Qatar Petroleum to boost LNG production capacity

Qatar Petroleum has unveiled plans to increase the capacity of its LNG expansion project by adding a fourth liquefaction train. Once completed, the new train will boost the Middle East country’s total LNG production capacity by 43%, up from 77mn t/y to 110mn t/y.

The announcement was made by Saad Sherida Al-Kaabi, President & CEO of Qatar Petroleum, who said: ‘As we have announced last year, Qatar Petroleum has embarked on a project to develop additional gas from the North Field and build three new LNG mega-trains. Based on the good results obtained through recent additional appraisal and testing, we have decided to add a fourth LNG mega-train and include it in the ongoing front-end engineering of the project. When the project is completed and all four new trains are online, Qatar’s LNG production capacity will reach 110mn t/y. This will increase Qatar’s total production capacity from 4.8mn to 6.2mn boe/d.’

‘Since announcing the lifting of its North Field moratorium, Qatar has gradually scaled up its development plans,’ reports Giles Farrer, Research Director, Global Gas and LNG Supply at Wood Mackenzie. ‘Its motivations for this latest move are likely to be informed by a number of considerations. Firstly, costs. With worldwide activity in the oil and gas industry still low, now is a good time in the cost cycle to invest in a new project. And there are likely to be economies of scale from developing a bigger project, particularly in light of the promising appraisal results at the North Field. These economies of scale will make what is already the most competitive new LNG project worldwide even cheaper.’

Farrer adds: ‘Our estimate of capex for the three mega-trains previously announced was around $24bn, encompassing both the upstream and liquefaction components of the project. Qatar could probably add an additional train without significant additions to capex. However, making sure megaprojects are delivered on time and on budget will be a huge undertaking.’

‘Another consideration is market share. Since Qatar announced its initial plan, the market environment has improved. Forecasts of future oil prices are higher and forecasts of future LNG demand have grown stronger, particularly in Europe and China. Having already taken the decision to compete for LNG market share, Qatar is doubling down, making sure that it will be fully able to benefit from LNG market upside.’

‘Further, one of Qatar’s major competitors for new supply development – US LNG – is currently engaged in a tariff war with China, the world’s largest growth market for LNG. Qatar could see this as an opportunity. It has recently signed a contract doubling the volumes that it will sell to PetroChina and is likely to be looking at further opportunities to supply the Chinese market.’