(EnergyAsia, October 31 2013, Thursday) — Sitting atop the world’s third largest natural gas reserves, Qatar has grown rapidly to become the largest global liquefied natural gas (LNG) exporter, but it will be challenged later this decade by Australia, East Africa and North America, predicts UK-based research firm Business Monitor.
In response, Qatar is expanding its downstream network, gas-to-liquids capacity and the international presence of the state oil company to counter a projected growth slowdown in domestic oil and gas revenues.
According to Business Monitor, Qatar’s natural gas production, boosted by the start-up of the Barzan project in 2015, will reach nearly 180 billion cubic metres (bcm) by 2022. Barzan is the last major approved expansion of Qatar’s upstream capacity pending a self-imposed moratorium on further development of the giant North Field.
The government is opening some onshore and offshore blocks to foreign investments, with the recent discovery of reserves in the offshore Block 4, the first major find in 42 years, giving a hint of Qatar’s untapped potential.
For now, the government is content with using some of its surplus gas to meet the country’s fast-rising domestic demand, which is expected to rise from 32 bcm in 2012 to nearly 60 bcm by 2022.
Business Monitor projects Qatar’s proven oil and natural gas reserves to decline modestly over the 2012-2022 forecast period, with a 1.9% decline in natural gas reserves expected between 2013 and 2021.
Oil reserves are also due to decline gradually, but actual liquids production should grow slowly over the forecast period, namely on the back of increased recovery operations and field redevelopment alongside growing condensate and natural gas liquids (NGL) volumes.
“Plans are underway to increase production capacity from 950,000 b/d to 1.2 million b/d,” said Business Monitor.
Export capacity is also set to hold steady as the government has no plans to increase the country’s annual LNG capacity of 77 million tonnes (107 bcm) reached in 2011.
However, Business Monitor expect Qatar to continue raising LNG export levels to meet the growing demands of its customers, particularly those in Asia, as well as to new ones in Brazil and Argentina.
According to Qatari officials, any export increases will come from efficiency gains rather than capacity expansion.
“There is some upside to pipeline exports supplies, with proposals to add additional compression facility to the Dolphin Pipeline which would allow for supplies closer to full design capacity. Growing demand in the GCC markets would support expansion, but a key sticking point will be price with gas currently sold at a significant discount,” said Business Monitor.
On the increasingly contentious issue of LNG pricing, Qatar will continue to resist calls by customers to shift away from the well-established oil-indexed mechanism. But its ability to resist pricing reform will come under challenge as a result of new supplies flowing from Australia, Russia, East Africa and North America.
Speaking at an international conference in Singapore this week, Qatargas CEO Khalid bin Khalifa Al Thani dismissed the idea that North America’s impending role as an LNG exporter might put pressure on Asia’s high prices.
Qatar is a major beneficiary of Asia’s willingness to pay high LNG prices, which have often traded between five and seven times the spot prices in the US.
Mr Al Thani said the US faces strong domestic opposition to plans to develop export-oriented LNG projects and rapid decline rates of shale wells, while Canada is short of basic infrastructure like pipelines and has to deal with growing opposition from aboriginal and environmental groups.
“I believe that gas prices will remain regionalised for the foreseeable future,” said Mr Al Thani at the Singapore International Energy Week.
“The North American pricing structure will not maintain the pace to significantly alter the pricing structure in Europe and Asia.”
With consumers more concerned with supply security, the international market will likely continue with the current pricing system, said the CEO of the world’s largest LNG exporting company.
“LNG producers will find it difficult to take on the price risk that is associated with the spot market,” he said, emphasising that investors must be compensated for undertaking risky capital-intensive projects.
As a warning to rivals hoping to produce LNG from expensive shale and other unconventional gas reserves, he said Qatar is well positioned to raise production by 10% from its 77 million tonnes per year capacity without having to make any new investment.
Qatar’s LNG capacity is divided between Qatargas (42 million tonnes per year) and RasGas (35 million tonnes), both partly-owned subsidiaries of Qatar Petroleum.