Qatar books capacity at UK’s Grain LNG from 2025-2050

Author: Edward Cox

2020/10/13

LONDON (ICIS)--Qatar Petroleum on Tuesday agreed to take 7.2mtpa, or almost 10 billion cubic metres (bcm), of long-term LNG storage and regasification capacity at the UK’s Grain LNG terminal from 2025.

This will be a combination of existing and new capacity, with a new LNG storage tank to be built at what is already Europe’s largest import terminal.

Qatar Petroleum plans to expand its LNG production from the mid-2020s.

The state-run company has been marketing expansion volumes to buyers in Asia while rapidly expanding its capacity position in Europe.

This will allow it to pivot between markets in the east and west to manage its growing portfolio.

Qatar has a majority equity and capacity share at the Welsh South Hook terminal.

FURTHER GRAIN EXPANSION

The agreement between Qatar and the UK’s National Grid marks the end of an Open Season at Grain that started in November 2019.

Qatar will take the entire 7.2mtpa regasification capacity and 380,000 cubic metres of storage capacity that was on offer from mid 2025 to 2050.

A new storage tank will boost capacity to 1.2mcm of LNG from the current 1mcm as a result of the agreement.

The volume that can be delivered into the British NBP will rise to 25bcm/year from the current 20bcm/year.

Some of the capacity will come from Grain’s existing facilities.

BP and Algeria’s Sonatrach have capacity agreements at Grain that expire in 2025, according to LNG Edge.

MORE CAPACITY, MORE LNG?

In February, Qatar signed an agreement to take almost 3mtpa of capacity at the French Montoir LNG terminal from 2021 up to 2035.

In September 2019, Qatar bought the entire capacity at Belgium’s 6.72mtpa Zeebrugge terminal from 2023-2043.

Taking capacity is not the same as ensuring LNG supply given that Qatar’s agreements are not linked to firm supply contracts.

Qatar at times uses the South Hook terminal to place flexible cargoes when demand fluctuates from major buyers in Asia.

This has historically been prevalent around the shoulder months.

The latest move is another sign of the competition LNG project developers face, especially those in North America, when aiming at the European market.

Northwest Europe’s gas import dependency is increasing and Qatar could offer an attractive source of supply.

But a growing dependency on LNG imports would also link the European market more closely to global markets which could lead to higher prices in a stronger market.