Global Energy: Qatar’s LNG Expansion [GGP]

Overview

This is a summary of discussions that took place on March 21, 2024, at Rice University’s Baker Institute for Public Policy. The Middle East Energy Roundtable brought together industry leaders, academic experts, research analysts, and participants from Qatar to discuss the global context shaping Qatar’s energy expansion project. Details of the public event on the same topic can be found here.

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Held under the Chatham House Rule, the roundtable is a collaborative venture between the Baker Institute Center for Energy Studies and the Edward P. Djerejian Center for the Middle East. This report is intended to serve as an aide-mémoire to those who took part and a general summary of discussions for those who did not. The unattributed views expressed are those of the participants.

Key points that emerged from the meeting included:

• Qatar’s decision to increase capacity for liquified natural gas (LNG) by 85%, resulting in the production of 142 million metric tons of gas per annum (MTPA) by 2030, was made as a long-term strategic decision. While the Biden administration’s pause on reviewing applications to export LNG — announced on Jan. 26 — will benefit Qatar’s LNG expansion in the short term, the U.S. pause was not a factor driving Qatar’s plans. Rather, Qatar is focused on the long-term benefits of price stability, security of supply, steady growth, and diversification of market supply and demand.  
• The European market will not be a major target for Qatar gas exports due to expectations for a flat-to-declining gas demand profile for Europe.  
• The U.S. pause on LNG exports could damage the U.S. LNG export sector. Liquefaction projects unable to achieve final investment determinations and break ground before the expiration of their permits in the period 2025–27 may be denied future extensions. If that happens, some planned LNG projects could be delayed or even cancelled.  
• In terms of the overlap of foreign relations and energy exports, Qatar sees opportunities for growth in countries with less developed economies, including Thailand, Bangladesh, and India. In East Asia, China has surpassed other Qatari import partners to become a key importer of Qatari LNG.

Much of the discussion focused on political risk to energy supply chains. Participants agreed that political risks were increasing, citing the major disruptions caused by shipping attacks in the Red Sea and the ongoing war between Russia and Ukraine. In addition, exporting states are concerned about uncertainties surrounding the pace and comprehensiveness of transitions to clean energy. Because of these risks, long-term energy contracts have tended to fall out of favor, with shorter-term and spot contracts rising in popularity.

Despite these issues, Qatari energy policymakers are convinced that the country’s multi-phased LNG expansion will bring large, long-term economic benefits. The temporary halt in U.S. LNG exports presents a timely opportunity for Qatar to intensify its gas marketing efforts.

Global Context

The current global LNG trade volume stands at approximately 400 MTPA, with three major players: the United States, Australia, and Qatar. Each of these countries accounts for roughly 20% of the market share, with the U.S. slightly ahead.

We are seeing the largest growth in global LNG trade ever recorded. The LNG industry tends to increase in waves:

• The 2009–11 increase of 73 MTPA was largely driven by Qatar.
• The 2015–19 increase of 145 MTPA was driven by the U.S. and Australia.
• The present global LNG expansion (2024–30) could surpass 200 MTPA.

Qatar’s Diversification Plan

The Qatari leadership has increasingly sought to diversify the country’s economy — venturing into sports, telecommunications, and logistics — even as it continues to increase exports of energy commodities. The country’s leaders have also demonstrated a commitment to achieving diversification through large-scale infrastructure projects. Their decision to grow Qatar’s LNG capacity — and increase annual production from 77 million metric tons to 142 million metric tons by 2030 — must be understood in the broader context of the push for economic diversification, which requires the investment capital that LNG exports can provide.

Market Opportunities for Qatari LNG

The Qatari plan intersects with several key developments in the broader energy market that bolster Qatar’s potential to dominate the LNG market in the coming years:

• The Biden administration’s decision to pause review of export authorizations to nonfree trade agreement countries (including China) could reduce the growth rate of U.S. LNG production and exports, allowing Qatar to take advantage of a potential gap in the market. The pause could undercut growth of a few American LNG firms, but it will not directly affect LNG projects in operation or under construction in the U.S.  
• Japan — historically the largest consumer of LNG and a pivotal player in the development of Qatar’s LNG sector in the 1990s — is expected to have reduced growth in demand for LNG in future years due to its move towards renewable energy and blue ammonia. As a result, Qatar is now focusing on the broader East Asian energy market: Chinese offtakers, for example, have signed a 27-year deal for Qatari LNG, whereas Japanese firms feature much less in the Qatari plans.  
• Declining LNG prices are helping to establish new markets in developing countries in Asia that might otherwise turn to coal.

Impact of Geopolitical Considerations on the LNG Market

In Europe, opportunities for Qatari LNG are not as promising, though many predict that the Russian invasion of Ukraine — and the subsequent shift away from Russian gas — could lead to Qatar emerging as a significant supplier to European markets. Although experts believe that there will be a noticeable increase in the amount of Qatari LNG supplied to Europe to replace lost Russian product, the trend is not expected to be permanent. Factors such as the European Union’s carbon emissions goals continue to reduce the attractiveness of fossil fuels, even LNG, to EU countries.

Geopolitical considerations in the Middle East have shaped Qatar’s aggressive LNG expansion. Qatar’s giant North Field is part of the world's largest non-associated gas field which extends across the maritime boundary with Iran. While maintaining a calm and collaborative relationship with Iran is vital to securing Qatar’s future as a major LNG exporter, this association has at times sparked discontent among its neighbors: In 2017 an air, land, and sea blockade, led by Saudi Arabia and the UAE, targeted Qatar — its ties with Iran were cited as one justification for the action. As the blockade continued, in 2018 Qatar announced its withdrawal from OPEC, signaling its intent to pursue a path of greater autonomy and flexibility by focusing on LNG. On this topic, panelists made several points:

• This move has only served to deepen the commitment of Qatar’s leadership’s to expanding LNG exports.   
• Despite — and throughout — the blockade, Qatari gas continued to flow into the UAE via pipelines, signaling the state’s desire to separate political disagreements from energy and financial partnerships.  
• Beyond the Gulf, Qatar is making efforts to form global links and partnerships across the geopolitical spectrum, by leveraging its LNG capacity. However, reticence — particularly among European importers — to sign the long-term contracts favored by the Qatari government has complicated these efforts.

Conclusion

Overall, while the current gas market faces some challenges due to the political risk associated with LNG, Qatar’s LNG expansion and subsequent diversification of its economy will likely produce long-term benefits for the country. Although not all European markets will be receptive, Qatar has already been successful in signing offtake agreements with firms based in Germany, France, and Italy, several of which run to mid-century. At the same time, Qatar continues to forge new trade relations in countries it views as growth markets of the future, particularly among developing countries in East Asia.

Originally published by Rice University’s Baker Institute for Public Policy.

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