Qatar walks a tightrope as it targets global LNG leadership
True to its direct geographical position between Saudi Arabia in the west and Iran in the east, Qatar’s geopolitical positioning is difficult to manage. In recent months, it has emerged that Qatar is moving decisively towards the Iran-China axis of power, but in recent days that has seemed less certain. The results of the new tender for the flagship Qatar North Dome expansion and new liquefied natural gas (LNG) supply agreements later this year will provide the safest signals yet as to the group that Qatar sees in his future. There are, however, clues, analyzed below, as to how Qatar believes it can best secure the number one position of LNG exporters, after losing the spot in January to Australia, and achieve its goal. production of 126 million tonnes per year (mtpa) in 2027, against a current capacity of around 77 mtpa.
The most recent development is the interest shown by a range of international oil companies (IOCs) in the expansion of the giant Qatar North Dome site, with Royal Dutch Shell, Eni, Total Energies, ConocoPhillips, ExxonMobil and Chevron all officially having submitted applications for the work involved. The 6,000 square kilometer North Dome site – along with the 3,700 square kilometer area of the South Pars field in Iran – is by far the largest unassociated natural gas field in the world. Conservatively estimated, the entire 9,700 square kilometer site contains at least 1.8 trillion cubic feet of unassociated natural gas and at least 50 billion barrels of natural gas condensate.
From 2005 until the end of the first quarter of 2017, Qatar imposed a moratorium on the further development of the North Dome in order to conserve its main hydrocarbon (and even financial) resources, but the determination to continue this self-ban imposed was finally lifted for two main reasons. First, it was clear to Qatar that competition in the area of LNG export was going to become much more intense, especially from Australia. This view proved to be correct and has continued to be so, because Australia finally overtook Qatar as the world’s largest exporter of LNG earlier this year. Although the increase in Australia’s LNG production and exports over the past three years was largely due to increased production from the Darwin-based giant Ichthys LNG project, other projects were operating. extremely efficiently in the country.
These included the Curtis Island CSG-LNG plants and others that still had enormous growth potential, such as Australia’s 10 major LNG projects with a combined capacity of 87.8 million tonnes per year, which accounted for all a significant threat to Qatar’s dominance in LNG. sector. The second reason for the lifting of Qatar’s moratorium on the North Dome was that it was increasingly clear that, although this moratorium limited the development of the site by Qatar, it only accelerated development. by Iran on its side of the 9,700 square kilometer site. This prompted frequent complaints from Doha that the unrestricted development of its South Pars site by its neighbor would hurt the future rate of recovery in Qatar’s own North Dome.
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Given these twin developments, Qatar has therefore announced its intention to increase its LNG production capacity by 64% over the next seven years, to reach the new target of 126 mtpa. This replaced the long-standing target of 110 mtpa (although this remains an interim target for the fourth quarter of 2025), in line with the discovery of other productive layers of gas fields attached to the main North Dome site but located about 12 kilometers ashore from the shore ashore in Ras Laffan. According to Qatar’s Energy Minister Saad Sherida Al-Kaabi at the time, this will allow the emirate to move forward with engineering work on two other LNG production facilities, d ‘a combined capacity of 16 million mtpa (“mega-trains”). Prior to this most recent expansion announcement, Qatar revealed that it was already planning to build four new LNG trains. According to industry sources, up to 30 percent of the shares of the North Dome expansion project could be up for grabs in one or more tranches and all six IOC offers will be approved or not at the start of the fourth quarter of this. year.
On the other hand – and at least equally possible – is that Qatar will appoint one of the two Western IOCs to be part of one or more of the projects related to the North Dome expansion while continuing to grow. money as well as the Iran-China axis. In “realpolitik” terms, this would make perfect sense, as Qatar believes its best chance of prospering in the future – given its perilous geographic and geopolitical position – is to accommodate both sides. That said, Qatar has no interest in dealing with Saudi Arabia, which remains one of the main allies of the Arab states in the region (although it is no longer its main Arab ally, as Washington wants to replace it. by the United Arab Emirates and others). Instead, Qatar is directing its comments and joint ventures towards the United States and American companies, following the Saudi-led blockade of Qatar that lasted from 2017 to the start of this year. The Qataris’ perspective on how they see Saudi Arabia’s future is best illustrated by the fact that Doha withdrew from OPEC in January 2019 after 60 years as a member.
In any event, Qatar is much more closely linked to Iran and China than to the United States and its allies, as evidenced by the fact that almost immediately after the United States’ unilateral withdrawal from the Plan of Joint Comprehensive Action (JCPOA) “nuclear deal” with Iran In May 2018, senior officials from Iran’s Petroleum Ministry and Qatar’s Energy Ministry began a series of meetings to agree on a new North Dome-South Pars joint development plan.
These meetings focused on two main areas, said a high-level source who works closely with Iran’s Oil Ministry. OilPrice.com. “First, Iran agreed to stop the aggressive recovery tactics it had used along the border areas. [demarcating South Pars and North Field] and secondly, Qatar has agreed to sit down with the Chinese and the Russians to discuss the future coordination of gas export destinations for the flow, marketing and pricing of Iranian, Qatari and Russian gas ”, a- he declared. “At that time, Iran and China were talking about expanding the scope of the previously agreed deal. 25 year contract between them and Russia was keen to ensure the good continuation of its own gas supplies to China [principally via the US$400 billion 30-year deal agreed in May 2014] and to ensure that Iranian gas does not replace Russian gas – and influence – in Europe, ”he added. “One of the key elements that were agreed at these meetings was that Iran would not pursue developments on its side of the South Pars reservoir which could damage the Qatari gas outlet of its North Dome field, leaving Qatar free to increase its LNG export volumes with a guaranteed buyer in China, and Iran in the meantime would receive assistance if needed from Qatar on develop its own LNG capacities, he stressed.
There followed a series of major LNG supply contracts from Qatar to China, of course, with the latest earlier this year being the largest. As OilPrice.com points out, the signing of a 10-year purchase and sale contract by China Petroleum & Chemical Corp. (Sinopec) and Qatar Petroleum (QP) for 2 mtpa of LNG moves the emirate even more resolutely into the Iran-China-Russia sphere of influence. This agreement brings together the world’s largest exporter of LNG and one of the world’s largest holders of gas reserves, both founding members of the Forum of Gas Exporting Countries (GECF), now made up of 11 members, with Russia. The deal also inextricably links this enormous combined global gas resource with the world’s largest buyer of energy products over the past two decades or more. At all levels, this adds significantly to the geopolitical challenge facing the US-Israel-Arab States alliance in the Middle East established through a series of “relationship normalization” agreements.
By Simon Watkins for OilUSD
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