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Interview: Qatar Petroleum CEO outlines his vision for the world's largest LNG producer

Dubai — Qatar Petroleum, the world's largest LNG producer, is looking to evolve beyond the traditional national oil company business model and expand further as it targets new long-term supply deals for the fuel, the company's CEO told S&P Global Platts in an interview.

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The following is an edited transcript of the interview with Qatar's energy minister and CEO of Qatar Petroleum, Saad Sherida Al-Kaabi conducted on September 30.

WILL YOU CONTINUE AT THE SAME PACE OF INVESTMENT THAT YOU HAVE HAD THIS YEAR?

We set a new strategy two years ago and have just been methodically working that strategy. So now we look at it like it's all at once but it's not been like that. So we will continue, yes. We see ourselves like any international oil company, like Exxon or Shell. We don't see ourselves as a national oil company. We think we are the number one NOC in the world. That was our goal and we think we are very close to that goal.

SO HOW DOES QATAR PETROLEUM MEASURE SUCCESS?

In every sense. Safety, efficiency, the KPIs we set for ourselves. We are very good, we just don't talk about it. We achieve something and we announce it and that is very important for us because we are not a flashy company. We supply Japanand Korea with 30% of their gas. We supply half of China's LNG imports. We are the biggest supplier to India, we supply Pakistan, and we supply the UAE pipeline along with LNG. We supply Jordan, Egypt, Turkey, France, Belgium, Poland; 20% of UK gas is from us. So this is just the gas, so when you put in LPG, fertilizers, plastics and chemicals we go to 123 countries.

HOW HIGH COULD QATAR'S DOMESTIC GAS PRODUCTION ULTIMATELY GO?

It could go higher. We haven't decided yet. Everything is technical and we have a moratorium in place. We proofed up more area. It's all technical and methodical. You talk about an aggressive approach but it's a methodical strategy. Nothingwe have done is [on a whim]. We have a very ambitious expansion plan.

WHAT IS THE LATEST UPDATE WITH THE NORTH FIELD EXPANSION PROJECT?

We selected a few companies and have given them a document of what we would like them to bid for and one of the things that we will analyze when using the companies and they are very well-informed of what that is and they will bid. Theones that can give us something beneficial, and if none of them can we will just continue alone. It's difficult to decide a date but probably by the end of this year, or first quarter [2020], max. We would want to award the onshore, while havinga partner, but if that doesn't happen we're not going to delay the project.

WILL SOUTH KOREA SUPPLY QP WITH LNG SHIPS?

There was a high-level meeting and they brought out at a communique in which we discussed them possibly buying LNG. There is a bid and they are bidding. They have some of the best shipbuilding in the world and have supplied all of our ships currently, but it is a competitive process and Japan and China are also bidding. Sixty ships is the minimum, but it could go up to 100.

WHAT IS QP'S PRODUCTION COST FOR OIL?

Well, it's a good question, but I can't answer because we have too many fields and it's different per project. But at$30/b, QP is still very profitable.

ARE THERE ANY MARKETS YOU ARE PARTICULARLY INTERESTED IN?

We are looking at the hotbeds of reserves, some portion of our exploration is in frontier areas, others in the hotbeds of the world, like Brazil. There is a bidding round coming in Brazil. As well as that, we will be participating in and we bought 30% of all of Exxon's assets in Argentina. We have got five exploration blocks in Mexico and we have a discovery in Cyprus, as well as going with Total in South Africa and Guyana. This is all this year. So we had three discoveries this year.

ARE THERE PLANS TO LAUNCH AN LNG TRADING DESK?

We have a lot of things we are planning and I can't talk about it. What I can tell you is everything you can think ofhas either been thought of, or we are thinking about, and are either going to go ahead or have decided against. Some people have said they will set up trading and two or three years later they set it up. If we do trading, we will announce our first trade.

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HOW WILL QATAR HANDLE LNG PRICE VOLATILITY WITH ITS EXPANSION?

We are a long-term producer, so when we decide to do a project it's based on the fundamentals of being a low-cost producer. Demand for gas is going to be there for a long time. The issue is that if the price is so low it will force the higher cost people to shut down. We want to be at the lowest end of that, so no matter what happens in the market, we will always have a market that will give us a margin that we can make money in because of our low costs. So we don't worry aboutlow gas prices.

A FEW YEARS AGO THERE WAS A LOT OF DEMAND TO MOVE AWAY FROM OIL INDEXATION, BUT IT DOESN'T SEEM TO HAVE TAKEN OFF.

This will be a debate that never ends. When oil prices are low people want oil indexation, when it's high, they want something else. If I'm not producing from Henry Hub or another gas hub, it doesn't make sense to tie Qatari gas to [those hubs]. The majority of countries that are sensible and long-term and using diesel for power, linking it to gas is cheaper than diesel and environmentally much friendlier. So if they link it to diesel, gas is always cheaper. So that's why people would want to link to oil.

We as an oil and gas company can accept the price risk because all of the oil and gas companies have taken the price up and down in cycles. But if it's something like Henry Hub, I have no control over it. Linking it to oil is much more reasonable to buyers and sellers. We have some linked to NBP or TTF, of course, it depends where you are selling it.

ARE YOU BEARISH THEN ON THE DEVELOPMENT OF THE SPOT MARKET?

No, I'm not saying it won't develop, but it won't do away totally with LTCs [long-term contracts]. Because LTCs are not crude, where it is transportable. To take LNG it requires massive investment to liquefy, transport, and degasify - so all this chain of investment, you can't just have it on spot and think "OK maybe I will supply this day to that guy" - no one has the volumes to do this. For Japan, Korea, and China -- if it's your baseload for electricity -- would you depend onmaybe it's available today, or tomorrow? The majority of countries will go for maybe 70%-80% in long-term sustainable deals because they want security of supply because it is a national security issue. They cannot do the whole thing spot.

COULD QATAR CUT OFF GAS SUPPLIES TO THE UAE BECAUSE OF THE EMBARGO?

We have decided that this is a business and we are not going to bring politics into business. There is a contract between us and we will sell as per the contract and it goes very well with what I spoke about. When I go to the Chinese I can show that even if we have a rift politically we will not cut off supply. We are a steady and stable supplier.

-- Robert Perkins, robert.perkins@spglobal.com

-- Claudia Carpenter, claudia.carpenter@spglobal.com

-- Miriam Malek, miriam.malek@spglobal.com

-- Edited by Joe Fisher, joe.fisher@spglobal.com