Qatar to merge LNG producers Qatargas and RasGas

Industry: Oil and Gas 2016-12-13

Qatar will merge state-owned liquefied natural gas producers Qatargas and RasGas Co Ltd, the chief executive of Qatar Petroleum (QP) said on Sunday, in the Gulf state’s latest reaction to lower energy prices.

The more-than-two-year slump in oil prices has forced Gulf countries to reduce state spending and consider consolidations as a way to cut costs: among the biggest being Abu Dhabi’s merging of Mubadala and International Petroleum Development Co.

While Qatar is more focused on gas than oil, it too has been forced into reorganizations, with QP already going through a process that reduced staffing and earmarked a number of assets for divestment.

The tie-up of Qatargas and RasGas, Qatar’s number one and two LNG producers respectively, has been talked about for a number of years stretching back before the oil price reduction.

At a news conference, QP CEO Saad al-Kaabi said that behind the announcement was an element of wanting to cut costs.

“Of course as an outcome of this cost reduction will be realized, it will make us more competitive in the market,” he said, adding that the move would save “hundreds of millions of dollars”, without giving a timeframe for the savings.

“It’s one business that will do the same thing. Putting it all (in) one place gives you a much bigger advantage in marketing.”

The transition, which will result in a single company called Qatargas, will take around 12 months to complete and will begin before the end of this year.

Once the new structure is in place, some areas of the business could see job cuts, although the operational side of the plants will not be affected, Kaabi said.

A Doha-based energy analyst said the move was in line with QP’s recent cost cutting but also had other benefits.

“Arguably the reasons for having two firms – to deal with western and eastern markets and also to encourage some competition during the rollout phase of LNG facilities – are no longer relevant,” he said.

Qatargas is the largest LNG-producing company in the world, with an annual output capacity of 42 million tonnes a year, according to its website. While QP owns a majority stake, global energy firms including Total, Mitsui & Co and ConocoPhillips also possess small stakeholdings.

RasGas has a production capacity of about 37 million tonnes a year, according to its website. It is a 70/30 percent joint venture between QP and Exxon Mobil.