Qatar’s new LNG expansion plans to squeeze out competitors

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Qatar’s planned expansion of liquefied natural gas (LNG) production could see it control nearly 25 per cent share of the global market by 2030 and squeeze out competitor projects including in the US where President Biden paused new export approvals, according to market experts.

Qatar, one of the world’s top LNG exporters, plans an 85 per cent expansion in LNG output from its North Field’s current 77 million metric tons per year (mtpa) to 142 mtpa by 2030, from previously expected 126 mtpa.

Some market experts said that the move will have an impact on global projects in the US, East Africa, and elsewhere which require financing and long-term customer commitments to reach a final investment decision (FID), given the Gulf state’s edge as the world’s lowest cost producer.

“The Qataris realised that they should be able to offer pretty much the most competitive prices. They have the reserves, lower costs for building incremental capacity, the relationship with engineering firms and existing clients, so why stop here?,” said Ira Joseph, senior research Associate at Columbia University’s Center on Global Energy Policy.

“This suggests that they are hurtling into use it or lose it mode. If you’re the world’s low-cost producer, why not throw down the hammer & scare away any competition that’s requiring long-term customers & financing,” he added.

Fraser Carson, Senior Research Analyst of Global LNG at Wood Mackenzie said the timing of the Qatari announcement is “fortuitous”, as other major LNG competitors stall, in light of the Biden administration’s pause of US LNG export approvals, Russian LNG is sanctioned and as civil unrest continues in Mozambique.

The US LNG capacity will almost double over the next four years, but a decision to pause approvals for applications for new LNG export terminals, for environmental reviews, has prompted warnings from gas importers that the move would compromise future energy security worldwide.

“The signal the US projects need to take from this: if they don’t go ahead, someone will,” said Kaushal Ramesh, Rystad Energy’s vice president for LNG research.

Qatar’s LNG growth strategy

The new expansion is expected to lead to a period of more stable, lower prices across the rest of the decade and would encourage greater take-up of LNG from Asian buyers, said Alex Froley senior LNG analyst at data intelligence firm ICIS.

“Bringing online 16 mtpa of low-cost volumes is positive for Asia and is exactly what the LNG market needs to guarantee a long-term future in emerging Asia,” Rystad’s Ramesh said.

The global gas market will grow to 580-600 mtpa by 2030, from the current 400 mtpa, mainly driven by Asian demand. Qatar is expected to control 24-25 per cent of that market by then.

“Qatar is geographically well placed to meet the current high demand in Northeast Asia in China, Japan and Korea and future demand in the only real growth region of South Asia, especially in India,” said Henning Gloystein, practice head, at Energy and Resources at Eurasia Group.

QatarEnergy chief Saad al-Kaabi said on Sunday that he still believes that there is ample opportunity for gas to be part of the energy mix in the future: “We think there will be a shortage of gas, even with our project”.

While there are concerns over the additional carbon emissions impact from new global LNG production, Others argue that there is still huge scope for gas to reduce emissions by replacing coal and oil, ICIS’s Froley said.

“Despite being the world’s largest LNG importer last year, China’s overall energy mix is only around 8 per cent gas against 61 per cent for coal and 18 per cent for oil, for example,” he added, citing IEA figures.

The world’s top energy companies including Exxon Mobil, Shell, TotalEnergies and ConocoPhillips have played a central role in Qatar’s LNG industry for decades. They all hold stakes in existing production facilities and in recent years acquired stakes in the new expansion phases, offering cash in exchange for LNG volumes.

While the new contracts are not as lucrative as in the past, according to industry sources, they offer the companies an important foothold in the LNG industry, which they expect will continue to grow in the coming decades as economies shift from coal to less polluting natural gas.

Industry sources expect Qatar to continue to seek partnerships with global players as it has a lot of LNG volumes to sell, with one source expecting Australia’s Woodside, whose US Lake Charles project is under threat by Biden’s pause, might seek to become a Qatari partner, given they have recently shelved plans for a $52bn tie-up with smaller rival Santos.

Read: Qatar plans new gas output boost amid global price collapse