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LNG World Shipping

Middle East gears up for LNG growth

Fri 31 May 2019 by John Snyder

Middle East gears up for LNG growth
McDermott will engineer the design for eight unmanned wellhead platform topsides for Qatar's expansion

Qatar has ambitious plans to increase its LNG production by 40% by 2024, while Oman and UAE are making substantial investments to meet global and domestic demand

Last year, the Middle East accounted for about 30% of the world’s LNG exports, with 94M tonnes. For the 12th consecutive year Qatar was the world’s largest exporter of LNG – with a market share of 24.9% – exceeding its nameplate capacity by producing 78.7M tonnes of LNG. Oman was 10th in the world table at 9.8M tonnes and the UAE 13th, at 5.5M tonnes.

As the second largest LNG exporter in the Middle East, Oman operates three liquefaction trains with a nameplate capacity of 10.4 mta at Qalhat near Sur. Oman LNG has long-term sales agreements in place with Korea Gas (Kogas), Osaka Gas and Itochu Corporation.

With the global trade in LNG reaching a record volume for the fifth consecutive year to 316.5M tonnes, and projected to reach 384M tonnes by the end of 2020, the Middle East is gearing up for increased demand from Asia.

Qatar’s ambitious plans

Supported by production from its new Wheatstone LNG and Ichthys LNG projects, Australia emerged as the leading LNG exporter earlier this year. While Australia’s lead could grow temporarily with additional production from Shell’s Prelude FLNG, Qatar already has ambitious plans in motion to regain the top spot.

These plans call for the construction of four additional “mega-trains” at Ras Laffan, each with a capacity of 7.8 mta. The expansion would increase nameplate capacity by over 40%, from 77 mta to 110 mta, with some 18 liquefaction trains operating by 2024.

State-run Qatar Petroleum (QP) has issued invitations to tender for the engineering, procurement and construction (EPC) of the four mega-trains to three EPC joint ventures (JV): Japan’s Chiyoda Corporation and Technip France; Japan’s JGC Corporation and South Korea’s Hyundai Engineering and Construction Co; and Italy’s Saipem SpA, McDermott Middle East and Taiwan’s CTCI Corporation.

The JVs will be bidding on the engineering, procurement and construction of the four LNG trains with gas and liquid treating facilities, ethane and liquefied petroleum gas (LPG) production and fractionation, a helium plant, utilities and infrastructure to support the processing units. A contract will be awarded by January 2020.

“Located 80 km off Qatar’s coast, the North gas field is considered the world’s third biggest, holding more than 900Tn ft3 of gas in reserves”

The increased LNG production will be fed by Qatar’s North Field expansion project. Located 80 km off Qatar’s coast, the country’s North gas field is considered to be the world’s third biggest, holding more than 900Tn ft3 of gas in reserves – about 15% of the world’s reserves.

QP awarded the front-end engineering design (FEED) contract for its North Field expansion project’s offshore pipelines and topsides facilities to McDermott Middle East Inc. The scope of this FEED includes engineering design for eight unmanned wellhead platform topsides, four trunk lines and four intrafield lines and is expected to take 12 months to complete.

Historic newbuild programme

The expansion of Qatari LNG production is going to require an historic LNG carrier newbuild programme – one that could potentially require more than 100 ships to be built over the next decade. South Korean shipyards are expected to top the list for QP’s tender to reserve ship construction capacity for the massive newbuild programme.

An historic newbuild programme could see the construction of LNG carriers similar to Mozah

The LNG carriers will join the fleet of Qatari-owned shipping and maritime logistics company Nakilat.

In 2018 Nakilat strengthened its international portfolio by expanding its JV partnership with John Angelicoussis-led Maran Gas, to include four additional LNG vessels. The agreement increased the Nakilat fleet to 74, presenting about 11.5% of the carrying capacity of the global LNG fleet.

Nakilat’s fleet includes 31 Q-Flex LNGCs (210,000-217,000 m3) and 14 Q-Max LNGCs (263,000-266,000 m3).

