EXCLUSIVE-Big energy firms bid for Qatar LNG project despite low revenues

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© Reuters. The Qatar Petroleum logo in Doha, photo from the Reuters archive.

By Ron Bousso and Dmitriy Zhdanikov

LONDON (Reuters) – Six major Western energy companies are vying to participate in a major expansion project in Qatar’s liquefied production, to help cement its position as the leading country in this field, at a time when several major projects around the world have faltered, industry sources said. the world recently.

The sources told Reuters that ExxonMobil, Royal Dutch Shell, Total (PA:) Energies and ConocoPhillips (AS:), which are already involved in LNG production in Qatar, submitted their bids, and were joined by Chevron (NYSE:) and Italy’s Eni on May 24.

These presentations demonstrate the continued interest of energy giants in investing in competitive oil and gas projects despite the growing pressures on the sector from governments, investors and activists to tackle greenhouse gas emissions.

In contrast to the first Qatari projects in the field of liquefied gas in the nineties and during the first decade of the third millennium, in which Doha relied heavily on the technical expertise of international oil companies and their high cash flow, Qatar Petroleum decided to proceed alone in developing the North Field Expansion Project, whose investments amounted to nearly 30 billion dollars.

However, it is seeking to partner with major oil companies to share the financial risk and help sell the additional quantities of LNG that it will produce.

A senior source in one of the advanced companies (SE): “I do not think that Qatar Petroleum needs the expertise of international oil companies in the upstream sector or project construction in the middle stage, but it would be happy to see who takes some quantities of LNG from them.”

Qatar plans to increase its production of liquefied gas by 40 percent to 110 million tons annually by 2026, consolidating its position as the largest exporter of this fuel in the world.

An Eni spokesperson confirmed that the company was involved in the bidding process. Qatar Petroleum, Shell, Chevron, Total Energy and Conoco declined to comment.

Exxon said that it does not comment on rumors in the market, but added, “We look forward to continued success in future projects with our partners Qatar Petroleum and the State of Qatar. ExxonMobil’s subsidiaries are working with Qatar Petroleum to identify opportunities for joint ventures at the global level that enhance the status of both parties.”

Energy leaders see natural gas as a key fuel as the world seeks to cut carbon emissions to replace more polluting coal, even though the International Energy Agency said in a report last month that investments in new fossil fuel projects must stop immediately in order to meet goals supported by the United Nations to limit the rise in global temperatures.

Activists say the expansion of natural gas is delaying the transition to renewable energy sources needed to achieve United Nations-backed goals to combat climate change.

The European Union is witnessing a debate about the role that gas should play in the energy transition.

Expectations of a tight global supply of LNG have increased sharply in recent months after Total suspended the $20 billion LNG project in Mozambique due to increased violence.

This followed a series of delays on LNG projects in North America as the COVID-19 pandemic hampered demand last year.

Since 2012, global demand for liquefied natural gas has increased every year and reached record high levels every year since 2015, mainly due to the rapidly increasing demand in Asia. Analysts expect global demand for LNG to grow between 3 and 5 percent annually between 2021 and 2025.

* Lower returns

The interest on the part of companies in the Qatari expansion comes despite the relatively low returns.

Qatar Petroleum offered the advanced international companies returns ranging between 8 and 10 percent on their investment, down from returns ranging between 15 and 20 percent that Exxon, Total, Shell and Conoco obtained from the first facilities for liquefied natural gas, according to sources from three participating companies.

The returns of the Qatari project have never been disclosed.

Qatar Petroleum and the six companies declined to comment on the terms of the bids.

“Qatar is clearly becoming more competitive. But it remains a very low risk from a resource perspective,” one source said.

Two sources said it was not expected to announce the results of the tender before next September.

In March, Qatar Petroleum said it would become the sole owner of the Qatargas 1 LNG project when a 25-year contract expires next year with international investors including Exxon and Total Energies, in a sign of its growing confidence.

Sources told Reuters last month that Qatar was also in talks aimed at involving Chinese companies in the project.

Two sources said Qatar Petroleum last month contracted with international banks to issue billions of dollars in bonds at the end of June to help develop part of the North Field project.

(Prepared by Munir Al-Bwaiti for the Arab Newsletter – Edited by Hala Kandil)





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