Qatar Petroleum Set To Go Global

BMI View: In the latest shift in the country's energy strategy, Qatar Petroleum will be spun-off from the energy ministry and given greater freedom as part of ambitious strategy that will see the national oil company go abroad in search of opportunities.

News has emerged that the incoming generation of Qatari leadership is set to accelerate efforts to free Qatar Petroleum (QP) so that the firm can better compete against its national oil company (NOC) peers around the world. The plan would see QP freed from direct control by the energy ministry in an effort to allow the company to be more reflexive and responsive amid changes at home and abroad.

Under the new structure, QP would accelerate its recent push to move beyond Qatar and into more upstream and downstream projects outside its home market. Recent moves include:

  • Tie-up with Centrica to spend CAN1bn (US$976mn) on acquiring Suncor Energy 's conventional natural gas assets across Alberta, north-eastern British Col u mbia and southern Saskatchewan ;

  • Republic of the Congo (Congo-Brazzaville): QPI announced an agreement to subscribe to a 15% increase in capital at Total's Congo outfit as part of the US$10bn Moho Nord project;

  • Joint Venture (JV) between QPI and US supermajor ExxonMobil - already a key partner at home - to 'assess jointly unconventional gas resources in North America and global opportunities' in LNG .

M oratorium on further development of the giant North Field - which supplies feedstock for the country's liquefied natural gas (LNG) industry - has given QP greater resources to invest in projects abroad. Its most recent international moves suggest that g iven greater strategic freedom, the firm will pursue a diverse range of opportunities across different geographies . An upstream project near ing development, investment in undeveloped acreage and the Exxon JV -all point toward a diverse portfolio . , QP 's history of working with international oil companies (IOCs) in its home market improves the odds of success . T his should help to de-risk future joint ventures targeting international opportunities.

With no plans for an expansion of export capacity, Qatar is at risk of ceding its place a s the world's leading LNG exporter by the end of the decade. The entrance of new supplies of LNG to the market will increase competition and give greater bargaining power to importers who are eager to see relief in their import bills - which Qatar has to date proven reluctant to offer as it insis ts for oil - ind exed long - term contracts to remain.

Competition From Down Under
Qatar & Australia LNG Exports (bcm)

However, with reports that QP was considering a bid for RWE Dea , the oil and gas division of German utility RWE , - growth could accelerate under an acquisition - led strategy. Interesting ly , much of RWE Dea's most prospective acreage is in Egypt, a country where Qatar has recently sought to cement its political influence. RWE has struggled to offload its oil and gas business, with insiders revealing in June that that only Wintershall had expressed serious interest but at a lower price than the EUR4.5bn (US$5.9bn) executives had hoped to earn .

Acquiring RWE Dea would quickly give Qatar a notable global footprint as producing and prospective upstream assets are added to its portfolio . QP may have the funds for such a deal. However, the state - owned firm will likely lack the managerial and technical capacity to manage a global portfolio on its own . It would likely to have to defer to current RWE Dea management while it buil ds its own capacity to manage operations globally.

QP To Dea Rescue?
RWE Share Performance (EUR)

Although other state-owned firms in the region have launched downstream projects abroad - for instance Saudi Aramco's refinery projects in Asia and the US -, QP will be the first Middle Eastern NOC to move abroad in such a manner. While it is likely the move will be closely watched, it appears unlikely that other Middle Eastern NOCs will follow with a similar major push abroad given their continued focus on further developing their own domestic potential.

Thus, QP's fiercest competition is likely to come from Asian NOCs. While Qatari investment has long been sought after in key sectors such as infrastructure, we caution that investment in the politically-sensitive natural resource sector abroad could still provoke controversy even when relations between governments are friendly. We note the challenges Malaysia's Petronas experienced in its efforts to acquire Progress Energy in the face of intense scrutiny from Canadian political and regulatory authorities.

Given the need to scale up its capacity, QP may initially be reluctant to take the lead on major upstream or downstream projects and instead continue to partner with competent parties. Yet we believe that as the firm's confidence grows, it is likely to take on more challenging projects in the face of growing global competition for access to resources.

We particularly see scope for QP to engage in gas or LNG projects, as part of an effort to retain its influence on global pricing even as its own direct leverage is eroded with the advent of new suppliers to the market. However, we do not expect an exclusive focus on gas, as evidenced by its interest in RWE Dea and Total's Moho Nord project suggest.

This article is tagged to:
Sector: Oil & Gas
Geography: Qatar

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