QP affiliate Qatargas is executing the LNG shipbuilding programme. Qatargas managed the construction of 45 Q-Flex and Q-Max ships, the world’s largest LNG vessels by carrying capacity. Three South Korean shipbuilders – Hyundai Heavy Industries (HHI), Samsung Heavy Industries (SHI) and Daewoo Shipbuilding & Marine Engineering (DSME) – built the Q-Flex and Q-Max ships, which are under charter to Qatargas to transport LNG to global markets.

Besides supporting Qatar’s North Field expansion project, the tender covers shipping requirements for the LNG volumes that will be purchased and off-taken by Ocean LNG.

Ocean LNG is a JV owned 70% by QP and 30% by ExxonMobil in the Golden Pass LNG export project in Sabine, Texas. Golden Pass is currently under construction and is planned to start by 2024. The tender also includes options for replacing Qatar’s existing LNG fleet.

“With this significant step, Qatar Petroleum embarks on another major LNG shipbuilding campaign expected to initially deliver 60 LNG carriers in support of the planned production expansion, with a potential to exceed 100 new LNG carriers over the next decade,” says Qatar minister of energy affairs and QP president and chief executive Saad Sherida Al-Kaabi.

“For the last 10 years gas demand in the emirate has outstripped its own domestic production, forcing it to import gas from Qatar”

As a way of expanding its reach to developing LNG markets, Nakilat inked a deal last year with Houston-based Excelerate Energy to acquire a 55% interest in a floating storage regasification unit (FSRU) Exquisite, the first such unit to join its fleet. FSRU Exquisite operates at the Engro Elengy terminal (EETL) in Pakistan’s Port Qasim.

ADNOC looks to international partners

Abu Dhabi National Oil Company (ADNOC) was the first LNG exporter in the Middle East and has been a supplier of gas to global markets for over 40 years. It has been exporting LNG from its three liquefaction trains at Das Island export terminal, mostly to Japan, since 1981.

For the last 10 years, however, gas demand in the emirate has outstripped its own domestic production, forcing it to import gas from Qatar.

In addition, a 25-year, 4.7 mta sales agreement between ADNOC and Japan’s JERA expired 31 March 2019. A new agreement that went into effect in April between JERA and ADNOC is for the purchase of eight cargoes annually for a period of three years, on an open destination basis. The volume is equal to about 0.5 mta.

ADNOC LNG, an affiliate of ADNOC in which Mitsui, BP and Total hold minority stakes, is stepping up its marketing efforts to line up a range of new LNG customers to fill the void created by JERA’s reduced requirements. ADNOC has signed seven short- and medium-term sales agreements, including the new JERA arrangement, totalling 4.2 mta.

Last November, Abu Dhabi’s Supreme Petroleum Council (SPC) approved ADNOC’s US$132Bn, five-year investment plan for a new integrated gas strategy that will sustain LNG production to 2040 and allow ADNOC to pursue incremental LNG and gas-to-chemicals growth opportunities where they arise, as well as meet its own domestic gas demand.

In an effort to exploit its oil and gas reserves through international partnerships, ADNOC launched a competitive licencing round last year for oil and gas blocks open for conventional and unconventional resources. As a result, ADNOC awarded exploration rights to US-based Occidental Italy’s Eni, Thailand’s Exploration and Production Public Company, India’s Bharat Petroleum and Indian Oil Corporation and Japan’s Inpex. ADNOC began a second competitive round of bidding in April.

Bahrain LNG delayed

Bahrain will soon become an importer of LNG through the Bahrain LNG terminal project. The receiving terminal, which will include the FSRU Bahrain Spirit, is jointly owned by the National Oil and Gas Authority (NOGA) of Bahrain, Teekay LNG Partners, Samsung Construction and Trading and the Gulf Investment Corp.

The terminal was originally set to open in Q1 of 2019, but is still under construction, according to a securities filing by Teekay LNG Partnership.

With an estimated fully built-up cost of US$903M, the Bahrain LNG project will be operated under a 20-year agreement and is now expected to take its first LNG cargo in Q3 2019.

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