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Sunday, October 24, 2021

QP pens 10 year contract with Shell to supply China with LNG

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The state-owned liquified natural gas supplies will provide another 1 million tonnes per year to China after a deal was signed with Shell.

Qatar Petroleum (QP) is set to supply an additional 1 million tonnes per year of liquefied natural gas (LNG) to China after signing a 10-year contract with British-Dutch multinational oil and gas giant Shell.

The newest deal means that Qatar will supply 12 million tonnes per year of LNG to China under existing long-term deals.

LNG deliveries will start in January 2022 to various LNG terminals in China, which is set to become the world’s largest LNG importer in 2021.

Under the deal with Shell, the LNG deliveries will come from the QatarGas 1 project. QP operates a 10 million tonnes per year joint venture project with TotalEnergies, ExxonMobil, as well as Japanese companies Marubeni and Mitsui.

QP is also set to be the sole owner of QatarGas 1 at the start of 2022, when its joint venture agreement with its partners expires.

China’s LNG demand continues to grow larger, leaving global suppliers, such as Qatar, with an opportunity to benefit from this growing demand.

The Asian state has been seeking to diversify its import sources as it has become more reliant on Australian LNG over the past few years.

In March, a 10-year deal was signed between QP with China Petroleum & Chemical Corporation (Sinopec). The terms of the LNG Sale and Purchase Agreement (SPA) were that 2 million tonnes per year of LNG be delivered to Sinopec’s  terminals in China starting from January 2022.

The March deal marked QP’s first long-term deal with the major Chinese LNG importer. Qatar has said that China is considered a major customer and strategic partner in the field of energy.

Read also: Qatar’s North Oil awards contract to Japanese drilling company

In April, China National Offshore Oil Corporation, China’s third-biggest oil company, hinted interest at a partnership in Qatar’s $29 billion North Field LNG expansion project.

The North Field expansion project is the world’s largest LNG project. The project is set to raise Qatar’s LNG production capacity from 77 million metric tonnes per year to 110 million metric tonnes per year by 2025.

QP jumbo bond sale

The latest developments come as QP made global headlines for its success following its first public bond sale on Wednesday.

The Qatar state-owned LNG supplying giant sold $12.5 billion in a jumbo four-tranche bond sale, the biggest issuance out of emerging markets in 2021.

QP hired Citi, JPMorgan, BofA Securities, Deutsche Bank, Goldman Sachs, HSBC, MUFG, QNB Capital and Credit Suisse to arrange the deal.

QP sold $1.5 billion in five-year bonds at 50 bps over US Treasuries, $3.5 billion in 10-year portions at 90 bps over UST, $3.5 billion in 20-year notes at 3.15% and $4 billion in 30-year Formosa bonds at 3.3%.

The company tightened the spreads across all four tranches by 30 basis points, after combined orders topped $41 billion, according to a document from one of the banks involved in the deal.

The Formosa bonds and the 10-year paper attracted the most demand, drawing in over $12 billion each.

Formosa bonds are sold in Taiwan by foreign borrowers and denominated in currencies other than the Taiwanese dollar.

Bloomberg data previously estimated that QP would sell $10 billion in the US dollar denominated sale. The company’s last dollar bond sale was in 2006, when it raised $650 million.

QP will use the proceeds for operational and investment purposes, including for its North Field expansion project, according to the bonds’ disclosure document.

Capital expenditure by QP, its subsidiaries and joint ventures through 2025 is projected at 300 billion riyals, the prospectus said.

QP also recently posted a profit of 18.1 billion riyals in the first quarter of this year, up from 13.3 billion riyals the year prior.


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