According to Business Monitor International (BMI), Qatar’s LNG export capacity will remain stable over the next ten years, supported by the completion of the Plateau Maintenance Project (PMP) for Qatargas I. The PMP has been an essential brownfield redevelopment aimed at sustaining natural gas production to support the 10 million tpy (13.6 billion m3) export facility. This will mitigate the impact of natural decline rates in the wells currently supplying the Qatargas I facility.
BMI suggests that the completion of PMP is also a positive development for Japan and the UK, which take the majority of LNG exports from the terminal. Key Qatargas contracts with Japanese utilities and supermajors shipping into Europe, run to 2021 and beyond. The PMP will guarantee LNG supply until the end of the concession in 2021, at a favourable value. The project cost US$ 2.3 billion.
The moratorium currently in place on the North Field is preventing further upstream investment projects, which could potentially expand Qatar’s LNG exports. However, with a number of new global suppliers, most notably Australia and the US, we are forecasting considerable growth in global LNH production. According to BMI forecasts, Qatar’s global LNG market share will fall from approximately 38% in 2014 to 19% in 2023, despite the maintenance of output.
Qatar retains a key advantage to produce LNG at low cost. Production costs at the relatively shallow North Field are low in comparison to the offshore fields in Australia and the hydraulically fractured gas in the US. Due to the size of the North Field, economies of scale also put Qatar at an advantage. The redevelopment of the wells for the PMP was also able to predominantly use existing equipment and infrastructure, keeping costs of the project to a minimum.
12 of the 14 liquefaction trains in Qatar were completed between 2004 and 2011. This largely avoided the steep rises in commodity prices and increased competition for LNG construction services experienced since 2010. These challenges have been of particular disadvantage to Australia, where the majority of the major new projects have seen considerable cost overruns.
While Qatar’s position in the global LNG market is due to decline, its cost competitiveness will place it in an advantageous position against growing competition. This should mitigate the benefit of shorter shipping distances from Australia to Asia, and the attractiveness of hub based pricing offered by LNG marketers in the US. With growing supply expected to dampen prices over the coming years, Qatar will be among the best placed to weather any price weakness, suggests BMI.
Adapted from a report by Emma McAleavey.
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