Qatar: Exporting energy

Text size +-
Recommend

With 79m tonnes of liquefied natural gas (LNG) produced per year, Qatar is continuing to secure long- and short-term supply deals in major markets, targeting both developed and emerging economies.

On September 19, the Zhejiang Ningbo terminal in China took its first delivery of LNG from Qatargas, the world’s largest LNG company. The gas was transported in a Qatargas Q-Max LNG vessel, with a capacity of up to 266,000 cu metres – considerably larger than most LNG transporters – and an on-board regasification apparatus (equipment that heats the LNG back into gas).

The LNG delivery to Zhejiang Ningbo is the latest development in Qatar’s growing LNG exports to China, where demand for energy continues to rise. Qatargas currently supplies around 5m tonnes of LNG to China annually, through long-term contracts with the China National Offshore Oil Corporation (CNOOC) and PetroChina.

CNOOC, the third-largest Chinese oil company and owner of the Zhejiang Ningbo terminal, buys 2m tonnes per year from Qatar, while PetroChina, Asia’s largest oil and gas producer, receives 3m tonnes. LNG exports to China may rise further in the coming years as the country’s energy needs intensify.

China is already one of the biggest markets for Qatari LNG, along with Japan, South Korea, the UK and India. Qatargas, which has an annual LNG output capacity of around 42m tonnes, currently exports to 21 countries, and the firm is looking to increase that number.

On September 12, the international press reported Qatargas was to supply more than 20m tonnes of LNG to Japan in the short term to bolster the latter’s energy security after last year’s earthquake. The exports include 11m tonnes, on top of the 9m tonnes announced by Japan last autumn, along with several new long-term agreements. Japan is the world’s largest buyer of LNG, and its imports have soared since the 2011 earthquake triggered the Fukushima nuclear disaster, leading the country to shut down all its nuclear plants. Qatar has been one of the main beneficiaries: official Japanese figures suggest that the Gulf state’s exports to Japan grew from less than $10bn in 2009 to $21.6bn in 2010 and $30.05bn in 2011.

In June, Qatargas announced it had signed a long-term deal with Tokyo Electric Power Company (TEPCO) for LNG supply. TEPCO is Japan’s largest LNG buyer and was one of Qatargas’ first LNG customers. It will now double its purchases from Qatargas to 2m tonnes per year.

The Japanese deals reinforce Qatar’s position both as a reliable long-term supplier and as a provider with the capacity and technology to respond quickly to short-term needs.

In April, India’s commerce ministry said it aimed to double its LNG imports from Qatar to 15m tonnes over the next three to four years, as well as providing 3m tonnes in short-term supply to address immediate energy needs. Likewise, in February South Korea signed a 20-year deal with Qatar’s RasGas – the second largest LNG producer in the world – for 2m tonnes of supply per year.

The many export deals are the fruit of Qatar’s large-scale investments in LNG capacity over the past two decades. The long-term agreements also reflect an awareness that the global liquid gas sector may be in a transitional stage, with supply expected to increase substantially over the next eight years – by up to 250m tonnes per year, according to the International Energy Agency.

This could bring prices down and remove their link with crude oil. Qatari producers usually prefer contracts that set prices according to those of crude oil, on an energy-equivalent formula. Australia and the US are both investing particularly heavily in LNG, with the US potentially being able to produce 45m tonnes per year by 2020. “The emergence of gas in other parts of the world is changing the global dynamics and landscape of the gas industry,” Marjo Louw, the country president of South African energy firm SASOL in Qatar, told OBG. “The US, for instance, stopped importing LNG and may become an exporter.”

Pricing structures may well change over the coming years, in which case Qatar’s long-term deals are wise forward-planning. But even if the link to crude does loosen, increases in capacity reflect an expectation for rising demand. Qatar, with its huge capacity, is well placed to meet that demand – as well as to provide emergency supply where and when needed.

Read Next:

In The Middle East

Maqbool Al Saleh, Chairman, OHI Group of Companies

How would you assess the government’s privatisation initiatives, and what role have public-private partnerships (PPPs) played in these?

In Energy

The renewable projects driving Egypt’s energy transformation

Egypt is moving ahead with plans to transform its renewable energy capacity, spearheaded by the development of a major solar power station.

Latest

Beligh Ben Soltane, Chairman, Tunisian Investment Authority (TIA)

What are the expected implications of Law No. 47 of 2019, which was adopted in April 2019 to improve the business and investment climate?