Qatar to remain a leading supplier of LNG

 

Qatar’s decision to expand liquefied natural gas (LNG) production by 43% from 77m tonnes per year to 110m tonnes per year by 2024 is designed to enable the country to capitalise on growing global demand for the fuel. The country has been one of the world’s main exporters of LNG, although in recent years, competitors including the US and Australia have ramped up production and carved their share of the market for the popular fuel. In November 2018 Australia overtook Qatar as the largest LNG exporter, with Qatar expected to take back the top spot in 2019. In focusing efforts on the further development of LNG, Qatar is working to regain and solidify its position as the world’s leading LNG supplier.

Supply Gaps

According to the International Energy Agency, global natural gas production hit a new high of 3.8bn cu metres in 2017, a 3.6% increase from 2016 and the largest annual increase since 2010. Increased production coincided with increased demand – from 1990 to 2017 consumption grew at an average of 6.3% a year, while in China growth has been even stronger at 13.1% per year over the last 20 years. While most fuels are exported through pipelines, LNG can be shipped, making it easier for Qatar to export to Africa, Europe, the Americas and beyond.

In 2017 LNG accounted for 32.9% of global trade, with Japan being the top importer of LNG, followed by China. Qatar Petroleum (QP), Qatar’s state-owned oil and gas company, aims to capitalise on increasing global primary energy consumption and meet gaps in their supply by the mid-2020s.

Exports

In the decade leading up to 2016 Qatar’s production of natural gas grew by an average of 12.9% per year. In 2007 the country produced 65.4bn cu metres, increasing to 175.7bn cu metres in 2017, with the country exporting 103.4bn cu metres as LNG that year. One of Qatar’s top competitors, Australia, boosted LNG exports from 59.2bn cu metres to 75.9bn cu metres between 2016 and 2017, while the US increased LNG sales from 4.3bn cu metres to 17.4bn cu metres. Asian markets are increasingly important to Qatar. In 2017, 69.6bn cu metres of Qatar’s LNG were exported to the Asia-Pacific region with South Korea, Japan, India and China importing 15.9bn, 13.8bn, 13.2bn and 10.3bn cu metres, respectively. European countries imported 23.7bn cu metres of LNG from Qatar, with Italy and the UK importing 6.8bn and 6.1bn cu metres, respectively. In the first quarter of 2018 LNG exports from Qatar to South Korea, Japan, India, China and Singapore increased by 42.1%, 4%, 15%, 60.1% and 66.2%, respectively, compared to the first quarter of 2017.

Expansion Plans

The decision to expand production and exportation of LNG is a milestone in the relatively short history of natural gas production in Qatar. Although the North Field was first discovered in 1971, Qatargas and RasGas, responsible for extracting and marketing the resource, were not formed until 1984 and 1993, respectively, and the first shipment of LNG was not exported until 1996.

In 2018 Qatargas and RasGas merged and today Qatargas operates 14 LNG trains with a capacity of 77m tonnes per year. Six of these trains are mega-trains, each with a production capacity of 7.8m tonnes per year. The trains remove other gases before freezing the remaining methane, enabling it to be shipped safely to import and regasification terminals around the world.

Qatargas also operates a fleet of 25 purpose-built ships, each with a capacity of between 135,000 and 152,000 cu metres. The company also has a fleet of 31 Q-Flex and 14 Q-Max vessels on charter, which are capable of transporting 210,000 and 266,000 cu metres of LNG, respectively. According to Saad Sherida Al Kaabi, minister of state for energy affairs, and president and CEO of QP, between 1996 and 2018 Qatar safely shipped 12,500 LNG cargoes and the increased production will build on the company’s history of safety and reliability. “The new capacity will give us the extended ability and flexibility to meet additional global demand while further boosting QP’s strategic growth plans,” Al Kaabi told local press, noting that countries are beginning to diversify away from a reliance on oil and look for cleaner alternatives in their energy mix.

The decision to increase production output from the North Field will involve construction of four LNG mega-trains that will collectively produce 23m tonnes a year of LNG. The trains will also create a daily output of 4000 tonnes of ethane, 11,000 tonnes of liquefied petroleum gas, 20 tonnes of pure helium and 260,000 barrels of condensate. The front-end engineering and design contract for these onshore facilities was awarded to Chiyoda Corporation of Japan.

Moratorium

Less than a decade after Qatar shipped its first LNG cargo, in 2005 the country imposed a moratorium on further development of its vast North Field. The decision was designed to preserve the legacy of its natural gas deposits for future generations and to ensure that its ability to produce, process and ship LNG around the world did not lead to oversupply in the market. However, with global trends suggesting significant future demand for the clean, portable fuel, Qatar’s leaders agreed in 2017 to lift the ban and increase output. According to BP’s “Statistical Review of World Energy 2018”, the country’s natural gas deposits will last for 141.8 years if production remains at 2017 levels.

Even if the lifespan of the field is reduced by an increase in production, much of the resulting revenue is likely to be diverted to the Qatar Investment Authority, the $320bn sovereign wealth fund created in order to pass revenue from the country’s hydrocarbons extraction to future generations. The gas expansion project is expected to generate $40bn in additional export revenue.

Trading Partners

The availability of increased volumes of LNG will also enable Qatargas to cement more long-term supply agreements with its trading partners. In September 2018 the company announced a long-term sales and purchase agreement (SPA) with PetroChina to supply China with 3.4m tonnes of LNG per year. The 22-year agreement, which ends in 2040, will supply the Chinese company with LNG from the Qatargas 2 project — a joint venture between QP, ExxonMobil and Total — to a number of terminals across China. “With China expected to become one of the world’s largest gas markets, this SPA will further strengthen the existing relationship between Qatargas and PetroChina over the long term,” Sheikh Khalid bin Khalifa Al Thani, CEO of Qatargas, told local press. In April 2018 Qatargas delivered its first consignment to Bangladesh after the company signed a similar SPA with Petrobangla to provide 2.5m tonnes LNG per year for 15 years.

According to its “Energy Outlook 2018”, BP expects China, India and other Asian economies to account for two-thirds of growth in worldwide energy consumption, with natural gas consumption growing faster than either coal or oil. BP also sees global supplies of LNG doubling by 2040, with much of that increase in capacity coinciding with Qatar’s expansion. Long-term agreements such as those between countries with booming Asian economies and Qatar should ensure that the country is able to reap the rewards of its investments over the next five years, continuing the process of recovering and cementing its position as the world’s leading exporter of LNG.

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The Report: Qatar 2019

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