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Qatar, Shell Ink Major LNG, Petrochemicals Deals; Total Grabs Share of Qatargas II

Qatar Petroleum inked several blockbuster liquefied natural gas (LNG) transactions last week involving development of its North Field, which eventually could become the world's largest LNG supplier.

The company signed a $6 billion deal with Royal Dutch/Shell Group for development of another LNG train. In addition, France's Total bought a 16.7% stake in the Qatargas II LNG train from partners Qatar Petroleum and ExxonMobil for about $1 billion. And Distrigas Europe signed a 20-year contract last week with the Qatargas II partners for delivery of 2.05 million metric tons/year of LNG through the Zeebrugge import terminal in Belgium.

"Qatar's goal to be the world's leader in LNG production is further secured through the development of large-scale projects such as this," said Al Attiyah, Qatar's energy minister, regarding the Shell transaction for another LNG train. The tiny Middle Eastern country, which holds about 9% (509 Tcf) of the world's natural gas reserves, expects to be the world's largest LNG supplier by the end of the decade.

Last October Qatar Petroleum signed a $12 billion agreement with ExxonMobil covering development of 26 Tcf of North Field reserves and construction of two LNG trains (Qatargas II ) with output of 15.6 million tons/year (2 Bcf/d).

The new heads of agreement (HOA) with Royal Dutch/Shell calls for development of another LNG train in Ras Laffan City. The Qatargas 4 train will include the integrated development of upstream gas production facilities with capacity to produce 1.4 Bcf/d of gas and substantial quantities of associated liquids, a single LNG train yielding 7.8 million tons/year for 25 years, and shipping of the LNG to the intended markets in North America and Europe.

Qatargas 4 will be a joint venture between Qatar Petroleum and Shell with 70% and 30% equity interests, respectively. LNG deliveries are expected to commence around 2010-2012.

Total's purchase last Monday covers up to 5.2 million tons of LNG per year from Qatargas II for a period of 25 years. The start-up of Train II of the Qatargas 2 project is expected by the end of 2008. Total is one of the founding partners with 10% (20% of the upstream) of Qatargas.

Wrapping up a blockbuster beginning for the week, Qatar Petroleum and Shell Chemicals also signed a letter of intent Monday for the development of a $3 billion world-scale ethane-based cracker and derivatives complex in the North Field. The complex will produce petrochemicals products to be marketed into primarily Asian growth markets, with a start-up date early in the next decade.

Shell CEO Jeroen van der Veer said Qatargas 4 will "broaden Shell's LNG supply portfolio to include projects in seven countries, and will provide additional supplies for the growing LNG markets in North America and Europe."

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