Qatar’s major expansion of its liquefied natural gas capacity will help it to be the biggest LNG producer in the world for at least the next two decades, the country’s Minister of State for Energy Affairs, Saad Sherida Al-Kaabi, told Bloomberg Television.
State firm Qatar Petroleum took the final investment decision to build what it says would be the world’s largest LNG project in terms of capacity, as it aims to raise its annual production by 40% by the end of 2025.
Qatar Petroleum sanctioned the North Field East Project (NFE), which is set to raise Qatar’s LNG production capacity from 77 million tons per annum (mmtpa) to 110 mmtpa.
The project, expected to start production in the fourth quarter of 2025, will cost nearly $29 billion. Qatar also plans another expansion phase at the North Field, set to further increase Qatar’s LNG production capacity from 110 mmtpa to 126 mmtpa, with an expected production start date in 2027.
“This is one of the most competitive, if not the most competitive, projects on the planet,” Al-Kaabi, who is also the President and CEO of Qatar Petroleum, said.
QP has also booked capacity at units that turn LNG back into gas in Belgium, France, and the U.K. It’s also looking to build on its 70% stake in Britain’s largest LNG import terminal by investing in more regasification plants, said Al-Kaabi.
A threat to competition
The first phase of the project will be so low-cost that it would be viable even at oil prices below $20 a barrel, Al-Kaabi said.
Oil prices collapsed last year, but have soared more than 60% since the start of November to around $64 a barrel with the roll-out of coronavirus vaccines.
Wood Mackenzie research director Giles Farrer, commenting on Qatar’s LNG expansion project, said: “Qatar is pursuing market share. This final investment decision (FID) is likely to put pressure on other pre-FID LNG suppliers, who may find Qatar has secured a foothold in new markets.”
The Energy Information Administration expects U.S. LNG exports to more than double from 2020 to 2029. The US exported 9.4 billion cubic feet of LNG per day in November 2020, according to the EIA.
This LNG growth in the US, however, may be stunted by Qatar, the world’s lowest-cost LNG producer.
Also, new projects will need more careful planning than in the previous boom in the mid-2010s. They will have to compete for profitability with low-cost Qatari and Russian LNG projects.
Also, buyers and investors will be increasingly looking at the environmental credentials of the LNG projects as many major developed economies, most of which are importers of LNG, have raised the bar for environmental standards as they pledge net-zero emission economies within three decades.
Is a future glut forming?
LNG companies are investing heavily in new liquefaction plants and export terminals along the Gulf Coast to meet growing global demand for natural gas, considered a cleaner alternative to coal and oil.
Several LNG projects are under construction along the Gulf Coast, including the Golden Pass LNG export facility, owned by Exxon Mobil and Qatar Petroleum, in Sabine Pass.
Global LNG demand is expected to reach about 580 million tons by 2030, according to Rystad Energy.
Around 104 million tons per annum (tpa) of new LNG supply will need to move forward over the next five years in order to meet the 580-million-ton global oil demand by 2030, Rystad Energy added.
However, the current proposed LNG capacity is ten times higher, at around 1 billion tpa.
At least for now, these are all signs of a glut on the horizon.