Qatar’s LNG Plans Get Even Bigger As U.S. Trade War Opens New Opportunity
Qatar Petroleum is primed to boost its natural gas output by adding a fourth liquefied natural gas (LNG) production line to raise capacity from the North Field, as it aims to steal another march on its competitors, particularly emerging U.S. exporters. U.S. LNG is one of Qatar’s major competitors for new supply development. But U.S. President Donald Trump is engaged in a tariff war with China, the world’s largest growth market for LNG. “Qatar could see this as an opportunity. It has recently signed a contract doubling the volumes that it will sell to PetroChina and is likely to be looking at further opportunities to supply the Chinese market,” said Giles Farrer, an expert in global gas and LNG supply at consultancy Wood Mackenzie. The world’s top supplier of the super-cooled gas said on 26 September that output from the field, which is shared with Iran, will rise from 77 million to 110 million tonnes of LNG per year. Qatar is well-placed to compete with any other LNG supplier because it has very low LNG production costs due to the co-production of valuable natural gas liquids from the North Field. “Based on the good results obtained through recent additional appraisal and testing, we have decided to add a fourth LNG mega train,” said Qatar Petroleum’s chief executive, Saad Sherida al-Kaabi, in a statement. Last year, Qatar announced it was planning to develop additional gas from the North Field and build three new LNG mega-trains. Qatar could probably add an additional train without significant additions to capital investment, said Farrer. Wood Mackenzie estimates capital expenditure for the three mega-trains previously announced was around $24 billion, covering both the upstream and liquefaction parts of the project. With worldwide activity in the oil and gas industry still low, now is a good time in the cost cycle to invest in a new project, added Farrer. “There are likely to be economies of scale from developing a bigger project, particularly in light of the promising appraisal results at the North Field…these economies of scale will make what is already the most competitive new LNG project worldwide even cheaper.” “Since Qatar announced its initial plan, the market environment has improved. Forecasts of future oil prices are higher, and forecasts of future LNG demand have grown stronger, particularly in Europe and China. Having already taken the decision to compete for LNG market share, Qatar is doubling down, making sure that it will be fully able to benefit from LNG market upside,” he added. The move comes more than a year after Saudi Arabia, the United Arab Emirates, Bahrain and Egypt severed diplomatic and trade ties with Qatar, accusing it of harboring “terrorism” – an allegation Doha denies. Al-Kaabi said the production increase will also help contribute to Qatar’s economic growth and stimulate the economy, as well as the country’s overall development.