exclusive:-qatar-petroleum-not-scaling-down-lng-expansion-despite-delay-in-bids-–-ceo

Exclusive: Qatar Petroleum not scaling down LNG expansion despite delay in bids – CEO

Business

DUBAI (Reuters) – Qatar Petroleum will postpone the start of production from its new gas facilities to 2025 due to a delay in the bidding process, but is not downsizing the world’s largest liquefied natural gas project despite concerns of a mounting glut, its chief executive told Reuters.

Saad al-Kaabi said the company is not scaling back a plan to build six new LNG production facilities, known as trains, needed for an ambitious domestic scale-up, though commercial bids from contractors and the start of output will be delayed.

QP, the state-run LNG producer in the world’s top supplier of the fuel, had wanted to lift its output to around 110 million tonnes per annum by 2024 from today’s 77 mtpa, as the first phase of its expansion.

Kaabi said the company had been expecting to receive final bids from contractors for the first phase – the North Field East project, which will involve the construction of four trains – this month.

However, that was delayed as firms asked for more time to submit bids due to the global lockdown linked to coronavirus.

That will delay the award of the final main contracts, which cover major onshore engineering, procurement and construction, to the fourth quarter of this year, Kaabi said.

“We are going to be starting first LNG (production) in 2025, so the delay is for three to six months,” he said.

With global commodities prices coming down, Kaabi added that he expects commercial bids to come in at a lower rate.

“We are moving full steam ahead with the North Field expansion. There is absolutely no hesitation on that,” Kaabi told Reuters in a video interview.

“I think the world still needs this gas.. with the cancellation of a lot of projects and companies reducing capital expenditure left and right due to the situation.”

Reuters reported in February that QP had delayed choosing Western partners for the expansion by several months after a collapse in global gas prices.

Kaabi said selecting those partners “goes hand in hand” with finalising the contractor bids, and will also happen before the end of the year. QP has shortlisted six international oil firms for up to a 30% stake in the project’s first phase, he said.

The second phase, known as the North Field South project, will boost Qatar’s LNG production capacity to 126 mtpa by 2027 through the construction of two more trains.

Kaabi said there would be no delay in the second phase of the project, or reduction in its scope.

“We have zero projects that are being cancelled for the development of the North Field,” he said.

FORCE MAJEURE

Global LNG demand has crumbled due to the coronavirus pandemic that has disrupted industrial output, with countries worldwide imposing lockdowns and strict travel curbs to slow its spread.

Indian buyers of Qatari LNG issued a force majeure notice to Qatar seeking to delay loading of LNG cargoes under long-term deals due to the demand drop. PetroChina has also suspended some natural gas imports, including LNG shipments.

Force majeure is a clause in contracts typically referring to unexpected external circumstances that prevent a party from meeting their obligations.

A steep drop in European gas demand due to lockdowns has also forced LNG suppliers like Qatar to find alternative buyers. QP has made a rare approach to buyers in Asia and Europe offering LNG cargoes in the spot market.

Kaabi said while some buyers have asked to delay or even temporarily stop some shipments, others were able to take more LNG cargoes than in their contracts, and that QP has also sold some cargoes in the spot market.

“(They are) our partners for the long run and we will support them in the times of need,” he said.

The company has delayed some routine and unnecessary maintenance, he added, due to the spread of the coronavirus and constraints on movement.

“Reducing or stopping production of LNG is something that we don’t see happening for the time being,” he said.

Reporting by Rania El Gamal; Editing by Jan Harvey