Qatar has been a principal beneficiary of Russia’s invasion of Ukraine early last year, securing its top liquefied natural gas (LNG) exporter position and vigorously pursuing an expansion program in its flagship North Field. As a corollary of this ambitious plan, Qatar announced last week that it is to move ahead with the long-anticipated Ras Laffan Petrochemicals complex that will utilise some of the Emirate’s gas expansion program to enhance its higher-value petrochemicals exports. Given Qatar’s geographical position - situated between Saudi Arabia and Iran – it has long been necessary for it to tread a delicate diplomatic path between the U.S. and its allies on the one hand, and China and its allies on the other. However, the huge Ras Laffan Petrochemicals Project features major companies not just from the U.S. but from several of the U.S.’s major allies in Asia, including from Taiwan.
The U.S.’s Chevron Phillips Chemical will take the lead in building the US$6 billion ethylene project located in Ras Laffan that will feature an ethane cracker with a capacity of 2.1 million tons of ethylene per annum. This will make it the largest in the Middle East and one of the largest in the world, according to QatarEnergy, which will run the project together with the U.S. firm, on a 70/30 basis in QatarEnergy’s favour. Anticipated to begin production in 2026, the Ras Laffan Petrochemicals complex will also include two polyethylene trains with a combined output of 1.7 million tons per annum of High-Density Polyethylene (HDPE) polymer products. This will increase Qatar’s overall petrochemical production capacity to almost 14 million tons per annum.
“[This complex] will double our ethylene production capacity and increase our local polymer production from 2.6 to more than 4 million tons per annum,” said Saad Sherida Al-Kaabi, chief executive officer of QatarEnergy and Qatar’s Energy Minister. “This cornerstone investment in Ras Laffan Industrial City marks an important milestone in QatarEnergy’s downstream expansion strategy[...] It will not only facilitate further expansion in the downstream and petrochemical sectors in Qatar but will also reinforce our integrated position as a major global player in the upstream, LNG, and downstream sectors,” he added.
It is apposite to note at this point that the Penn State University-educated Al-Kaabi then went on to highlight that QatarEnergy’s position as a major global player will be further enhanced once the new world-scale petrochemical project in Orange, Texas, comes online, again in partnership with Chevron Phillips Chemical, executed by QatarEnergy’s joint venture Golden Triangle Polymers Company. The final investment decision on the Ras Laffan Petrochemicals complex comes less than two months after QatarEnergy and Chevron Phillips Chemical made the final decision to go ahead with the US$8.5 billion Golden Triangle Polymers Plant on the U.S. Gulf Coast in Texas.
It is also interesting to note that these decisions have come at around the same time as the U.S.’s ConocoPhillips was instrumental in ensuring gas supplies from Qatar to Germany at a time when any wavering from the de facto leader of the European Union (EU) over implementing U.S.-led energy sanctions on Russia would have undermined the U.S. core strategy towards punishing Russia for its invasion of Ukraine. As highlighted by OilPrice.com at the time of the deal, two sales and purchase agreements signed between QatarEnergy and the U.S. company for the Qataris to export LNG to Germany for at least 15 years from 2026 came at just the right time as far as Germany was concerned.
These two deals between Berlin and Doha will provide Germany with 2 million metric tonnes per annum of LNG, sent from Ras Laffan in Qatar to Germany’s northern LNG terminal of Brunsbuettel, according to a statement at the time from QatarEnergy’s Al-Kaabi. Additionally, he added, the two deal marked the first ever long-term LNG supply agreements from Qatar to Germany, with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security. ConocoPhilips is involved, as one of its subsidiaries will be the entity that purchases the LNG from Qatar that will then be delivered to Brunsbuettel, which is currently still under development.
It is also interesting to note that the new LNG agreements for Germany will be sourced from Qatar’s North Field East (NFE) project. The NFE is the first and larger of the two-phase North Field expansion plans, which includes six LNG trains that will ramp up Qatar’s liquefaction capacity to 126 million tonnes per year by 2027 from 77 million. The North Field is one half of the two parts – the other part belonging to China’s key ally in the Middle East, Iran - that constitute the world’s biggest gas field. This 9,700 square kilometre gas reservoir holds an estimated 1,800 trillion cubic feet of non-associated natural gas and at least 50 billion barrels of natural gas condensates. Qatar’s 6,000 square kilometre section – the ‘North Field’ – is the cornerstone of its world-leading LNG exporter status. Iran’s 3,700 square kilometre section – ‘South Pars’ – already accounts for around 40 percent of Iran’s total gas reserves – mostly located in the southern Fars, Bushehr, and Hormozgan regions – and about 75 percent of its gas production.
Interestingly, ConocoPhillips holds a 3.125 percent share in North Field East project and a 6.25 percent share in the North Field South project, which are planned to start up in 2026 and 2027, respectively. The U.S. also very pertinently still has its huge Al Udeid airbase in Qatar functioning as a forward operating headquarters of its Central Command (CentComm). Whilst Saudi Arabia was still considered by Washington to be its key ally in the Middle East and Riyadh still had in place a blockade against Qatar (that ran from June 2017 to January 2021), the U.S.’s ability to influence Qatar was reduced. With Saudi Arabia now effectively downgraded in the U.S. list of allies, Washington is seemingly able to pursue a freer energy and security policy across the Middle East, including towards Qatar.
This appears to be paying dividends for the U.S. in the strategically-placed Emirate as not only have its own companies been busy signing new agreements with Qatar, including those that steady the political will of its key ally in the EU, Germany, but also in the case of Ras Laffan, several companies of countries that the U.S. regard as crucial to its interests in Asia have benefited. Most notable of all the corollary awards attached to the giant Ras Laffan Petrochemicals complex contract was the engineering, procurement, and construction (EPC) contract for the ethylene plant to Samsung Engineering CTCI Joint Venture (SCJV). Aside from the award to South Korea’s Samsung Engineering, CTCI is the leading EPC services provider in Taiwan, the subject of greatly increased pressure from China in the past few months.
By Simon Watkins for Oilprice.com