Qatar: Expanding energy horizons

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The world’s largest exporter of liquefied natural gas (LNG) is spreading its wings into energy ventures far from the vast reserves on its own doorstep. Qatar is investing in shale-related projects in North America and elsewhere to help maintain its position as one of the top players in the global gas market.

On May 9 state-owned Qatar Petroleum International (QPI) and ExxonMobil unveiled plans to develop a $10bn export terminal at Golden Pass in Texas. The facility was originally designed as an import and regasification facility to land some of the take from Qatar’s fields, but events have overtaken its initial purpose.

Indeed, the US is set to become one of the world’s largest exporters of LNG by 2020, ratings agency Moody’s said in a report released in early May. The first US-based export terminal, Cheniere Energy’s Sabine Pass facility in western Louisiana, is expected to come on-line in 2015.

To ensure the Golden Pass terminal has ample supplies of raw material on tap, QPI and ExxonMobil announced in mid-April they had signed a memorandum of understanding to work together on projects to explore and develop unconventional gas resources in North America and to cooperate on other LNG opportunities around the world. Qatar brings to the partnership immense experience of LNG production.

One of the main markets for exports from Golden Pass will be the UK, with the two partners already having a regasification facility at Milford Haven in southern Wales. Domestic reserves from Britain’s North Sea fields are dwindling, with the country becoming increasingly reliant on imports to make up for the shortfall.

However, a large amount of US LNG exports are expected to head to Asia. The Panama Canal is undergoing a $5.25bn expansion that will treble the waterway’s capacity and allow the largest gas tankers currently operating to make the passage, shortening the route between US processing plants on the Gulf of Mexico and Pacific rim markets. Already, some of Qatar’s Asian clients, including Osaka Gas and Chubu Electric Power Company of Japan and South Korea’s Korea Gas Corporation, have inked import agreements with US producers.

The QPI-ExxonMobil exploration tie-up came hard on the heels of the Qatari firm’s announcement of a partnership with British company Centrica to acquire the conventional natural gas assets of Canada’s Suncor Energy in a $1bn deal. The agreement, which is expected to be closed in the second half of the year pending approval of the Canadian energy sector regulator, would give QPI and Centrica access to just under 27.75bn cu metres of reserves from fields in three provinces.

In a research note issued on April 15, Andrew Potter, an analyst at CIBC World Markets, said the deal was another step in Qatar’s programme of broadening its energy horizons: “For Qatar, the motivation is a diversification strategy outside of its traditional core region.”

According to Noel Tomnay, the head of global gas research at Scottish consultancy Wood Mackenzie, buying into the US and Canadian gas sectors would allow Qatar to play a greater role in the international gas industry along the entirety of the production chain, as well as maximise the benefits on its existing investments, such as its underutilised regasification plant in the UK.

“The bolstering of Europe’s, and specifically the UK’s, energy supply security through the facilitation of LNG exports from the US, combined with Qatari energy investment in North America, would strengthen Qatar’s geopolitical hand,” Tomnay said in a statement issued to coincide with a report from Wood Mackenzie issued just days before the QPI exploration and development tie up with ExxonMobil.

The report went on to say that, by limiting new projects to increase LNG capacity at home and shifting its investment focus overseas, Qatar was moving to protect the value of existing contracts with importers, and to put itself in a position of strength when the time comes to renegotiate these agreements.

By investing in US gas extraction and processing, Qatar is helping to ensure that it plays a role in the burgeoning North American energy boom. Should that boom not rattle international markets as hard as many have predicted, Qatar will still have its own strong production and export network in place.

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