March 16, 2021 Read More →

Qatari LNG expansion is bad news for higher-price competitors in U.S., Russia, analysts say

Reuters:

Qatar Petroleum, the world’s top liquefied natural gas (LNG) producer, is cranking up the pressure on high-cost rivals with bold expansion plans that will boost supplies over the coming decade and potentially push prices down further.

As competitors struggle to break even due to lower prices, the Qatari firm last month announced it will boost LNG output by about 40% to 110 million tonnes per annum (mtpa) by 2026 in phase one of its expansion of North Field LNG, the largest single LNG project ever sanctioned.

The company is expected to announce second phase expansion plans this year which will lift LNG capacity by 2027 to 126 mtpa, enough to meet the total import needs of both Japan and South Korea – the world’s top and third largest LNG importers, respectively.

Qatari marketing has the potential to undercut competing suppliers and has already helped put downward pressure on LNG contract prices over the last two years, Credit Suisse analyst Saul Kavonic said.

Qatar, which accounts for a fifth of global LNG supplies, is already by far the lowest cost LNG producer. Its breakeven price for a cargo shipped to top market Northeast Asia is estimated at around $4 per million British thermal units (mmBtu), compared with around $5 to $8 per mmBtu from Russia, Mozambique and the United States, said Alex Dewar, senior director at the centre for energy impact at Boston Consulting Group (BCG). Australia pre-FID capacity breakevens are in the $7 to $11 per mmbtu range, he added.

The combination of the North Field expansion, expiring contracts with existing buyers, and its planned joint-venture Golden Pass terminal in the United States will mean the gas giant will likely have about 70 to 75 mtpa of uncontracted LNG volumes to sell by 2027, analysts estimated.

[Jessica Jaganathan]

More: Analysis: Qatar tightens global gas market grip with bold expansion moves

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