Qatar expected to add 30 MTPA to global LNG production in 2025-26


Qatar expected to add 30 MTPA to global LNG production in 2025-26

The year 2018 witnessed an important change of direction in the commissioning of new LNG projects. Stronger global market conditions led to new LNG projects getting approval in the past year. A larger volume of new proposed production received FID (final investment decisions) in 2018 than in the prior 3 years combined, MENA Advisors noted in its latest report.

According to the report, Qatar is expected to add 30 MTPA (million tonnes per annum) to the global LNG production in 2025-26, taking the global production to over 500 MTPA, up by over 60 percent from 2008.

A total of 21.5 MTPA (6 percent of existing capacity) received FID in 2018 and a further 15.6 MTPA reached FID in February 2019 with a number of other large US projects expected to reach FID this year.

According to MENA Advisor, the global LNG market had a good year in 2018. LNG trade grew 10 percent, following on from strong growth of 12 percent in 2017. In particular, demand from Asia, mainly China and South Korea, grew strongly as the region looks to natural gas to reduce the negative impact on air quality of other energy sources, mainly coal.

Additionally, most LNG prices globally followed an upward trend in 2018, thanks to strong demand growth and also as a result of higher oil prices, which has a knock-on impact on the LNG market.

The new commissions come in addition to 101 MTPA of production capacity that is already under construction, equivalent to 26 percent of 2018 production capacity, having been commissioned before the sharp drop in oil prices in 2014. Additionally, LNG spot prices have softened during 2019 due to a slowdown in demand from Asia. However, analysts at the MENA Advisors argue that the global LNG market will not be oversupplied, at least in the next seven years.

“Facilities already under construction mean that there should be a fairly sharp increase in production capacity in 2019 and 2020, before plateauing in 2021-24. Most of these new additions will come from the US and Australia. We expect Qatar to add 30 MTPA in 2025-26, taking global production to over 500 MTPA, up by over 60% from 2018,” they said.

For this additional capacity to be fully utilised, demand would need to grow at just over 6 percent. This is not out of line with historical demand growth, which has averaged 6.4 percent since 2000, nor with recent demand growth, which has risen to an average of 11 percent over the last two years as Asian countries have voraciously switched to gas as a cheap and clean source of energy. Additionally, many countries, mainly China and

India, continue to build out regasification facilities, which are needed to receive LNG, in a positive indication for future demand growth. Despite these strong drivers, slower growth in the global economy, especially China, could lead to slower growth in demand for LNG. However, even if demand growth fell short and grew at 3 percent per year on average out to 2026, this would be sufficient to maintain the utilisation of production capacity in 2018, which was 80 percent.

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