Al Kaabi ... creating a more efficient organisation

The merger of Qatargas and RasGas is designed to help Qatar adjust to new market dynamics, with its position as the world’s top LNG exporter under threat

In a major restructuring move that will create by far the world’s largest LNG company, Qatar Petroleum (QP) have announced plans to merge joint venture subsidiaries Qatargas and RasGas in a bid to cut costs and streamline operations.

The integration is expected to take about a year, QP said, with the merged entity – boasting 14 trains and all of Qatar’s 77 million tonne per year liquefaction capacity – to retain the name of Qatargas, the slightly larger of the two producers.

"The collective resources, talents, and capabilities of two global leaders will be joined to create an even more effective and efficient organisation to uphold the best interest of ... Qatar, our customers, and our shareholders," QP CEO Saad Al-Kaabi said in a statement.

The merger is designed to help Qatar adjust to new market dynamics, with its position as the world’s top LNG exporter under threat from newer entrants to the market, including Australia and the US. The security of Qatar’s favored long-term contracts has become less appealing to buyers amid a glut of supply and a growing spot market.

The move also appears to throw into question the future of foreign investors in Qatar’s LNG sector. Both Qatargas and RasGas have foreign shareholders but these are unlikely to be affected, at least for now, analysts say.

"[I] don’t think it will have any impact on the shareholders in the different projects, since their equity varies anyway," Robin Mills, CEO of consultancy Qamar Energy, said. "Mostly I see this as a housekeeping/cost-saving exercise."

Shareholders in Qatargas include ExxonMobil, Mitsui, Marubeni, ConocoPhillips, Royal Dutch Shell, Idemitsu Kosan and Cosmo Oil. The company’s biggest LNG markets are Japan and China, while it also operates the 146,000 barrel per day Laffan condensate refinery in Qatar and a regasification terminal in the UK.

RasGas, which supplies LNG to South Korea, India and Taiwan, is a joint venture between QP and Exxon. Like Qatargas, it operates seven LNG trains, as well as the Al-Khaleej gas project, which produces around 2 billion cubic feet per day (20.7 billion cubic metres per year) of gas from the North Field in the Mideast Gulf for the domestic market. It is also responsible for the delayed Barzan gas project, which will likewise produce from the North Field reservoir.

The announcement of the merger had been talked about for some time and continues a regional and global trend of consolidation in the oil price downturn. In the nearby United Arab Emirates, state-owned Abu Dhabi National Oil Co. in October announced it would merge its two main offshore operators.

The move "fits in with recent consolidation trends to cut costs" and, in practice, will likely "just mean cutting a lot of expat costs," a Doha-based economist said, adding that the historical reasons for having two companies – serving two different sets of countries on long-term contracts – no longer apply.

There has also been consolidation on the LNG consumer side recently, with Japanese duo Tokyo Electric Power Co. and Chubu Electric Power Co. having integrated their contracts under Jera, which is now the world’s largest LNG buyer.

Since 2014, Qatar and its national oil company have worked to slash costs and streamline operations in the face of a prolonged period of lower energy prices. In June, QP took over marketing of oil products from state-run Tasweeq.

Meanwhile, Qatar has lifted a self-imposed moratorium on development of the world’s biggest natural gas field, the CEO of Qatar Petroleum (QP) said on April 3, as the world’s top LNG exporter looks to see off an expected rise in competition.

Qatar declared a moratorium in 2005 on the development of the North Field, which it shares with Iran, to give Doha time to study the impact on the reservoir from a rapid rise in output.

The vast offshore gas field, which Doha calls the North Field, accounts for nearly all of Qatar’s gas production.