Qatar’s North Field (NF) expansion project is forecast to increase the country’s LNG output by 64%.
The first phase - North Field East (NFE) - is to be completed by 2025 and the second phase -North Field South- by 2027, which is likely to place Qatar as the world’s second largest LNG exporter behind the US with Australia taking up third place.
Over the next five years, Australia’s LNG export capacity will barely grow, with just one LNG supply project under construction, while the US is set to expand its LNG export facilities by about 80%, according to a report from US credit agency, DBRS Morningstar.
NF’s expansion is expected to be a key growth driver for Qatar's economy in the coming years and contribute to sizeable fiscal and current account surpluses.
As Qatar intends to reduce its GHG emissions by 25% by 2030, it is also expanding its carbon capture and storage facilities capacity, as part of the NF expansion project.
This $30 bill LNG expansion project represents the second large infrastructure project undertaken in Qatar, following the 2022 FIFA World Cup football tournament.
It is taking place at a time of increased global demand for natural gas, partly driven by Russia’s invasion of Ukraine in February, 2022.
The country’s hydrocarbon sector has already benefited from higher demand and prices for natural gas from mid-2021 to the beginning of 2023. The positive impact was particularly evident in the current account, which posted a surplus of 26% of GDP – the highest since 2013 – and in the fiscal surplus, which reached 14.2% of GDP, according to the IMF.
Qatar’s Sovereign Wealth Fund – the Qatar Investment Authority (QIA) – appears to have also benefited from this windfall, with estimated assets up from $366 bill in 2020 to $475 bill in 2022, DBRS said.
However, the benefit from high gas prices on economic growth has been constrained, as contracts are mainly signed on a long-term basis, in which price variability is limited, compared to the spot LNG market, while Qatar currently has limited spare production capacity.
The project is expected to be a key growth driver for the Qatari economy over the medium term, as during the construction phase, it is expected to support non-hydrocarbon sectors, including transport, logistics and manufacturing.
According to the IMF, the construction phase is forecast to add an average of 0.3% of GDP to non-hydrocarbon growth per year. LNG expansion overall is expected to increase real GDP by a cumulative 5.7% by 2027 and add about 3.5% of GDP in export receipts annually.
It is also predicted to help maintain a sizeable current account surplus, projected at nearly 12% of GDP and contribute to a steady large fiscal surplus above 11% of GDP on average between 2025/2028.
In addition, DBRS forecast that the QIA will continue to benefit from large fiscal surpluses, likely receiving sizeable transfers to support its investment objectives.
