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Qatari LNG Heading to China in 25-Year Deal

April 14, 2008
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A sales and purchase agreement struck Thursday among Qatargas, Shell and PetroChina will lead to the long-term supply of liquefied natural gas (LNG) from Qatar to the Chinese market -- and that much less available for import to the United States.

"Three to four years ago, the Qatari projects were going to send this gas to the Atlantic Basin, particularly the U.S., Wood Mackenzie consultant Frank Harris told the Financial Times. "What it means is that we are going to see a lot less LNG go to the U.S. than we thought."

The newspaper reported that Wood Mackenzie values the deal at about $60 billion, assuming $100/bbl oil.

The agreements were signed in Beijing by Abdullah bin Hamad Al-Attiyah, deputy prime minister and minister of energy and industry of Qatar; Jiang Jiemin, president of China National Petroleum Corp. and chairman of PetroChina Company Ltd. and Linda Cook, executive director of Royal Dutch Shell plc.

The LNG will be provided from the Qatargas 4 project in Qatar and shipped to PetroChina's LNG receiving terminals upon the start-up of commercial operations of the facilities. The agreements are for 3 million metric tons/year of LNG for 25 years. Qatar is the world's largest LNG exporter and is set to expand production to 77 million metric tons/year by 2010. Chinese companies have previously signed long-term LNG supply agreements with projects in Australia, Indonesia and Malaysia.

"I see China as an important customer for Qatar in the future," said Al-Attiyah.

According to the Energy Information Administration, LNG imports into the United States are expected to decline by 12% this year compared to 2007 due to increased demand from Asia and Western Europe. While U.S. LNG regas capacity will nearly quadruple by 2009 to 5.7 Tcf, considerably less LNG supply is expected to be available. "Given global LNG supply constraints, overall capacity utilization at the U.S. LNG import facilities is expected to remain below 50% through 2030," EIA Administrator Guy Caruso said (see NGI, March 10).

"These agreements underline the partnerships that Shell is building with both suppliers and consumers to help meet the global energy challenge," Cook said. "Qatar is the giant of the LNG sector and China is emerging as a very significant gas market. Linking supply and demand through long-term agreements should be of tremendous benefit to both sides."

The Qatargas 4 LNG project, currently under construction, is a partnership of Qatar Petroleum (70%) and Shell (30%). Shell claims that it has the largest global position in LNG among the major international energy companies.

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