Total Wins Big Slice of Qatar Phase 2 LNG Expansion

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TotalEnergies has won the first of the equity stakes for Phase 2 of Qatar's 48 million ton per year LNG mega-expansion, state-owned QatarEnergy announced on Saturday.

The French major's selection as a 9.375% partner in the 16 million ton/yr Phase 2, also known as North Field South (NFS), comes as no surprise, confirming an earlier exclusive report by Energy Intelligence.

"With this agreement, we see an enhanced position for Total as a long-term strategic partner for QatarEnergy," Energy Minister Saad al-Kaabi said at the post-signing ceremony press conference.

The award gives Total an outsized share of the 25% of NFS that QatarEnergy will make available to international partners.

"The timing is perfect because as you know most of the leaders of the world have discovered this year the word LNG," Total CEO Patrick Pouyanne told a press conference in Doha.

"Particularly Europe. There is new demand for LNG in Europe, so this comes perfectly on time." 

Total had previously won a 6.25% stake in the larger Phase 1 of the expansion, which was awarded earlier this summer.

The stakes in both phases will add about 3.5 million tons/yr of LNG to Total's portfolio, the company said.

Pouyanne said he was was initially "surprised" with the speed at which al-Kaabi moved forward with the NFS process, but that Total was happy to respond with similar urgency and keen to join any future expansions of Qatar's massive LNG industry.

"If you should go one day to North Field West, we are happy to join," he told al-Kaabi.

Al-Kaabi explained that the process of finding partners for the first phase of the expansion, which took some four years, "made us ready for the second."

"It set the base for what we wanted to do next on NFS," he told reporters.

Partner selection for NFS is expected to be based on the pool of Phase 1 winners. In addition to Total, these include Exxon Mobil, Royal Dutch Shell, ConocoPhillips and Eni.

More than any of its peers, the French major remains committed to the Middle East and sees the region's low-cost oil and gas as a key competitive advantage.

It has a track record of bidding big when it has to — most notably back in 2016 for a strategic stake in Abu Dhabi's onshore concessions.

Total has made gas and LNG in particular a strategic priority, but its Middle East and North Africa output is the most oil-intensive of any of its international oil company peers with some 77% of its 2021 production in the region coming from oil.

Exxon Mobil, for example, derived just 42% of its total output from oil last year. A stake in NFS would represent a clear way to redress the imbalance.

The French major needs to make up for some recent setbacks in its LNG portfolio. Total's 10% stake in the 9.9 million ton/yr Qatargas-1 expired at the end of 2021 and was not extended.

The company has been forced to step back from the planned expansion of its Russian LNG activities and in April it took a $4.1 billion impairment in connection with its stake in the Arctic LNG-2 project in Russia.

Total's massive LNG project onshore Mozambique has also been delayed indefinitely by unrest in that country.

NFS is known to have slightly higher production costs than Phase 1, "but it is still a world-class asset," al-Kaabi told Energy Intelligence in an exclusive interview earlier this month.

"If in our international exploration program we find something one-tenth as good as the quantity/quality of NFS, I'll be making headline news," he said.

"Now, with NFS to NFE, I'm comparing a Rolls-Royce to a Bentley, or a Bentley to a BMW, or a BMW to a Mercedes," he added, referring to North Field East (NFE), as Phase 1 of the big LNG expansion is also known.

Like other Qatari LNG projects, NFS benefits from ample associated liquids production, including 122,000 barrels per day of condensate, 5,000 tons per day of liquefied petroleum gas and 2,000 tons/day of ethane.

Just as significantly, the North Field expansion marks the first of a new wave of green LNG projects, with QatarEnergy investing over $250 million in decarbonization measures.

These include: carbon capture and storage (CCS) — Qatar is targeting 11 million tons/yr of CCS capacity by 2035 — solarization of electric power and a range of technologies to reduce flaring and methane leaks.

Total is a partner with QatarEnergy on its flagship Al-Kharsaah solar project.

Total already has three downstream and petrochemical joint ventures in Qatar, a 16.7% stake in Qatargas 2's Train 5, 40% of the offshore Al-Khalij field and 30% in the 290,000 b/d Al-Shaheen offshore field.

It also has a 24.5% stake in the 2 billion cubic foot per day Dolphin pipeline that supplies Qatari gas to the United Arab Emirates and Oman.

QatarEnergy has partnered with Total on a number of notable exploration successes overseas, including in South Africa, Cyprus and Namibia.

Next Steps

NFS is likely to be considerably cheaper than the $28.75 billion Phase 1, but total costs won't be known until the construction contract is awarded sometime early next year, al-Kaabi said.

Pouyanne said he expected Total to spend around $1.5 billion on NFS, compared to $2 billion to $2.5 billion for NFE.

Contract terms are likely to have been tough given the keen competition among industry heavyweights to secure a stake in NFS.

As with Phase 1, there will also be an option for key Asian customers of QatarEnergy to take small equity stakes.

Al-Kaabi gave little indication of when additional NFS stakes might be awarded, saying only that new partners would be announced "in due course."

LNG Projects, Green LNG, Liquefaction, Corporate Strategy , Majors, NOCs, Gas Supply
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