Qatar’s liquefaction capacity drive set to cost $50 billion but sanctioning unlikely this year

Qatar’s ambition to raise its liquefaction capacity from the current 77 million tonnes per annum (tpa) to 126 million tpa is likely to cost more than $50 billion in greenfield investments in additional development of the giant North Field, according to estimates by Rystad Energy.

The first stage of the project, estimated to cost about $35 billion, was expected to be sanctioned this year. However, Rystad Energy now estimates that it is more likely to be approved in the first half of 2021.

The expansion’s first phase includes contracts for associated onshore liquefaction and storage facilities. Tenders in play include construction of four liquefied natural gas (LNG) trains, utilities and offsite facilities, a helium recovery unit, non-technical buildings, warehouses, workshops, and associated facilities. The second stage of the expansion is likely to get the green light at the earliest by 2023.

Operator Qatar Petroleum is re-evaluating the commercial outlook of its North Field Expansion (NFE) project due to low gas prices before reaching out to international partners. Furthermore, the commercial bid deadline for liquefaction facilities has been extended to the second quarter of 2020.

Given the anticipated delays in formal sanctioning of the project, Rystad Energy has lowered its total forecast for capital expenditure in the Middle East, predicting about $21.3 billion of investments will get the go-ahead in the region this year, versus the previous estimate of more than $56 billion.

"Because of the spillover of delayed sanctions from 2019 and 2020, next year could see projects worth more than $55 billion reach a final investment decision – if current schedules hold," says Rystad Energy’s Senior Upstream Analyst Aditya Saraswat.

In the UAE, Rystad Energy estimates that sanctioning of new gas projects in 2020 will amount to $12.5 billion.

In Saudi Arabia we estimate that the sanctioning of the delayed Zuluf oil field expansion, a project targeting some 5 billion barrels of oil equivalent, will likely cost more than $10 billion in investments and is forecast to get the green light in early 2022.