Exxon Mobil, Royal Dutch Shell, TotalEnergies, ConocoPhillips, Chevron, and Italy’s Eni submitted bids on May 24 for Qatar’s LNG expansion project, industry sources told Reuters.
This is an indication of the growing demand energy giants continue to have for investing in competitive oil and gas projects despite increasing government, investor and activist pressure on the industry to haste an energy transition.
Contrary to what the country’s national oil company, Qatar Petroleum (QP), has done in the past from relying on international oil companies’ technical expertise to their financial support, QP has solely proceeded with the development of the nearly $30 billion North Field expansion project.
“I don’t think QP needs the IOCs expertise in the upstream or midstream construction of the project but they will be glad to see someone take some LNG volumes off their hands,” a senior source in one of the bidding companies said.
While Exxon Mobil refused to comment on market rumours, the company did express eagerness to continue working with QP, saying: “We look forward to continuing success in future projects with our partners Qatar Petroleum and the State of Qatar. ExxonMobil affiliates are working with Qatar Petroleum to identify international joint venture opportunities that further enhance the portfolio of both.”
An Eni spokesperson confirmed the company is participating in the bidding process. QP, Shell, Chevron, TotalEnergies, Conoco declined to comment.
A global increase in LNG demand has been noticed every year in the past decade and hit all-time highs almost every year since 2015. Analysts have said they expect global LNG demand will grow about 3-5% each year between 2021 and 2025, which motivates Qatar to grow its LNG output by 40% to 110 million tonnes per annum (mtpa) by 2026, strengthening its position as the world-leading exporter of LNG.
The interest from companies in the Qatari expansion project comes despite relatively low. QP offered international bidders returns of around 8% to 10% on their investment, down from around 15% to 20% returns Exxon, Total, Shell and Conoco have seen from the early LNG facilities, according to sources in the three companies involved.
International oil companies view natural gas as a key fuel in the energy transition movement although the International Energy Agency said in a report last month that investments in new fossil fuel projects should stop immediately in order to meet U.N.-backed targets aimed at limiting global warming.
In fact, according to activists, expansion in natural gas delays the transition to renewable energy that is needed to meet U.N.-backed targets to battle climate change. The European Union is in the midst of a debate about what role gas should take in the energy transition.
