QATAR: Gas reserve/expansion hike is strongly credit positive

GULF COUNTRIES - In Brief 25 Nov 2019 by Justin Alexander

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At a press conference in Doha today, the Minister of Energy, Saad al-Kaabi, made the unexpected and dramatic announcement that new appraisals have extended the range of North Field, including onshore. North Field was already scoped as the world's largest and wettest gasfield (with much higher levels of valuable condensate than most fields). The new reserve assessment is 1760 trillion cubic feet of gas, nearly double the prior estimate, and 70 billion barrels of condensate (as well as LPG, ethane and helium). The new appraisals extended the field at least 12km onshore. Given the new reserves, Qatar has further upsized its LNG expansion plans. When a 12-year moratorium on new development was lifted in April 2017, the initial plan was for only about a 10% hike in LNG production. This was successively raised to about 43%, adding 4 new LNG trains to lift output from 77m tonnes/year to 110m by 2024/5. Significant work is already underway for the expansion and the final contracts and partnerships are due to be awarded in Q1 2019. The new plan envisages an additional 2 trains, by 2027, lifting output to 126m t/yr, 64% above current levels. It is currently unclear whether the upsizing will result in a delay in the contract/partnership awards for the first 4 new trains and push out their startup timeframe, though we are seeking clarification on this. Either way, the expansion should be very credit positive. Even without any new LNG, Qatar is expected to post steady fiscal surpluses (certainly including sovereign wealth fund income) with oil and gas prices at around current levels. The hike in production should push those surpluses back into double-digit levels and help reduce de...