GGP: Qatar Lifts its LNG Moratorium
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.
This is an excerpt from a publication by the Oxford Institute for Energy Studies published in April 2017.
The recently announced intention by Qatar to lift its long-running moratorium on new LNG projects and to produce some 20 bcma of LNG in 5 to 7 years’ time is a highly significant development for the LNG industry. With its low-cost base and high condensate and LPG co-production, Qatar can compete with any of the established LNG suppliers (as well as Russian pipeline gas). This Comment assesses the implications for the market and addresses possible reasons for the timing of the announcement. The re-engagement of Qatar in the development of new LNG supplies is potentially good news for consumers but somewhat worrying for upstream players sitting on inherently high cost competing projects.
Background and Introduction
Following its capacity expansion in the late 2000’s, Qatar became the world’s largest LNG supplier. This was not without trauma: export volumes targeted at the US market were, due to the shale gas boom, not required by the time new capacity had been commissioned, and demand in European and Asian gas (and LNG) markets was hard hit in 2009 by the financial crisis. Adapting nimbly to the new market reality, Qatar was able to secure markets for its LNG output as Asian demand rebounded from 2010 onwards, exacerbated by the Fukushima disaster of March 2011.
Subsequently, strong Asian LNG demand growth and price signals from (oil indexed) contract LNG prices and LNG spot prices, supported by a ‘tight’ post-Fukushima market, have triggered LNG project FID’s notably in Australia and the USA, but also in Russia. With projects already commissioned and under construction, Australia is set to eclipse Qatar as the world’s foremost LNG supplier by 2020.
Qatar’s moratorium was announced in 2005 to allow an analysis to be made of the North Field’s performance but this has been extended on a rolling basis. In 2014 it was stated that a comprehensive evaluation of all the reservoir, well data and models was continuing in order to develop the optimum strategy for the long-term future of the field.
An OIES – Columbia paper1 noted the advantageous economics of Qatar LNG projects due to the high condensate and LPG co-production with feedgas from the North Field, and also the impressive track record of project execution. These resulted in a low effective LNG break-even price which no other current LNG exporting country could challenge in terms of new project economics. This said, the apparent schedule and cost overrun on the Barzan project and its apparent lower condensate and LPG yield per bcm of gas production prompts a re-appraisal of this position.
Howard Rogers
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.