Shell signs up to Qatar project as LNG demand booms

Shell has become the latest international partner in the expansion of the world’s largest liquefied natural gas project in Qatar as global demand for the fuel soars following Russia’s invasion of Ukraine.

Europe’s biggest oil and gas company will take a 6.25 per cent stake in the $29bn project through a joint venture with state-owned QatarEnergy, it said on Tuesday. It did not disclose the financial terms of the deal.

Shell is the fifth international company to join the project in the past four weeks. Controlled by QatarEnergy, North Field East intends to boost the Gulf state’s LNG export capacity from 77mn tonnes to 100mn tonnes by 2026, helping it to overtake Australia as the second-biggest producer of the fuel behind the US.

“This agreement deepens our strategic partnership with QatarEnergy, which includes multiple international partnerships,” said chief executive Ben van Beurden.

Shell joins ExxonMobil, TotalEnergies, Eni and ConocoPhillips in the project, after each signed joint venture agreements since the start of June. Exxon and Total, like Shell, will each own a 6.25 per cent stake through separate joint ventures with QatarEnergy. Eni and ConocoPhillips will hold just over 3 per cent each through similar, smaller agreements.

Demand for LNG is soaring, particularly in Europe, where governments are rushing to find alternatives to piped natural gas from Russia following its invasion of Ukraine.

Analysts said the international companies’ main role would be to help market the additional production.

Qatar discovered the North Field, one of the world’s largest gas reserves which it shares with Iran, in 1971. Another phase, called North Field South, could increase its total export capacity further to 126mn tonnes a year by 2027.

LNG, which is often presented as a lower-carbon alternative to oil and coal that can help consumers cut emissions while more renewable energy is developed, is central to Shell’s growth strategy.

Shell is already the world’s largest LNG trader and is seeking access to more supply. In March it signed a 20-year LNG supply deal with US LNG provider Venture Global for 2mn tonnes of the fuel a year from an export facility in Louisiana.

In the first three months of the year, Shell produced 8mn tonnes of the fuel but sold 18.3mn tonnes, representing roughly 20 per cent of the market.

The global LNG trade in 2021 was 380mn tonnes last year, up 6 per cent from 2020, but the next major increase in supply will come from Qatar.

Before the war in Ukraine a key source of LNG for Shell was the Sakhalin-2 project in Russia’s far east. After the invasion Shell pledged to divest its 27.5 per cent interest and last week Moscow threatened to nationalise it.

Sakhalin-2 produced roughly 11.6mn tonnes of LNG in 2020, of which 3.2mn tonnes will have flowed to Shell before the war.