Qatar has ambitions to increase its liquefaction export capacity from the current 77 million tonnes per annum (tpa) to 126 million tpa, reports Rystad Energy. Such a project is expected to cost more than $50 billion in new investments, Rystad Energy. The trouble is, given the global surplus in LNG (liquid natural gas), which is likely to increase with the go-ahead of other LNG export projects worldwide in North America, Africa, Australia and Russia. The viability of the Qatari project is in doubt.
Qatar project details
The first stage of the Qatari project is likely to cost about $35 billion, and was due to be sanctioned this year. But Rystad Energy now estimates that it is more likely to be approved in the first half of 2021. The delays because of the ongoing LNG surplus and the ongoing decline in LNG demand buy one of Qatar’s leading customers China, because of the impact of the virus on industrial activity.
Once the final investment decision is made for the first phase of this expansion export project, sometime in 2021, the contracts offered for tender will include development of related onshore liquefaction and storage facilities. In detail, this will include development of four liquefied natural gas trains, utilities and offsite facilities, a helium recovery unit, non-technical buildings, warehouses, workshops, and associated facilities. Once, the first stage is complete, sometime during 2023, they will give the final investment decision the go-ahead. Then the second stage of the expansion is likely to get the green light at the earliest by 2023.
However, there are problems facing this ambitious Qatari project. A major issue is that the terms of trade of have changed from LNG export producers being price makers to being price takers. This means an increasing number of LNG customers are attempting to renegotiate long term contract are increasingly buying from the spot market and reselling surplus supplies. For example, Tokyo Gas, Japan’s largest natural gas utility, is joining like-minded gas importers and plans to renegotiate long-term LNG contracts to remove restrictive destination clauses and increase flexibility.
As a result, Qatar Petroleum is re-evaluating the prospects of its North Field Expansion project, because of existing low gas prices, before reaching out to international partners for funding and market development. Also, they have extended the commercial bid deadline for liquefaction plants to the second quarter of 2020.
Because of this Rystad Energy analysts have cut its total forecast for capital expenditure in the Middle East, predicting about $21.3 billion of investments will get the go-ahead in the region this year, versus an earlier estimate of more than $56 billion.
One thing is clear, the prospect of the Qatari increasing its liquefaction export capacity is likely to be further delayed.