Since completing its 14th liquefied natural gas (LNG) train at RasGas 3 in 2010, Qatar’s LNG growth has been relatively muted. The country hasn’t constructed an LNG train in 12 years and is gradually losing its lead in the LNG export race as Australia and the United States gain ground. However, Qatar has plenty of untapped reserves left in its North Field cash cow.
Known as the North Field expansion, Qatar plans on increasing its capacity from its current 77 MTPA to a staggering 126 MTPA by constructing four trains by 2025 and then adding two more by 2027. In October 2020, Qatargas, which is 100% owned by Qatar Energy (QE), reaffirmed its intention to expand North Field production, receiving final proposals from engineering firms in September 2020. In 2021, QE began accepting bids from various engineering, procurement, and construction firms, as well as bids for financing.
On June 6, Reuters reported that ExxonMobil, Shell, TotalEnergies, and ConocoPhillips won bids for the North Field expansion. The expansion is estimated to cost US$30 billion. QE’s partnerships will help reduce the financial risk and cost of the project. Qatar has a long history of partnering with European and North American firms on megaprojects. Over time, the partnerships increased Qatar’s access to end markets, allowed QE and its partners to learn from each other and share expertise, and aided in the feasibility of Qatar’s expensive projects. The scale and scope of QE’s megaprojects would make for speculative gambles and a risk management nightmare if it were to fully undertake them on its own.
Qatar’s race for LNG stardom is a bit misleading. The discovery and initial development of Qatar’s reserves was due to concessions with Western companies, many of which helped fund Qatar’s existing LNG projects. It’s many of these same companies that ended up winning bids for a share of the North Field expansion. Although all of Qatar’s LNG export capacity is operated by QE, a great deal of it, roughly one-third, is owned by European and American companies. In this vein, Qatar’s LNG expansion is a win for the US and European gas compression industry. The North Field expansion directly creates jobs. What’s more, the North Field expansion is good business for American and European firms, which indirectly leads to even more job creation.
The North Field expansion will boost global LNG supply and reduce Russia’s grip over European and Asian buyers. In this vein, the successful and timely completion of the North Field expansion can provide leverage for the European Union to sustain sanctions on Russia and a longer-term ban on importing Russian oil and natural gas.