Shell, Qatar to Sign $8B LNG Deal, Targeting US

25 February 2005

Reuters reports that Qatar and Royal Dutch Shell will soon sign an $8 billion deal to supply liquefied natural gas (LNG) to the United States.

Qatar holds the world’s third largest reserves of natural gas (509 trillion cubic feet) behind Russia and Iran, most of it in the offshore North Field. The project, Qatargas-4, will push state-run Qatar Petroleum towards its goal of becoming the world’s top LNG producer by 2011.

Industry sources reckon the project—involving a single 7.5 million tonne per year LNG train—will require funding of close to $6 billion.

The project is expected to send 7.5 million tonnes per year of LNG, gas super-cooled to liquid for transport on tankers, to the United States where declining domestic natural gas production has heightened demand for imports.

Start up is expected around 2010.

Last year Shell committed to a $6 billion on Gas-to-Liquids (GTL) in Qatar, currently planned to be the world’s largest. (Earlier post.)

Qatar’s original markets for its LNG exports were Japan and South Korea, the world’s two largest LNG importers. India subsequently joined them as a significant market for Qatari LNG.

Both LNG and GTL are means for natural gas producers to turn their natural resources into cash from remote markets. In the case of the US, the largest stores of natural gas in the world are far away...too far for pipeline delivery, as is done from Mexico.

The mention of the US as a target market in the report highlights an issue that will become increasingly pressing: where will the LNG terminals (the facilities that receive the super-cooled, liquefied gas and regassify it) be located? The US currently only has four such terminals—insufficient to meet the projected need. There are numerous proposals—and much local opposition.