EXCLUSIVE Energy majors bid for Qatar LNG project despite falling yields

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Six major Western energy companies are vying to partner with Qatar’s vast expansion of liquefied natural gas production, industry sources said, helping the Gulf state consolidate its position as the top LNG producer as several major projects around the world were recently stalled.

Exxon Mobil, Royal Dutch Shell, TotalEnergies and ConocoPhillips, which are part of Qatar’s existing LNG production, were joined by new entrants Chevron and Italian Eni to submit bids on May 24 for the expansion project, industry sources told Reuters.

The offers show that energy giants continue to be eager to invest in competitive oil and gas projects despite increasing pressure from government, investors and industry activists to tackle greenhouse gas emissions. tight.

Unlike Qatar’s first LNG projects in the 1990s and 2000s, when the country relied heavily on the technical expertise and deep pockets of international oil companies, the country’s national oil company, Qatar Petroleum (QP), has alone pursued the development of the north field of nearly $ 30 billion. expansion project.

However, it is seeking to partner with the oil majors in order to share the financial risk of development and to help sell the additional volumes of LNG that it will produce.

“I don’t think QP needs IOC’s expertise in building upstream or halfway through the project, but they’ll be happy to see someone take volumes of LNG away from them,” a source said. principal of one of the bidding companies.

Qatar plans to increase its LNG production by 40% to 110 million tonnes per year (mtpa) by 2026, thereby strengthening its position as the world’s leading exporter of super-refrigerated fuel.

A spokesperson for Eni confirmed that the company was participating in the bidding process. QP, Shell, Chevron, TotalEnergies, Conoco declined to comment.

Exxon said it had not commented on the market rumors, but added, “We look forward to continuing the success of future projects with our partners Qatar Petroleum and the State of Qatar. ExxonMobil subsidiaries are working with Qatar Petroleum to identify international joint venture opportunities that further enhance the portfolio of both. “

Major energy companies see natural gas as a key fuel in global efforts to cut carbon emissions and replace the more polluting coal, although the International Energy Agency said in a report last month that investments in new fossil fuel projects should cease immediately in order to meet UN-backed targets aimed at limiting global warming.

Campaigners say the expansion of natural gas is delaying the transition to renewable energy that is necessary to meet UN-backed goals to tackle climate change. The European Union is at the heart of a debate on the place of gas in the energy transition.

Prospects for global LNG supplies have tightened sharply in recent months after Total suspended its $ 20 billion LNG project in Mozambique amid increased violence.

It followed a series of delays to LNG projects in North America, with COVID-19 hampering demand last year.

Global demand for LNG has increased every year since 2012 and has reached record levels every year since 2015, mainly due to growing demand in Asia. Analysts said they expected global LNG demand to increase by around 3-5% each year between 2021 and 2025.

LOWER RETURNS

Corporate interest in Qatari expansion comes despite relatively low returns.

QP offered international bidders returns on investment of around 8% to 10%, down from around 15% to 20% of the returns that Exxon, Total, Shell and Conoco received from early LNG facilities, according to reports. sources in three companies involved.

Feedback from projects in Qatar has never been disclosed before.

The six companies and QP declined to comment on the terms of the offers.

“It is clear that Qatar has become more competitive,” said a source. “But this remains a very low risk from a resource perspective.”

The results of the tender are not expected to be announced until September, two of the sources said.

In March, QP announced that it would take full ownership of the Qatargas 1 LNG plant when its 25-year contract with international investors, including Exxon and TotalEnergies, expires next year, a sign of its growing confidence.

Qatar is also in talks to make Chinese companies partners in the project, sources told Reuters last month.

QP last month hired international banks for a first sale of multibillion-dollar government bonds by the end of June, two sources said, to help in part with the development of the Northern Field project.

Our standards: Thomson Reuters Trust Principles.

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