Enabling growth: Looking overseas to invest in the oil, gas and power segments

Qatar’s self-imposed moratorium on expanding production from the North Field has spurred Qatar Petroleum (QP) to invest in strategic partnerships abroad in order to maintain its global market share. Qatar Petroleum International (QPI) is QP’s wholly owned primary vehicle for foreign investments in the energy sector. QPI was established in 2006 with a mission of making “strategic commercial investments across the energy value chain around the world”, according to QPI’s website. This mission fits QP’s new corporate vision, which was released in October 2013, and states that the company will strive to become a “world-class oil and gas corporation, with its roots in Qatar, and a strong international presence”. According to Nasser Khalil Al Jaidah, CEO of QPI, “QPI will continue to pursue its strategy of opportunity and discovery-driven growth, seizing and responding to opportunities as they are developed and present themselves.”

Investments

QPI manages a multi-billion dollar portfolio of investments across the energy sector. The firm’s investments are generally joint ventures or part of a consortium of investors. The company has established investment partnerships with international, national and state-owned oil companies.

For example, QPI signed an agreement with Shell Gas and Power Development in 2007 to pursue the joint development of business opportunities. The two firms have been exploring business opportunities in key strategic energy markets. In June 2008 the partners signed a framework agreement to assess the feasibility of developing an integrated refinery and petrochemicals plant in China. The deal has progressed, with QPI assessing a 24.5% investment in the project, which may be a multi-billion dollar deal.

The company also has other major projects in Asia. In 2009 QPI invested in two joint ventures with Shell Chemicals in Singapore. The deal was QPI’s first downstream acquisition. Under the agreements, Shell sold shares to the new joint venture, which was called QPI and Shell Petrochemicals Singapore (QSPS), which would then control a 50% stake in the Petrochemical Corporation of Singapore and a 30% stake in Polyolefin Company Singapore. The venture has a capacity of producing 1.9m tonnes of olefins, with sales agreements with the Singapore Petrochemical Complex including 260,000 tonnes per year of low-density polyethylene and 600,000 tonnes per year of polypropylene.

A consortium of Japanese firms owns the remaining shares in the two chemical companies, which builds on Qatar’s existing Japanese partnerships in QSPS. QPI is also investing in Vietnam, with a recent investment for a 25% stake in a $4bn petrochemicals project. The Long Son complex is an integrated petrochemicals plant that will include an olefins cracker which is integrated with downstream plants that will produce an estimated 400,000 tonnes of high-density polyethylene, 450,000 tonnes of polypropylene and 400,000 tonnes of linear low-density polyethylene per year. QP has allocated resources to supply the plant with feedstock through Tasweeq.

Partnership Agreements

QPI also signed a memorandum of understanding with Total in March 2010 to invest in projects in Africa. Total is a major player in African energy markets, with 27% of its output coming from investments in the region. QPI’s investments in Africa include a 20% share in an exploration project with Total E&P in Mauritania. QPI reports that drilling was started in 2009. More recently, QPI and Total signed a shareholder agreement to invest in Total E&P’s operations in Congo. Under the deal, QPI invested in a 15% increase in the capital share of Total’s Congo subsidiary operations. The $10bn Moho North project is Congo’s first deepwater project, and Total controls a 53.5% stake in it. The project is expected to begin production in 2015 with an output of 140,000 barrels of oil equivalent (boe) per day by 2017, according to Kable Intelligence.

North America is seeing a significant level of activity in the oil and gas sectors, and QPI is targeting ventures in these markets. It recently signed a deal with the UK’s Centrica to buy gas fields from Suncor in Canada. Under the deal, Suncor Energy sold a portion of its natural gas and crude oil assets for almost $1bn in 2013. The deal gives Centrica a 60% stake in the development, with QPI owning the remainder. The assets are estimated to produce 42,000 boe per day.

QPI has also partnered with ExxonMobil to develop gas projects in North America. In the US, QPI and ExxonMobil’s biggest project is a liquefaction plant at the Golden Pass LNG terminal in Texas. Under the deal, QPI and ExxonMobil will invest $10bn through a company called Golden Pass Products to convert an LNG terminal, which was built to import gas, into an export facility. Golden Pass Products is currently applying for authorisation to export LNG from the facility.

LNG Global reports that the new plant will generate an estimated 45,000 jobs in the US during the construction phase. Total output would exceed 15.6m tonnes of LNG each year – almost 3% of total US output. The project already has permission from the Department of Energy to export LNG to countries under free-trade agreements with the US and is expecting broader approvals within a few years.

There is currently only one other energy company with authorisation to ship LNG globally from a terminal in nearby Louisiana. Cheniere Energy is expected to start delivering LNG by 2015.

Energy & Power

In addition to large-scale oil and gas investments, Qatar is investing in the energy and power sectors. QPI recently signed its first deal in Greece, with an agreement to purchase shares in GEK Terna’s Heron II plant. QPI will purchase a 25% stake in the gas-fired 435-MW plant for an estimated $58m.

The Qatar Electricity and Water Company (QEWC) is one of the bigger players investing in utilities across the GCC region. QPI, QEWC and Qatar Holding recently established a $1bn investment fund dedicated to investing in utilities abroad.

QEWC owns a 60% stake in Nebras Power, while Qatar Holding and QPI will own 20% each. QEWC is investing in Abu Dhabi’s Mirfa independent water and power project, which will deliver some 1600 MW of power and 53m imperial gallons per day of water.

QEWC is the second-largest utility company in the MENA region in terms of market value. It has invested in shares in a number of foreign entities, including a 60% stake in AES International’s 370-MW Amman East power plant. QEWC also signed a recent deal to help build a $1.6bn integrated power plant in Oman. The 2000-MW Sur Power project is the country’s largest greenfield project to date and is expected to account for up to 40% of Oman’s power generation capacity when it is commissioned in 2014. The power plant is being built in collaboration with Marubeni, Chubu Electric Power and Multi Tech of Oman.

Qatar’s investments in energy and utility projects are a clear indication of its expansion plans. Consulting firm Wood Mackenzie notes that buying into the US and Canadian gas sectors will enable growth along the value chain across the energy sector and maximise the value of existing investments and supply chains.