Qatar inks deal with Shell to supply Kuwait 1 million mt/year of LNG

Dubai — Qatargas has signed an agreement with Shell to deliver 1 million mt/year of LNG to Kuwait under a 15-year contract starting this year.

The LNG will come from Qatar Liquefied Gas Co. 4, a joint venture between Qatar Petroleum (70%) and Shell (30%), Qatargas said Sunday in a statement.

The new agreement comes a month after Qatar Petroleum agreed to supply Kuwait Petroleum Corp. with up to 3 million mt/year of LNG over 15 years starting in 2022, as Kuwait seeks to rely more on gas for power generation.

"These agreements demonstrate our commitment to the state of Kuwait, which is a very important LNG market," Saad Sherida al-Kaabi, Qatar's energy minister, said in the Qatargas statement.

Kuwait began importing LNG in 2009, in an attempt to lower reliance on crude to produce electricity and water. In 2017, it signed a 15-year LNG agreement with Shell for supplies to start this year.

Gas demand

Kuwait is set to bring online 4.5 GW of new gas-fired power plants in the next few years and, combining that with industrial demand growth, Kuwait's gas demand is expected to peak above 80 million cubic meters/day by 2025, or 27% higher than last year, according to S&P Global Platts Analytics.

"Qatar and Shell have historically been the largest suppliers of LNG to Kuwait, and the slew of deals we have had in the last month show how they are angling to maintain that dominance," according to Samer Mosis, senior LNG analyst at Platts Analytics. "For Qatar, pressure to sign new offtake agreements is increasingly dire, with over 20 million mt/year of existing deals expiring within the next five years, and that is before we take into consideration Qatargas's massive expansion plans, none of which are contracted for yet."

Qatar and Australia are vying to be the world's largest LNG exporter, with Australia No. 1 in January and Qatar largest last year for every month except July, according to Mosis. Qatar plans to boost its production capacity to 126 million mt/year by 2027, from the current 77 million mt/year.