Biggest LNG Maker Hires Builders for $29 Billion Expansion
Qatar Hires Builders for $29 Billion LNG Expansion Project
(Bloomberg) -- Qatar hired engineers for a planned $29 billion expansion of its capacity to produce liquefied natural gas, seeking to cement its position as the world’s biggest supplier of the fuel.
While Australia, the U.S. and other producers have been ramping up output, Qatar’s LNG capacity has stayed mostly flat for a decade. Gas, a cleaner-burning alternative to crude oil, is seen as an important fuel for bridging the global transition from petroleum to solar energy and other renewables.
State-run Qatar Petroleum selected Chiyoda Corp. of Japan and London-based TechnipFMC Plc to do construction work worth around $13 billion, Qatar’s energy minister and QP Chief Executive Officer Saad Al-Kaabi said at a signing ceremony in Doha on Monday.
“This was the main contract we were waiting to sign to finalize the costs of the project,” Kaabi said. QP will award an agreement to build storage tanks within the next two weeks and will sign almost all other project-related deals by the end of the year, he said.
The expansion is the world’s biggest LNG project under development and will lift Qatar’s annual output to 110 million tons per year from 77 million tons. LNG is a form of super-chilled natural gas that can be shipped worldwide without the need for costly pipelines.
With its long-term break-even price at about $4 per million British thermal units, Qatar’s North Field East project is “right at the bottom of the global LNG cost curve, alongside Arctic Russian projects,” Giles Farrer, a research director at consultant Wood Mackenzie Ltd., said in an emailed note. Benchmark LNG futures for March delivery in Asia traded at about $8.40 per mmbtu on Monday.
QP has booked some of its planned capacity specifically for buyers in Europe. “I’m not worried about the marketing side of it,” Kaabi said.
The company is in talks with ExxonMobil Corp., Chevron Corp., ConocoPhillips and other energy firms as potential joint venture partners to take a 30% stake in the expansion project, he said. QP will issue tender documents next week and choose a partner by the end of the year or opt to develop the project alone, he said.
Each of the shareholders would be responsible for funding its own portion of the investment, he said. Several Asian LNG buyers are also keen to invest in the project and QP is assessing these offers too, he said.
Companies that helped build and finance Qatar’s previous LNG developments stand a better chance of joining in the expansion, Credit Suisse said in an emailed note. ExxonMobil has invested in all but two of Qatar’s earlier LNG trains, or production lines. Total SE, ConocoPhillips and Royal Dutch Shell Plc, among others, have also invested.
An inability to attract such large partners would likely be considered a failure for Qatar, Credit Suisse said. “We suspect enough due diligence has gone into this to ensure a successful outcome.”
First gas for the expansion project will be produced in the fourth quarter of 2025, and each of the four LNG trains will be fully operational by early 2027. Each train has a capacity of 8 million tons per year, “but we know they can do more,” Kaabi said.
Baker Hughes Co. won a contract in September to supply gas turbines and centrifugal compressors to each of the new trains.
Qatar plans to increase its production capacity even further -- to 126 million tons per annum -- by 2027. QP won’t need a full tender process because most of the contracts signed for the first expansion include options for the next phase, including fixed prices. It may only need to seek bids to provide two additional LNG trains, Kaabi said.
“We’re looking to monetize our field in the fastest way possible,” he said.
Qatar had a self-imposed moratorium on developing its portion of the North Field, the world’s biggest gas deposit that it shares with Iran, between 2005 and 2017.
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