Output from Qatar’s low-cost, gas-rich North Field is set to establish the nation as the biggest long-term supplier of LNG just as an earlier glut turns into voracious demand through 2019 and beyond.
As state-owned Qatar Petroleum has made clear, Qatar sees itself as a pivotal supplier, particularly in Europe and China where it is expected to profit from the trade dispute with the United States.
“One of Qatar’s major competitors for new supply development, US LNG, is currently engaged in a tariff war with China, the world’s largest market for LNG,” pointed out energy consultant Wood Mackenzie’s Giles Farrer, research director for global gas and LNG supply. “Qatar could see this as an opportunity.”
Further, Qatar’s export opportunities can only be helped by China slapping a 10% tariff on LNG imports from the United States in September in retaliation against Washington’s imposition of duties on a range of goods.
Qatar hasn’t been slow in exploiting Sino-American friction. Earlier this year Qatargas, the country’s gas-producing arm, agreed to double the volumes of LNG it will sell to state-owned PetroChina, the country’s largest gas supplier, in a 22-year deal involving a fleet of tankers that will deliver about 3.4M tonnes a year of LNG. The gas will be shipped by Qatargas’ fleet of 70 conventional, Q-Flex and Q-Max LNG vessels to different receiving terminals across China between now and 2040. The first cargo was transported in late September.
And in another affirmation of the country’s growing links with China, in October Qatar Petroleum signed a sale and purchase agreement with another Chinese company, Oriental Energy, to deliver 600,000 tonnes of LPG over five years, starting in January 2019. The latter deal is one of the most important Qatar has made in China – Oriental Energy is the country’s biggest LPG company with a large distribution network and storage facilities, with five major terminals. Like Qatar’s LNG deliveries, the gas will be shipped by tanker.
In Qatar’s LNG ambitions, the giant North Field, with total recoverable gas of more than 900 trillion standard cubic feet, will be the linchpin because of its low cost of supply. According to a recent study by Mr Farrer, “there are likely to be economies of scale from developing a bigger project, particularly in the light of the promising appraisal results at the North Field mentioned by Qatar Petroleum.”
If the appraisals of North Field turn out as well as Qatar Petroleum hopes, it should be able to undercut rival exporters such as Australia and the US. “The North Field’s economies of scale will make what is already the most competitive new LNG project worldwide even cheaper,” Mr Farrer pointed out.
Other studies such as those by the Oxford Institute of Energy Studies back this judgement. Earlier the OIES, noting Qatar Petroleum’s excellent track record in bringing its LNG projects into operation, said “These resulted in a low effective LNG breakeven price, which no other current LNG-exporting country could challenge in terms of new-project economics.” Production will be based on three mega-trains requiring a capital cost of about US$24Bn, well within the country’s reach.