Qatar Signs off with Sinopec

Credit Offshore Energy

As a sequel to inking of  QatarEnergy’s  contract with Exxon Mobil Corp, TotalEnergies, Eni and ConocoPhillips for investment in its North Field East (NFE) expansion QatarEnergy is signing of with China Petrochemical Corp (Sinopec) making it the largest phase of the nearly $30 billion LNG expansion venture. The NFE project will shore up Qatar’s liquefaction capacity from 77 mtpa to 126 mtpa by the year 2027. The NFE is located on the maritime border between Qatar and Iran, also known as South Pars Field ,with estimated reserves of 1,810 Tcf.China is the world’s second largest purchaser of LNG and is desperate to bolster its energy security and ensure reliability of clean fuel supply. This contract is the LNG sector’s single largest sales and purchase agreement ever.

China fills Japan’s Void

To counter energy supply volatility arising after Russia’s invasion of Ukraine fierce competition arose for LNG.  The NFE project and investment by many players will boost LNG production and to some extent guarantee long-term supplies of gas to Europe ,desperately looking for alternatives to Russian gas flows. The gas from NFE will be supplied almost equally between Europe and Asia.

 

Credit Reuters

China has swooped to capture the demand supply void created by Japan’s reluctance to commit to any long term agreement for LNG  with Qatar. Faced with the prospects of declining exports to Japan ,attributable to heightened concerns of Japanese utilities about carbon footprint and reopening of Japan’s nuclear power plants,  Qatar opened talks with Sinopec.This is the first ever direct investment by China’s Sinopec in Qatar’s LNG sector envisaging a transfer by QatarEnergy of a 5% interest , out of its 75 % overall stake, with a capacity of 8 mtpa. Sinopec terminals in China will be supplied 4 mpta annually from the year 2026 onwards. Qatar is well poised to become the world’s leading LNG exporter ,passing the US, enhancing its export volumes from the current 77 mtpa to 110 mpta.

Transition to Clean Energy

Credit LNG Prime

The state owned Qatari company  will supply LNG to Sinopec on an ex-ship basis inclusive of shipping and delivery of the gas. To ensure ex ship delivery from its NFE projects Qatar has embarked upon a huge ship building program and 60 LNG carriers are being constructed for long term charter at three shipyards in South Korea and one in China. The world is grudgingly realising that gas should be an essential part of any energy transition as wind dies down and sun doesn’t shine all the time.

By Nadir Mumtaz