest producer in the world), following a boost

in gas reserve estimates at its giant North Field—the world's

largest. The decision has major implications for the global

LNG market and competing projects, bringing Qatar's total

hydrocarbon output up to a massive 6.7 mn boe/d

1

—not

bad for a country with a population of just 2.4 mn.

The expansion will take the form of two “mega

trains,”and is an upward revision of an already ambi-

tious expansion plan (Qatar Petroleum had previously

announced its intent to raise LNG production capacity to

110 mn mt/y by 2024). The larger expansion means the

completion date is delayed from 2024 to 2027.

Qatar Petroleum CEO Saad al-Kaabi, who also serves

as Qatar's energy minister, said the decision was made

easier by new studies, which boosted estimated reserves

in the North Field to 1760 tcf of gas and 70 bn bbl of con-

densate (as well as significant quantities of liquefied

petroleum gas, ethane and helium). The field is by far the

biggest in the world, and even before the upward revi-

sion, it contained enough gas to supply Europe's entire

needs for over a century—a truly strategic asset of geopo-

litical significance.

In fact, the field's liquids and gas together represents

over 350 bn bbl of oil equivalent (bn boe), making it the

largest hydrocarbon deposit of any kind (non-coal) in the

world, with Saudi Arabia's giant Gawar oilfield—the

world's biggest conventional oil-field—trialing with less

than 150 bn boe, of which 65 bn boe had been produced

by 2010. Looking at gas alone, North Field is in the order

of six times the size of the world's second biggest field,

Urengoy in northern Russia, and 10 times the size of

Russia's Yamburg and Algeria's Hassi R'Mel—the world's

third and fourth biggest conventional fields.

Qatar shares the field with Iran, where it is known as

South Pars, but development there has struggled with fre-

quent delays, largely because of international sanctions

(a deal signed with total in 2017 was followed by the

French major's withdrawal in the run-up to US sanctions).

Iranian production is limited to 500 mmcm/d pipeline sup-

ply to its domestic market, along with some liquids produc-

tion, and there have so far been no Iranian LNG exports

(although Iran does export gas to Iraq and Turkey).

A raft of recent LNG project start-ups in Australia

means Qatar will likely temporarily lose its crown as the

world's top LNG exporter in 2020. Later in the decade,

the US is expected to compete for top spot with Qatar,

although the new Qatari expansion plans could make US

developers think again about some export projects,

because the market is more likely to become over-

supplied again in the mid-2020s and Qatari feedstock gas

is cheaper.

1|GLOBAL IMPACT

The additional LNG volume from the expansion will add

to anticipated global LNG oversupply in the mid part of

the 2020s, and due to its low-cost gas and scale, this could

threaten the economics of LNG projects elsewhere, such

as those in Mozambique and Canada, as well as the

United States. There has already been strong interest in

taking a stake in the project from oil and gas majors keen

on adding low-cost LNG to their global portfolios.

ExxonMobil, Chevron, and Shell are already major stake-

holders in Qatar's existing LNG capacity. However, Qatar

says it may go it alone this time.

The expansion should ensure even greater market

power and influence for Qatar on the international stage,

although a number of long-term contracts (20 bcm/y of

supply) are coming up for renewal over the next year or

2. This, combined with ample supply and a trend towards

short term contracts, could put downward pressure on

export prices, and possibly lead to a move away from reli-

ance on crude benchmarks for pricing.

The expansion is unlikely to be affected by the on-

going blockade of Qatar by surrounding Arab countries

(Saudi, Bahrain, and UAE), which has hit local Qatari

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