Qatar Awards first North Field Contracts

22.06.2022 - The emirate of Qatar has begun signing agreements with US and European energy majors for the country’s planned $30 billion expansion of its North Field, which is believed to harbor the world’s largest natural gas reserves. TotalEnergies is taking the top slot.

Speculation over which companies would receive contracts for a new project that eventually would supply liquefied natural gas to Europe and help to make up some of the shortfall from Russian pipeline has been in circulation for several weeks.

Initial reports said state-backed Italian energy giant Eni would be tapped to lead a consortium of five global energy groups that would be coordinated by QatarEnergy (QE). In the meantime it has emerged that France’s TotalEnergies will have the biggest stake in the mega project that will allow the oil and gas-rich Middle East country to ramp up its liquefaction capacity from 77 million t/y currently to around 110 million t/y by 2027.

The deal with Total calls for establishing a joint venture in which the French company will hold a 25% stake and QE the 75% majority. This JV will own a 25% share of the overarching North Field Expansion (NFE) scheme.

Total’s CEO, Patrick Pouyanné, said his company had been negotiating its role in the project since 2019, when the plans were first broached—almost three years before the Ukraine War disrupted the international energy markets and opened up a perspective for the country to expand its position as world’s largest LNG exporter. Pouyanné hinted that Qatari leaders had driven a “hard bargain.”

It is unclear whether the participation of other companies will also take the form of joint ventures, but the collaboration of Italy’s state owned energy giant Eni and ConocoPhillips of the US definitely will.

On Jun. 19, QE’s CEO Saad Sherida Al-Kaabi, who is also the country’s energy minister,  together with Eni CEO Claudio Descalzi presented an agreement for a 75:25 joint venture. This JV, however, will have only a 12.5% interest in the over-arching NFE project.  

Descalzi called the deal a “strategic move” that will expand the Italian player’s presence in the Middle East and offer it access to a world- leading LNG producer,

At a press conference on Jun. 20, Al-Kaabi said QE had signed a separate joint venture agreement with ConocoPhillips that would operate on the same terms as the pact with Eni. He added that the selection process for partners has now been completed and that subsequent signings could be announced as soon as next week.

Among major energy players expected to participate in the gas field expansion, none would have a share bigger than Total’s, the minister-cum-company executive said. Companies also expected to be on board are Shell and ExxonMobil.

The supply deals for individual countries are likely to be negotiated by Qatar’s energy ministry with national leaders. Both Italy and Germany, which will bear the brunt of Europe’s pullback from Russian gas, have already signed framework agreements with their potential new supplier.

In those two countries, the terms of gas supply from Qatar and elsewhere could heat up the energy debate even more. In Germany especially, Green and anti-nuclear groups are already dismayed by the possible return to coal, and potentially nuclear power sources.

Reports suggest that until Qatar exploits its more of its North Field, some of the gas shipped to Germany would come from the Golden Pass liquefaction plant being developed on the Texas coast by a 70:30 joint venture of QatarEnergy and ExxonMobil. This is due to begin shipping in 2024. According to the US Department of Energy, about 75% of natural gas produced in the US in 2019 was from fracking, a procedure that faces vehement opposition in much of Europe.

Author: Dede Williams, Freelance Journalist