After 12 years, Qatar restarts development of world's biggest gas field

In recent years, Qatar has been seeing some intense competition to keep their position as the world’s top LNG exporter.

However, the country’s latest move — lifting of a self-imposed ban on development of the world’s biggest natural gas field — is expected to blow the competition right out of water.

In 2005, Qatar had declared a moratorium on the development of the North Field, which it shares with Iran, to give Doha time to study the impact on the reservoir from a rapid rise in output.

The vast offshore gas field, which Doha calls the North Field and Iran calls South Pars, accounts for nearly all of Qatar's gas production and around 60% of its export revenue, reported Reuters.

“We’ve completed most of our projects and now is a good time to lift the moratorium,” QP Chief Executive Saad Al Kaabi said.

“For oil, there’re people who see peak demand in 2030, others in 2042, but for gas, demand is always growing,” he added, while speaking to journalists at Qatar Petroleum’s headquarters in Doha.

Gulf Times reported that the plans would see the development of an export-oriented gas project in the North Field, with a capacity of about 2bn cubic feet a day.

The mammoth project is expected to increase current production of North Field by about 10% and add about 400,000barrels per day (bpd) of oil equivalent (bpdoe) to Qatar’s production.

“I’m very confident about the future of LNG and we’ll be going forward making sure that we’re one of the lowest cost producers for a very long time and we’ll remain as a dominating force in LNG in the world,” Al Kaabi was quoted as saying by The Peninsula.

Talking about the timing of plans to develop a new project when oil prices are volatile, Al Kaabi said low prices had not affected Qatar.

“By the time this project comes online in five years or so, it should be a good market for gas. We don’t see that the pricing pressure has affected us as much as some,” he said.

He said Qatar Petroleum had spent hundreds of billions of dollars on developing the North Field and now was a ‘good time’ to allow for new ventures there.

Qatar is expected to lose its top exporter position this year to Australia, where new production is due to come online soon.

The LNG market is undergoing huge changes as the biggest ever flood of new supply is hitting the market, with volumes coming mainly from the United States and Australia.

Australian media reacted to the new development with alarm.

‘The announcement on Monday in Doha by the QP chief executive points to a tougher task ahead for Australian-listed players such as Woodside Petroleum and Oil Search which have ambitions to expand their own LNG production,’ wrote Australia-based Financial Review.

“It’s also a threat to other developers of new capacity worldwide, as Qatar can add new capacity at a lower cost than anybody else,” said research director for global LNG, Giles Farrer.

Earlier, a surge in new supply from Australia after a $200bn wave of investment has contributed to a glut in the global LNG market and depressed prices.

Qatar has the advantage of being able to invest in new LNG supply without having first to lock in long-term sales contracts with buyers. That might give Qatar an edge in the current market where buyers have been reluctant to sign up for new purchase contracts, despite expectations of a shortage emerging in 2022-23, an Australian analyst told the Financial Review.

Iran, which suffers severe domestic gas shortages, has made a rapid increase in production from South Pars a top priority and signed a preliminary deal with France's Total in November to develop its South Pars II project.

Iran's oil minister last week vowed to ramp up production of its part of the shared field.

However, Al Kaabi downplayed the potential for any dispute with Iran.

“Iran and Qatar have an excellent political relationship, for us as technicians we’ve an excellent technical relationship. We’ve a committee that meets regularly to discuss what both sides are doing,” he was quoted as saying by Times Colonist.

“So there's a mutual understanding of what’s happening. They're free to do what they want on their side of the field and we’re free to do what we want on our side of the field,” he added.