Qatar’s Ambitious LNG Expansion Plans Pressures The United States And Rivals; Russia Enforces 6-Month Gasoline Export Ban
Qatar's ambitious plans for LNG expansion could significantly alter the industry's trajectory, with projections indicating a potential quarter share of the market by 2030; Qatar's strategic manoeuvres are expected to impact rival projects worldwide, including those of the United States. The forthcoming expansion also has significance in Asia.
Experts in the market predict that Qatar’s strategic expansion in liquefied natural gas, LNG production could grant it control over nearly a quarter of the global market share by 2030, potentially sidelining rival projects, such as those in the United States and President Biden’s decision to halt new export approvals adds weight to this assertion.
Qatar, already a leading LNG exporter globally, aims to boost its LNG output from the current 77 million metric tons per year (mtpa) to 142 mtpa by 2030, marking an 85% increase from the previously anticipated 126 mtpa from the North Field.
Thus, analysts anticipate significant ramifications on global projects, particularly in regions like the United States and East Africa, where securing financing and long-term commitments from customers are crucial for final investment decisions.
Qatar’s advantageous position as the world’s lowest-cost producer strengthens its competitive edge in this context, owing to its reserves, cost-effective capacity expansion, established relationships with engineering firms, and a solid client base.
Ira Joseph, Senior Research Associate at Columbia University’s Center on Global Energy Policy, remarked that Qatar recognizes its ability to offer highly competitive prices; with its inherent advantages, including lower costs for capacity expansion and strong industry relationships, Qatar is inclined to solidify its position in the market further.
Fraser Carson, Senior Research Analyst of Global LNG at Wood Mackenzie, views Qatar’s announcement timing as opportune – with major competitors facing setbacks, such as the Biden administration’s pause on U.S. LNG export approvals and sanctions on Russian LNG, Qatar stands to benefit, particularly amid ongoing civil unrest in Mozambique.
The Story Of Rivalry
The rivalry between Qatar and the United States has escalated, notably after Europe’s decision to reduce reliance on Russian pipeline gas post-Ukraine invasion.
U.S. gas suppliers stepped in to fill the resulting supply gap, propelling the United States to become the world’s largest LNG exporter in 2023, surpassing Qatar; notably, Qatari supplies also contributed to offset the shortfall.
While U.S. LNG capacity is set to nearly double over the next four years, the decision to halt approvals for new LNG export terminals spotlights concerns about environmental reviews.
Gas importers warn that such actions could jeopardize global energy security in the future, emphasizing the need for U.S. projects to proceed in order to prevent potential supply shortages.
Kaushal Ramesh, Vice President for LNG research at Rystad Energy, emphasizes the message that U.S. projects should glean from these developments, and failure to move forward may create openings for competitors to capitalize on market demand.
The Question Of Asia
Asia’s growth trajectory in the liquefied natural gas (LNG) market is anticipated to experience a notable shift with the upcoming expansion, according to Alex Froley, a senior LNG analyst at data intelligence firm ICIS.
He suggests that the addition of 16 million metric tons per annum (mtpa) of low-cost volumes will foster a period of enhanced stability and lower prices throughout the decade, stimulating increased LNG uptake among Asian purchasers.
Kaushal Ramesh, from Rystad, echoes this sentiment, highlighting the positive implications of Qatar’s expansion for Asia’s long-term LNG prospects, particularly in emerging markets, emphasizing the significance of such developments in sustaining growth in the region.
Projections indicate substantial growth in the global gas market by 2030, with estimates ranging from 580 to 600 mtpa, driven primarily by escalating demand in Asia.
Henning Gloystein, Practice Head of Energy and Resources at Eurasia Group, stresses Qatar’s strategic advantage in meeting the growing demand across Northeast Asia and the prospective growth region of South Asia, notably in India.
He emphasizes Qatar’s geographical suitability to cater to current and future demand dynamics in these critical markets.
Despite concerns surrounding the environmental impact of increased LNG production, there remains a compelling argument for gas as a means of emissions reduction by displacing more carbon-intensive fuels like coal and oil, as stated by Froley of ICIS.
He points to China’s relatively low gas usage in its energy mix compared to coal and oil, indicating significant potential for gas to play a larger role in emission reduction efforts.
Major energy conglomerates such as Exxon Mobil, Shell, TotalEnergies, and ConocoPhillips have been integral players in Qatar’s LNG industry for decades, holding stakes in existing production facilities and recent expansion phases.
While the profitability of new contracts may not match historical levels, these companies view them as pivotal for securing a foothold in the growing LNG market as economies transition towards cleaner energy sources.
Despite potentially less lucrative contracts, industry sources emphasize the strategic importance for energy companies to participate in Qatar’s LNG industry, anticipating sustained growth as economies shift away from coal towards more environmentally friendly natural gas alternatives.
Qatar’s Influence
Industry insiders anticipate Qatar’s continued pursuit of partnerships with global players, given its substantial LNG volumes available for sale.
One source suggests that Woodside, an Australian company facing challenges with its U.S. Lake Charles project due to Biden’s pause, may consider becoming a partner with Qatar; the potential collaboration arises as Woodside recently halted plans for a $52 billion merger with its smaller rival Santos.
Russia Gasoline Export Ban
Even as competition heightens between Qatar and rivals, Russia announced a six-month ban on gasoline exports starting from March 1.
The decision aims to address rising domestic demand from consumers and farmers, as well as to facilitate planned maintenance of refineries. The ban, initially reported by RBC, was confirmed by a spokeswoman for Deputy Prime Minister Alexander Novak.
The move mirrors a similar ban imposed by Russia between September and November last year, which aimed to mitigate high domestic prices and shortages.
However, this time, the ban excludes member states of the Eurasian Economic Union, Mongolia, Uzbekistan, and two Russian-backed breakaway regions of Georgia – South Ossetia and Abkhazia – from its scope.
Only four former Soviet states – Belarus, Kazakhstan, Armenia, and Kyrgyzstan – were previously exempted from the ban.
