DOHA, Oct 29 - QatarEnergy is securing long-term liquefied natural gas (LNG) supplies from the US and other sources. This move is part of a strategy to boost revenue in case there are future disruptions to exports through the Strait of Hormuz, according to CEO Saad Sherida Al-Kaabi.
Al-Kaabi explained that if the Strait were to close, gas prices would rise sharply, allowing QatarEnergy to earn income that would not have been possible otherwise. This approach shows how Qatar, a leading LNG producer, plans to recover losses from the ongoing conflict involving Iran and to safeguard its revenues against possible future disruptions.
Recently, the company signed a 20-year contract to purchase 3 million metric tons per year from Woodside’s facilities in the US. Last week, two additional agreements were made with Cheniere Energy for up to 4 million metric tons per year through 2054 from their Sabine Pass and Corpus Christi plants. In total, QatarEnergy has secured 7 million metric tons of LNG in the last two weeks alone.
“More deals are on the way,” Al-Kaabi said, noting that deliveries from Cheniere are not expected to start before 2031.
TRADING STRATEGY
Appointed CEO in 2014, Al-Kaabi shared that this strategy was developed about three months ago after QatarEnergy evaluated and discarded pipeline options due to their vulnerability. He pointed out that pipelines and pumping stations can also be targets during conflicts.
The plan leverages QatarEnergy’s expertise in LNG, trading operations, and its fleet of ships. It does not require significant capital investment, making it more cost-effective than building new pipelines or LNG facilities.
“In normal times, you would see a fair return, but during critical situations, you can really see the potential for profit,” Al-Kaabi stated.
QatarEnergy halted LNG production in early March due to multiple Iranian missile strikes on Qatar, declaring force majeure to affected buyers on March 4. Qatar produces about 20% of the world’s LNG, all of which pass through Hormuz, and has extended force majeure until the end of 2026.
Al-Kaabi indicated that the inability to export significant volumes has heavily impacted revenues.
QatarEnergy aims to utilize its fleet of around 200 LNG tankers—the largest in the world—and its trading operations, which Al-Kaabi mentioned would soon become the biggest gas trading platform globally.
“With the arbitrage capability we possess, the volume, and the number of ships, we can execute this strategy successfully,” he added.
This hedge targets a market that has shifted since Iran reacted to the war started by the US and Israel on February 28, effectively closing the Strait of Hormuz, a crucial route for global oil and LNG shipments.
QatarEnergy can capitalize on the difference between lower US gas prices and higher prices in Europe, Al-Kaabi explained. “The arbitrage potential here could help cover some of the losses.”
MORE AGREEMENTS TO COME
Al-Kaabi predicts that QatarEnergy will finalize additional long-term agreements, spanning 20 to 25 years, with US and other producers this year.
The goal is to secure “much higher” than 7 million metric tons per year, although specific figures were not disclosed. Negotiations are ongoing with various suppliers, including Venture Global, which is reportedly in advanced talks to supply 3 million metric tons per year.
He clarified that QatarEnergy cannot offer US volumes to long-term clients to compensate for Hormuz disruptions, as those contracts are tied to specific terminals and destinations. However, customers have been understanding regarding these disruptions.
Damage from Iranian missile strikes in March affected two of QatarEnergy’s 14 LNG trains at the Ras Laffan processing facility, impacting a combined capacity of 12.8 million metric tons per year and roughly 17% of Qatar’s export capacity. QatarEnergy estimated that the damage could result in about $20 billion in lost revenue annually.
Al-Kaabi stated that repairs to the damaged trains are expected to take around three years. The Pearl gas-to-liquids plant, a joint project with Shell that was also hit, is anticipated to resume operations by early 2027.
He mentioned that Qatar could fully restart LNG production within a week of reaching a peace agreement, provided ships are available, although output might initially be limited to around 83% of pre-war levels until the repairs are completed.
Al-Kaabi assured that no announced projects have been canceled. Ras Laffan can accommodate 77 million metric tons per year, and plans for expanding LNG output to 142 million metric tons remain solid, with all contracts in place. Development continues for North Field East, South, and West, with the first North Field train expected to commence in early 2024, contingent on a US-Iran peace deal.
Al-Kaabi revealed he has met with Iran’s acting petroleum minister twice recently to discuss potential oil and gas cooperation once the conflict concludes.