Total Wins First Qatar LNG Expansion Stake

TotalEnergies has been selected by QatarEnergy as the first equity investor in the gas-rich Mideast Gulf state's $28.75 billion North Field East (NFE) LNG project, with more stakeholders to be announced in coming weeks.

Under the structure of the highly anticipated deal announced Sunday, Total will hold a 25% interest in a new joint venture alongside state-owned QatarEnergy at 75%.

The venture will, in turn, hold a 25% interest in the 32 million ton per year NFE project, which is the first of two phases of expansion totaling 48 million tons/yr.

This will give Total a 6.25% stake in total NFE capacity, which is equivalent to a volume of 2 million tons/yr of LNG.

"The way we structured the deal is that … one revenue stream, if you will, is one train," QatarEnergy CEO Saad al-Kaabi, who is also the country's energy minister, told a press conference in Doha.

"We have unified all the elements of the North Field East expansion — the production, the maintenance, the delivery — so you own [a] virtual train."

It is not yet clear whether the same deal structure will apply to the other partners that have yet to be announced.

However, the selection process — which had been repeatedly postponed — has been completed and each train will have at least one foreign equity partner. Al-Kaabi said no company would be given a larger share than 25% of a single train.

If QatarEnergy retains 75% of the NFE project's overall LNG capacity, that would represent 24 million tons/yr.

In addition to Total, Qatar had short-listed Exxon Mobil, Shell and ConocoPhillips — which are already investors in Qatar's existing LNG capacity — and newcomers Eni and Chevron to bid for stakes in the NFE project.

QatarEnergy has also been talking to some of its existing Asian LNG customers about taking equity stakes.

Phased Approach

The NFE project is the first phase of Qatar's LNG expansion program. A second phase — North Field South (NFS) — is set to increase Qatar's total liquefaction capacity by another 16 million tons/yr to around 126 million tons/yr by 2027.

First LNG production from Phase 1 is expected to start by 2026, al-Kaabi said.

The upstream part of the project will develop the southeastern area of Qatar's giant North Field with eight platforms, 80 wells and pipelines to the onshore gas liquefaction facilities.

Several contractors, including Spain's Tecnicas Reunidas and McDermott of the US, are already working on major engineering, procurement and construction (EPC) contracts involving on- and offshore portions of the NFE project.

More Awards Coming

Al-Kaabi said that the other equity partners in the NFE project would be announced in the coming weeks, with the next one due to be made in Doha on Thursday.

He said a total of $50 billion would be invested to reach Qatar's planned overall LNG capacity of 126 million tons/yr.

At a time of global energy supply concerns and sky-high oil and gas prices, interest among LNG buyers in the NFE and NFS projects has been strong. "We have a lot of buyers that are talking to us," al-Kaabi said.

Total's Qatar Footprint

The selection of Total as one of QatarEnergy's partners does not come as a surprise.

The French major has been involved in Qatar's LNG sector since the very beginning and broadened its footprint in the country in recent years by adding a 30% stake in the Al-Shaheen oil field in 2016.

In 2021, Total lost its 10% stake in the 10 million ton/yr Qatargas 1 LNG venture, along with Exxon and others, after their 25-year contract expired. Sunday's award will more than compensate for that loss.

"Total has been quite aggressive in growing its Middle East position, in contrast to most of the other supermajors," said Robin Mills, CEO of Dubai-based Qamar Energy.

Coveted Prize

Qatar's LNG megaexpansion was always a coveted prize for international companies.

The project boasts low-cost gas, a stable political environment, and ample flows of associated natural gas liquids to further boost project profitability.

Europe's shift away from Russian gas and diminishing prospects for Russian LNG growth have turbocharged the country's appeal.

Qatar's LNG production also offers low greenhouse gas emissions — a major attraction for Total, which has been prioritizing gas and LNG in its major new projects and is targeting Scope 1 and 2 emissions reductions of 40% by 2030 (from 2015 levels).

“With its low costs and low greenhouse gas emissions — thanks to carbon capture and storage — the North Field expansion will be an exemplary and major contribution to our low-carbon LNG growth strategy," said Total CEO Patrick Pouyanne.