Qatar Launches World's 'Biggest LNG Project'

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Qatar has taken the final investment decision on Phase 1 of its huge LNG expansion project, setting the stage for negotiations with potential international oil company (IOC) investors. Qatari Energy Minister Saad al-Kaabi said the project -- led by state-owned Qatar Petroleum (QP) -- will benefit from unrivaled economies of scale and best-in-class environmental performance. As expected, QP also awarded the $13 billion contract to build four new onshore LNG trains with a combined capacity of 32 million tons per year to Chiyoda and Technip (IOD Feb.04’21). A notice will now go out to companies vying to acquire a minority interest in the first phase of the expansion, which has an overall estimated cost of $28.75 billion, including upstream work and construction of storage capacity and utilities. Negotiations should start soon with short-listed IOCs that may become equity investors -- Exxon Mobil, Royal Dutch Shell, Total, Conoco Phillips, Chevron and Eni -- al-Kaabi told a news conference. But he reiterated that if their bids are not deemed attractive enough, QP will pursue the project alone. Outside investors are being offered a combined stake of up to 30% in the first phase of the project, which will lift Qatar's LNG production capacity from around 77 million tons/yr today to 110 million tons/yr. A proposed second phase of the expansion will add a further 16 million tons/yr of capacity to 126 million tons/yr. Feed gas for the new liquefaction trains will come from the country's giant North Field, with the two phases of the expansion accordingly being dubbed the North Field East (Phase 1) and North Field South (Phase 2) projects. Al-Kaabi -- who is also QP's CEO -- said the process of bringing in outside investors may well be staggered and may not be completed until the end of the year. He said all of the short-listed IOCs are "very eager to come in" and added that discussions were also under way with LNG buyers -- most likely from LNG-importing nations in Asia -- about possibly investing in the project. QP said it expects to start LNG production from the first phase by the end of 2025, with each of the four trains added every three to six months. Additional production of natural gas liquids, condensate and helium will lift overall total first-phase production to some 1.4 million barrels per day of oil equivalent. Kaabi said it will be "one of the energy industry's largest investments of the last few years, in addition to being the largest LNG capacity addition ever built and the most competitive LNG project in the world." At its peak the first phase of the expansion will require a construction workforce of 65,000 people. Preliminary work has already started on the second phase, for which QP hopes to start production by the end of 2027. Some of the work on storage capacity and utilities awarded under the first phase of the project will take account of the additional liquefaction capacity to be built during the second phase. A range of industry sources broadly support al-Kaabi's bold claims about the Qatari expansion. In addition to having the lowest-cost LNG, Qatar's LNG industry also has industry-leading low greenhouse gas emissions. Those environmental considerations could be a key driver of interest among potential investors in the expansion, as well as among buyers of the LNG. To further enhance its environmental and climate credentials, the first phase of the expansion will include several greenhouse gas mitigation initiatives, including 2.2 million tons/yr of carbon capture and storage (CCS) (IOD Jan.13’21). The CCS project will "be the largest of its kind in terms of capacity in the LNG industry and will be one of the largest ever deployed or developed anywhere in the world," al-Kaabi said. Other environmental measures include construction of 1.6 megawatts of solar power capacity. Beyond the scope and cost of its two-phase LNG capacity expansion, QP also plans to build an additional 100 tankers to carry the LNG to customers around the world. It says this will be "the largest LNG shipbuilding program in history." Rafiq Latta, Nicosia, and Oliver Klaus, Dubai

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