Qatar Could Offer Chinese Firms Stakes In World’s Largest LNG Project

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Qatar Could Offer Chinese Firms Stakes In World’s Largest LNG Project

Qatar is in discussions with Chinese state energy giants to potentially make them equity partners in the world’s largest liquefied natural gas (LNG) project, in what could be a strategic choice to add huge potential LNG customers to its partners alongside Western majors, industry sources with knowledge of the matter told Reuters.

In February, Qatar approved what would be the world’s largest LNG project in terms of capacity, North Field East Project (NFE), set to raise the tiny Gulf nation’s LNG production capacity from 77 million tons per annum (mmtpa) to 110 mmtpa. Apart from hosting the biggest project, which would help it to be the global LNG export leader, Qatar also has one of the lowest breakeven prices for its projects, which is set to contribute to its position as one of the world’s top LNG suppliers, analysts say.

“At a long-term breakeven price of just over $4 per million British thermal units, it’s right at the bottom of the global LNG cost curve, alongside Arctic Russian projects,” Wood Mackenzie research director Giles Farrer said, commenting on Qatar’s LNG expansion project.

Traditionally, Qatar has partnered with the oil and gas supermajors such as ExxonMobil, Shell, and Total in its LNG projects. Those firms, plus Chevron, ConocoPhillips, and Eni, are again invited to bid for a share of the huge expansion project.

But this time, Qatar could add Chinese state giants such as PetroChina and Sinopec, to the partnerships, according to Reuters’ sources.

In March this year, Qatar signed a ten-year LNG supply deal with Sinopec, aiming to solidify its position in China.

A long-term agreement with China is a step to securing more of the Chinese LNG market, which is a key driver of global LNG demand growth.

In recent weeks, Qatar has also signed LNG supply agreements with Pakistan and Bangladesh, which, apart from addressing growing demand in Southeast Asia, could be interpreted as Qatar growing closer to the China sphere of influence, according to analyst Simon Watkins.

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