DUBAI - Qatar Petroleum (QP), the world's top liquefied natural gas (LNG) supplier, signed a contract on Monday for the first phase of its North Field LNG project expansion, aiming to boost the country's LNG output by 40% a year by 2026.

The expansion, which will take Qatar's LNG production capacity to 110 million tonnes per annum (mtpa) from 77 million mtpa, is the largest single LNG project ever to be sanctioned, according to consultancy Wood Mackenzie.

QP signed a contract covering major onshore engineering, procurement and construction at the expansion project, known as North Field East, with a joint venture between Chiyoda and Technip.

Production from that phase will start by the fourth quarter of 2025 and reach full capacity by late 2026 or early 2027, QP's CEO Saad al-Kaabi said in a virtual news conference.

"The total cost of the project will be $28.7 billion, making it one of the industry's largest investments in the past few years and largest LNG capacity ever built," Kaabi said.

Kaabi, who is also Qatar's energy minister, said that while QP is ready to develop the North Field alone, a bidding process for international oil firms to take up to a 30% stake in the project's first phase will start next week.

He said he expects a decision to finalise partnerships with oil companies for the field's expansion by the end of this year.

ExxonMobil, Royal Dutch Shell, Total and ConocoPhillips are long-standing partners in Qatar's LNG plants.

A second phase, known as the North Field South project, is expected to lift Qatar's LNG production capacity further to 126 mtpa by 2027.

Kaabi said QP is currently evaluating a further increase in LNG capacity beyond the 126 mtpa.

"I would say 'stay tuned'," he added.

The new capacity from North Field East, an LNG export plant being developed in the United States with Exxon Mobil Corp, and expiring long-term LNG contracts from some existing projects mean Qatar's export volumes are increasing, Wood Mackenzie research director Giles Farrer said on Tuesday.

"We estimate it will have over 75 million mtpa of uncontracted LNG volume to sell by 2027, around 70% of its LNG portfolio," he said.

At a long-term breakeven price of just over $4 per million British thermal units, Qatar's LNG production is at the bottom of the global LNG cost curve, alongside Arctic Russian projects, Farrer said.

"Qatar is pursuing market share. This FID (final investment decision) is likely to put pressure on other pre-FID LNG suppliers, who may find Qatar has secured a foothold in new markets."

(Reporting by Rania El Gamal, additional reporting by Jessica Jaganathan in Singapore; editing by David Evans, Ed Osmond and Richard Pullin) ((rania.elgamal@thomsonreuters.com;))