Qatar's LNG Plans End Stagnation: Analysts
Qatar’s announcement that it plans to increase LNG production from 77mn mt/yr to 100mn mt/yr in the next five to seven years shows that it is ending the period of stagnation, analysts told NGW July 5.
Andrei Belyi, professor at the University of East Finland, said that Qatar was going into relative decline, as output grew elsewhere. In 2010 Qatar accounted for 30% of the world’s supply but last year, just 20%; and by the end of the decade it could be down to 15%, he said: “Qatar does not want to lose out and so it has decided to abandon the moratorium.”
He said that additionally Qatar was looking to buy and trade LNG, on its own, or with ExxonMobil, and it has liquefaction capacity at Golden Pass in the US. This gives Qatar the opportunity to secure swap deals without delivering physical cargoes from the contract location, just as BP refines more crude than it produces and sells more refined products at the pump than its own refineries’ output.
An analyst who asked not to be named said that Qatar had always thought big: big jetties, big tankers and big liquefaction trains, in keeping with the proportions of the giant North Field. Qatar had been very cautious about North Field development owing to the effect of production on the reservoir pressure, and what this means for Iran, which shares the field. Given that Iran is one of Qatar’s few allies in the Middle East, the decision "to go long in an already long market" will not have been taken lightly, he said.
As well as Canada, onshore liquefaction projects in east Africa and Russia could also be hit; but Russian projects that are strategic would probably survive, even if the economics look weaker than ever. They are already expensive because of their location, he said. “My suspicion is it will hurt the Canadians most.”
The announcement also comes several weeks into an economic blockade by other Gulf Co-operation Council states, but not by Kuwait which is acting as intermediary. “It shows that Doha is not going to be pushed around,” said another analyst. “We can survive, despite you and your sanctions.” He said there would be no closure of the Straits of Hormuz, as that could precipitate an airstrike; nor would Egypt close the Suez Canal to Qatari LNG tankers.
Downgrading relations with Iran, along with shutting down Qatari national broadcaster Al Jazeera and the Turkish military base, and ending support for the Muslim Brotherhood – which briefly governed Egypt in 2012, during which time it received gifts of Qatari LNG – are all on the list of demands that Saudi has presented to Qatar. The latter’s response is due to be discussed later July 5 but its initial response has not been to make concessions.
The analyst said the announcement could be bad news for projects in east Africa operated by Eni, Anadarko, Shell and Statoil that have yet to take final investment decisions (the Eni-led Coral floating LNG project offshore Mozambique announced its FID on June 1 - BP is the venture's offtaker). Such pending projects, however, could be saved if an Asian buyer saw them as a way of weakening Qatar or simply of diversifying away from Qatar.
“East African projects will not go ahead, except as strategic decisions, or with ExxonMobil and Qatar as the buyer,” he said.
Earlier this year, Exxon agreed to take a 25% equity interest in the Eni-operated Mozambican offshore Area 4, whose 85 trillion ft3 (2.4 trillion m3) reserves are enough to feed multiple onshore LNG export trains. As part of Exxon's farm-in, it was agreed that the US supermajor – not Eni – would lead the construction and operation of any onshore LNG trains to be developed onshore Mozambique. Anadarko and partners also have some 75 trillion ft3 offshore Mozambique, while Shell- and Statoil-operated consortia have almost 40 trillion ft3 of gas resources between them offshore Tanzania.
William Powell