Qatar remains undeterred on LNG projects

By Andrew England in Doha
Published: April 5 2009 17:46

Qatar, the world’s leading exporter of liquefied natural gas, is pushing ahead with its multibillion dollar gas projects in spite of the collapse in energy prices and a steep fall in demand, a senior official said on Sunday.
But Faisal al-Suwaidi, chief executive of Qatargas, one of two-state controlled gas companies, said he expected that new gas projects around the world would be put on hold for up to two or three years. This would lead to a “big” supply-demand gap in five years, he said.

I don’t think we will see any decision made on new projects for the next two or three years as a minimum because of the outlook for the prices,” Mr Suwaidi told the Financial Times.
“If you see all the projects that were planned or talked about you see almost (supply/demand) balance . . . But now by 2014 you will see a big gap between supply and demand . . . because of the number of projects that have been either shelved, cancelled or postponed.”
Gas prices, which are often linked to oil prices, have fallen sharply as demand has dropped because of the global economic crisis, causing industry experts to predict a gas glut that may put further downward pressure on prices, particularly in the US and UK.
LNG, which is super-cooled so that it can be transported by tanker, provides about 7 per cent of gas supply and has become increasingly important in meeting marginal demand. Most LNG is sold in long-term contracts, but some is also sold into spot markets.
Qatar has been rapidly expanding its LNG production in recent years and on Monday it will inaugurate Qatargas 2, a $13bn project with an annual capacity of 15.6m tons of LNG. The development – the world’s largest LNG project – is targeting the UK market and will be capable of supplying 20 per cent of the UK’s gas needs.
Two other projects – Qatargas 3 and Qatargas 4 – are scheduled to go online by the end of next year, with each adding an additional annual capacity of 7.8m tons with a focus on the US and European markets. Overall, Qatar plans to increase its LNG production capacity from about 31m tons to 77m tons by 2012.
Mr Suwaidi said the US would continue to take “any quantity” as long as producers were willing to accept the price, but he believed the UK market would be oversupplied for the next four or five years.
“All our projects are under construction . . . and we are not worried in the long term. I would say in [the next] one or two years we will need to pay more attention to the disposing of the quantity,” Mr Suwaidi said.
“Shorter term, yes, we have concerns [about prices], but in the longer term the fundamentals are the same.”
Qatar boasts the world’s largest natural gas reservoir, the North Field – estimated to be about 900tcf (trillion cubic feet). However, a moratorium on new projects in the North Field was expected to remain in place until 2013 or 2014 because of delays completing a study into the field’s reservoirs, Mr Suwaidi said.
Copyright The Financial Times Limited 2009