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Qatar eyes global LNG investment

Tue 14 Feb 2017 by Karen Thomas

Qatar eyes global LNG investment

Qatar, the world’s largest LNG exporter, is expanding its overseas investments to counter production constraints at home, to diversify its output and to position itself to supply gas to new importers.

LNG World Shipping is keeping a close eye on developments in Qatar, after state energy giant Qatar Petroleum (QP) announced in December that it will merge state-owned producers RasGas and Qatargas.

At the time, QP said that the decision positions Qatar to weather falling energy prices. It is increasingly evident, however, that a long-term shift in strategy is under way that aims to future-proof Qatar’s position as an energy giant – even as its domestic reserves shrink.

A new report from BMI suggests that the country’s natural gas production will peak next year (see graph). It goes on to highlight Qatar’s new, two-pronged strategy: positioning itself overseas and reorganising the two home-grown gas-production and LNG-export businesses.

The other challenge facing Qatar is a slow-down in demand from top LNG importer Japan. Japan sourced 15 per cent of its imports from Qatar last year, third only after Australia and Malaysia, according to IHS Energy.

Last year, Japan imported 83.3 million tonnes a year (mta), down 2 per cent on-year by volume but 40 per cent on value, according to the country’s full-year trade data, published last month.

Qatar’s overseas investments include a 40 per cent stake in Block 10 off Cyprus, as a partner with ExxonMobil, which holds a 60 per cent stake. Qatar Petroleum also owns a 30 per cent stake in Chevron’s deepwater licences off Morocco. And in December, Qatar Investment Authority (QIA) teamed up with Glencore to buy a 19.5 per cent stake in Russian oil firm Rosneft.

BMI says Qatar may team up again with ExxonMobil to bid for Mozambique’s proposed onshore LNG project. Separately QP holds a 70 per cent stake in the US-based Golden Pass project in Texas. QP, ExxonMobil and ConocoPhilips want to reconfigure the LNG-import terminal as a 15.6 mta export project.

Merging RasGas and Qatargas to form a single entity known as Qatargas will improve efficiency, cut costs and free up capital to fund international expansion, BMI says. This supports a two-pronged investment strategy – to shore up future supply, taking equity stakes in overseas projects and securing long-term demand, developing import infrastructure, as with the Pakistan floating import partnership it announced last week with Höegh LNG and others, and in Brazil.

That strategy also explains QP’s decision, announced last autumn, to launch a new marketing body – Ocean LNG – to market a “future international gas-supply portfolio”.

“Saad Sherida Al Kaabi, the chief executive of QP, has acknowledged the limits of focusing purely on domestic hydrocarbons for growth, especially given that Qatar’s crude production is in decline,” BMI says.

“[Mr] al-Kaabi’s answer to local growth limits is to increase investment abroad, stating that Qatar will look to grow international investments over the next two years, in both upstream and downstream assets.”

Meanwhile, shipmanagement companies are waiting to find out what the merger will mean for the LNG carriers chartered to the two companies. “So far, we are told it will be business as usual – until we hear otherwise,” said a source.

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