LNG Long Game


Economic News

22 Jul 2010
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Qatar is stepping up its efforts to take advantage of the growing international demand for liquid natural gas (LNG), expanding into new markets and strengthening its production, processing and shipping capacities.

Qatar announced plans last year to ramp up annual production to 77m tonnes by 2011, up from the present output of 31m tonnes, and has subsequently begun expanding into the European market, as well as its more traditional export destinations of Asia.

To meet this target, Qatargas has set up a new processing plant and storage tank farm due to come on line by the end of the year. Another new facility, with a capacity of 7.8m tonnes, is due to commence operations in 2009, near the main North Field site. The company has also just taken delivery of a prefabricated loading berth at the port of Ras Laffan to speed up gas transfers.

Qatar's other LNG producer, RasGas, is also building up production, with output set to increase to 37m tonnes annually by 2009, up from the current 20.7m tonnes. The company is constructing two new processing facilities, with an annual capacity of 7.8m tones each, one of which is scheduled to commence operations this year and the other in 2009.

While Qatargas is improving infrastructure to boost production, storage and loading capacity, the country still has to get its gas to its growing list of clients. The company has a fleet of eight LNG tankers of its own, while the Qatar Gas Transportation Company (QGTC) has embarked on a major expansion programme.

According to a report issued by shipping insurer Lloyds'List on August 13, international demand for LNG could rise from last year's 226bn cubic metres (165m tonnes) to 320bn cubic metres (233.6m tonnes) by 2010 and to almost 790bn (576.7m tonnes) by 2030.

To help meet this demand, the world's LNG tanker fleet would have to be increased from the existing 260 vessels, with a combined carrying capacity of 33m cubic metres, to 700 ships with a capacity of 78m by 2030, the report said.

Of the 112 LNG tankers either under construction or on the order books of shipyards around the world, 25 are destined to fly the QGTC company flag. These include 14 of the new Q-Max class of LNG tankers, the largest afloat with the capacity to carry 266,000 cubic metres. The company plans to have 56 tankers in its fleet by 2010, making it one of the biggest LNG carriers in the world.

One factor driving the increasing demand for LNG is the growing concern over greenhouse gas emissions, especially in developing markets such as China and India. If these two countries are to meet their commitments under the Kyoto climate agreement, LNG will play a greater role in their energy mix, said Faisal Al Suwaidi, the chief executive officer of Qatargas.

"As international oil prices have skyrocketed and the issue of climate change has risen in prominence, LNG has grown in popularity," he told the local media in early August. "Much like the hybrid car, it forms a sort of halfway house between fossil fuel sources and alternative, renewable energy and can help to bring emissions down," he added.

Official estimates put Qatar's identified gas reserves at 32trn cubic metres - one of the largest in the world representing 14.4% of the global total. However, while Qatar is seeking to maximise its output and earnings from LNG sales, it also has to balance its export trade with sharply increasing domestic demand, which is growing at a rate of between 12 and 13% annually, according to Qatargas officials.

Qatar has put on hold new development projects in it main North Field, pending the completion of existing schemes and the finalising of a comprehensive study into the field's full capacity. Though initially set to be finished next year, the survey will not be concluded until 2011 at the earliest, officials have said. The delay, first announced in 2007, has put the drilling of 100 new wells on the backburner.

While this may put a dampener on Qatar's plans to more than double production by 2011, the country should have the required infrastructure in place by that time.

Though Qatar has gas to burn, it also wants to ensure its own needs are met and that it does not exhaust its resources too quickly. Faisal Al Suwaidi, Qatargas chairman and chief executive, said that while huge investments in the North Field could bring about a massive increase in output, it would also see a draining of the field within 10 years. "Or you could properly manage it and the reserves will be there for the next 100 years," he told the local media.

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