Qatar is moving forward with a massive liquefied natural gas (LNG) capacity expansion in spite of the current glut in the market and longer-term questions over the role of gas in the energy transition. Qatar is betting that it can dissuade other prospective LNG suppliers and outcompete them through scale, low production costs, and co-production of condensates and liquefied petroleum gas (LPG). In launching this expansion, Qatar faces a number of looming questions—and its choices have implications for the entire LNG industry.
Breakneck Expansion or Moderate PaceAlready the world’s largest LNG exporter, Qatar declared a moratorium on new developments at its North Field in 2005 in an effort to ensure the long-term health of the field. By the time Qatar ended the moratorium in 2017, the LNG world had changed. Qatar still held a commanding position, but growing volumes from Australia, the United States, and other suppliers chipped away at its market share and contributed to a global LNG glut. These market developments convinced Qatar to reenter the fray. In 2017, Qatar declared plans to build four new LNG trains, and last November, Qatar Petroleum (QP) chief executive Saad al-Kaabi announced that a significant gas reserve addition would support a six-train expansion to ultimately raise capacity from 77 million tons per year (mmtpa) to 126 mmtpa.
QP seems undeterred by the longer-term challenges for gas. The market already appears well-supplied for at least the next few years, and in 2019, companies took final investment decisions (FID) on more than 70 mmtpa of LNG, far exceeding the previous annual record. But QP is a strong believer in long-term gas demand. It is confident in its low production costs and established relationships with major buyers, and sees advantages in moving ahead with the mega-expansion while other major projects have been deferred and better terms can be negotiated from service companies. Last, QP could perceive some advantages in lower gas prices, which bolster the fuel’s competitiveness against coal and renewables.
QP seems undeterred by the longer-term challenges for gas. The market already appears well-supplied for at least the next few years, and in 2019, companies took final investment decisions (FID) on more than 70 mmtpa of LNG, far exceeding the previous annual record. But QP is a strong believer in long-term gas demand. It is confident in its low production costs and established relationships with major buyers, and sees advantages in moving ahead with the mega-expansion while other major projects have been deferred and better terms can be negotiated from service companies. Last, QP could perceive some advantages in lower gas prices, which bolster the fuel’s competitiveness against coal and renewables.
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