The deal was announced amid rising concern about future gas supplies. Economic analysts fear economic recovery could be stalled since prices are almost twice as much as they were a year ago.
"Our expectation is that we will be going to a final definitive agreement probably by the second quarter of next year," said Jim Mulva, ConocoPhillips chief executive.
He estimated that the total investment required by Qatar and the Houston oil company could be as much as $5 billion, including facilities in Qatar to liquefy the gas, a fleet of a dozen new tankers to move it and re-gasification facilities in the US.
In a public ceremony at the Qatari Embassy in Washington, officials from Qatar Petroleum and ConocoPhillips signed an agreement to develop the project, named Qatargas 3.
Under the proposed joint venture, Qatargas 3 would own 70 percent of the project; ConocoPhillips would own 30 percent.
The agreement provides the framework for the necessary project agreements and the completion of key feasibility studies.
Qatargas 3 needs to be large to achieve economies of scale to compete with liquefied natural gas from more accessible West Africa, Trinidad and Tobago, and Venezuela, Mulva said.
"We are going to scale up in terms of the size of our liquification plant, and then we are to scale up the size of our LNG tankers," Mulva said.
"By doing all of these things, we think we will be very competitive with respect to laying gas in the US market."
ConocoPhillips will purchase the liquefied natural gas from Qatargas 3 and be responsible for re-gasification and marketing in the United States.
Average daily sales volumes are expected to be about 1 billion cubic feet per day, over 365 billion cubic feet per year.
Qatargas 3 will liquefy about 7.5 million tonnes, or 365 billion cubic feet of natural gas per year.
"That's huge – 50 percent bigger than any other proposed project," said Mark Gilman, an analyst with First Albany Corp in New York.
But he also described the agreement as long on promises and short on specifics.
"It's awfully premature and fairly intangible at this point," he said.
Increased imports of liquefied natural gas have been suggested as one option to ease an anticipated supply crunch, but this deal illustrates that there will be no quick fix.
The Qatar Petroleum/ConocoPhillips deal is not expected to deliver new imports until 2008, even if the project is to go ahead on schedule.
Federal Reserve Chairman Alan
US concern over gas
Earlier this week, Federal Reserve Chairman Alan Greenspan reiterated his concern about high natural gas prices making the United States "uncompetitive in a number of industries."
Greenspan called for an expansion of the nation's ability to import liquefied natural gas from abroad to ease pressure from dwindling natural gas supplies in the US.
Liquefied natural gas currently makes up about 1 percent of the US gas supplies, according to the Energy Information Administration.
Imports of liquefied natural gas into the United States declined about 3 percent in 2002 to 233 billion cubic feet. In 2001, they totalled 238 billion cubic feet, according to the Energy Information Administration.
The liquefied natural gas imported in the United States is a fraction of what the country uses. Demand in 2002 was 23.2 trillion cubic feet and that figure is expected to remain flat for this year, according to the agency.
Liquefied natural gas is natural gas that has been cooled to minus 162 degrees Celsius, which turns it from a gas to a liquid, allowing far more of it to be carried in tankers than if it were in a gaseous state.
It is then loaded on tankers and shipped to a facility where it is heated and returned to its gaseous state.
Qatar has natural gas reserves of 509 trillion cubic feet, the world's third largest. The country's North Field, which would supply this project, is the world's largest natural gas field.
Currently, Qatar exports about 14 million tonnes, or about 680 billion cubic feet, of liquefied natural gas per year, mainly to Japan, South Korea and Spain.
Qatar is in discussions to begin selling liquefied natural gas to India as well.