Huge LNG ambitions in the Middle East

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A second phase of the North Field expansion is then expected to further increase Qatar’s LNG capacity to 126 Mt/y at an estimated total cost of US$28.75 billion. (Photo: Qatargas.)

Qatar dominates Middle East natural gas news as it develops the North Field East extension, which is the world’s largest single project for LNG

Middle East natural gas news has been dominated by developments in Qatar for the past year. The country is already one of the world’s top LNG exporters, although it has recently been supplanted by Australia and is also set to be overtaken by the US as more liquefaction capacity comes online there in 2022. However, Qatar is taking steps to regain and expand its LNG dominance as it expands production from its North Field, its portion of the world’s largest unassociated natural gas field that it shares with Iran.

In February 2021, state-owned Qatar Petroleum – which has since been renamed QatarEnergy – announced a final investment decision (FID) for North Field East (NFE), the first phase of its North Field Expansion project. NFE will increase Qatar’s liquefaction capacity from 77 million tonnes per year (tpy) to 110 million tpy. A second phase of expansion, North Field South (NFS), is then expected to further increase capacity to 126 million tonnes per year at an estimated total cost of $28.75 billion.

“QatarEnergy is advancing the development of the North Field Expansion project that will put it back at the forefront of global LNG exports,” Ian Simm, principal adviser at consultancy IGM Energy, told COMPRESSORtech2. “Under Saad al-Kaabi’s leadership, the company has proven to be a smart operator and has a stacked hand in expanding its gas production and liquefaction capabilities,” he said.

Among other benefits, QatarEnergy benefits from having extremely deep pockets, to the point that it has delayed selecting equity partners for the project and has adopted FID itself for NFE. She is reviewing offers from international companies to take part in the project, but has previously indicated that she is not afraid to go it alone if necessary. Another benefit the company enjoys is its low cost of supply, with rising natural gas prices and demand putting it in an even stronger position.

“North Field’s enviable size and productivity provide economies of scale that mean Doha LNG will remain profitable at prices well below those of its competitors,” said Simm. He also sees QatarEnergy’s delays in onboarding equity partners in NFEs as beneficial for the company given how the global gas market has changed in the meantime.

“It looks like QatarEnergy will finally announce its choice of equity partners by the end of the second quarter, but given the number of delays to date, it wouldn’t be a huge surprise if that date were pushed back,” he said. “The delays have ultimately worked in Qatar’s favour, and it will likely find itself in a far stronger negotiating position than before.”

infrastructure

As construction progresses at NFE, a major compression project is underway at the same time, aimed at maintaining the production profile of the original North Field. According to a November Upstream report, the North Field Production Sustainability (NFPS) project will involve at least seven compression platforms over the coming years, to be tendered in four phases.

QatarEnergy has not responded to a request for more details, but COMPRESSORtech2 believes the NFPS budget, while not comparable to that for NFE, could still reach a few billion dollars.

Together, the NFE, NFPS, and NFS are demanding a massive build-out of infrastructure and billions of dollars worth of contracts to be awarded. Some of these have already been announced, but more are to come and various contractors are reported to be competing for the work.

“My estimate is that there are still $7 billion to $8 billion worth of additional contracts up for grabs for NFE, including Package 4 related to the North Field East sulfur treatment,” Simm said. “However, I would say that the most significant contracts in terms of developing the North Field extension of the EPC deal, valued at $13 billion, is the offshore EPCI work awarded to McDermott in January.”

Simm also cited QatarEnergy’s ongoing $19 billion plans to acquire up to 100 LNG vessels, which he says will be critical to exporting any additional LNG cargoes.

The mega trains to be built by Chiyoda and Technip will each have a capacity of 8 Mtpa and will receive around 6 bcf/d (1.7 × 108 m3/d) of feed gas from NFE. The contract also includes a “major” carbon capture and storage (CCS) facility. According to the two companies’ February 2021 statement, the CCS facility is expected to result in approximately 25% lower greenhouse gas (GHG) emissions compared to similar LNG projects – although it does not specify on what basis a project is considered similar .

(This report is from a regional update published in the March 2022 issue of CompressorTech2.)

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