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QatarEnergy signs up TotalEnergies as first partner for next phase of LNG expansion

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QatarEnergy signs up TotalEnergies as first partner for next phase of LNG expansion

Highlights

North Field South to create 16 million mt/year of LNG capacity

Will add to 32 million mt/year from North Field East project

Expansion critical to easing long-term gas supply crunch

  • Author
  • Claudia Carpenter
  • Editor
  • Herman Wang
  • Commodity
  • LNG Natural Gas

Gas giant QatarEnergy is speeding up its LNG expansion with the signing of the first partner for its North Field South development just months after five companies were selected for North Field East, as it aims to cement its status as the largest source of liquefaction capacity in the world.

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TotalEnergies will have a 9.375% stake out of a 25% interest in the North Field South project to be shared by international companies, with QatarEnergy holding the remaining 75%, the companies announced Sept. 24 following a signing ceremony in Doha.

Qatar energy minister Saad al-Kaabi, who signed the agreement with TotalEnergies CEO Patrick Pouyanne, said in a statement that the project will include carbon capture and sequestration.

"We are committing significant investments to lower the carbon intensity of our energy products," he said.

Qatar, now behind heavily courted for its gas supplies as western buyers turn away from Russia, is building six new liquefaction trains to boost the country's LNG export capacity by 48 million b/d to hit 126 million mt/year by 2026, under a plan first unveiled in 2017.

Two of those trains, with a combined capacity of 16 million mt/year, will be at North Field South.

The remaining 32 million mt/year are at North Field East, where Qatar awarded stakes to TotalEnergies, Eni, ConocoPhillips, ExxonMobil and Shell in June and July.

Those awards were delayed several years from QatarEnergy's initially announced schedule, making the relatively quick signing with TotalEnergies for the North Field South development notable, said Mehrun Etebari, S&P Global Commodity Insights' associate director for global LNG.

"Unlike the North Field East partnership awards, the North Field South awards are being made prior to the main engineering and construction contracts being finalized," he said. "It is likely that the partnership selection process that resulted in the wave of awards for the North Field East project three months ago may have led to preliminary decisions on partnerships for the North Field South as well."

LNG supply crunch

More expansion could be coming at the North Field, located on the maritime boarder between Qatar and Iran where it is called South Field. The field is the world's largest non-associated gas field, with estimated reserves of 1,810 Tcf.

Through its combined interest in North Field East and South, TotalEnergies will add 3.5 million mt/year of LNG production to its worldwide LNG facilities by 2028, the company said in the statement.

Qatar probably can't go much faster to complete the North Field expansion, with prices skyrocketing as Europe looks for ways to replace Russian fuel after its invasion of Ukraine. Platts, part of S&P Global, assessed the Dutch TTF month-ahead price at an all-time high of Eur319.98/MWh ($312/MWh) on Aug. 26. It was last assessed on Sept. 23 at Eur179.20/MWh, almost three times higher than at the end of 2021.

"Given the scale of the project it would be unlikely to see a significant acceleration in the construction timeline," Etebari said.

S&P Global expects the LNG market to remain very tight through the middle of the decade, making the full North Field expansion's timeline of 2026 critical to consuming nations in search of fuel supplies.

Qatar also has its 70% stake in the 16 million mt/year Golden Pass LNG terminal in Texas, due online in 2024. ExxonMobil owns the other 30%.

"The startup of the new Qatari liquefaction trains will add to this loosening of the market, easing pressure on prices," Etebari said.