Expanding Qatar to take LNG lead
Australia is set to lose its status as the world’s top LNG exporter after rival Qatar declared it would proceed with a huge low-cost expansion.
Australia is set to lose its status as the world’s top LNG exporter after rival Qatar declared it would proceed with a huge low-cost expansion, threatening revenues from a major export earner.
The Middle East nation was overtaken by Australia in late 2018 following a $200bn investment boom.
It will press ahead with a major boost to production despite a supply glut and low oil prices.
Qatar plans to lift supply from 77 million tonnes, just behind Australia’s 78 million tonnes, to 110 million tonnes in 2025 and 126 million tonnes two years later by tapping low-cost supplies from its vast North field operations.
The gas giant competes with Australia to supply customers in Asia where 70 per cent of the fuel is consumed globally. It produces the fuel at the cheapest rates in the world and has no plans to cut production in the current climate amid tepid demand.
“Once you have an issue with demand, the most expensive people go out first,” Qatar’s Energy Minister Saad Al-Kaabi told the US-Qatar Business Council. “They can’t sell, they’re selling at a loss, so I think a whole bunch of people would have to close down LNG before it gets to us.
“If we stop selling LNG because of cost, that means there is something drastically wrong in the energy markets. It’s not us.”
Australia’s next wave of LNG projects have been deferred due to the biggest oil crash in a generation, with Woodside Petroleum alone putting a halt to $53bn of projects in Western Australia.
Consultancy Wood Mackenzie estimates Australia’s market share of global LNG supply will shrink from 20 per cent to 10 per cent by 2040 as competing sources from nations including Qatar grab buyers in Asia.
As final investment decisions “continue apace outside of Australia there is a danger that the current wave of opportunity is missed, and future Australian LNG may end up priced out of the market”, WoodMac said. “2019 was a record year for LNG supply investment decisions with multiple liquefaction projects. Projects in North America, east Africa, Qatar, Russia, Papua New Guinea are vying for FID over the next 36 months alongside Australia. To maintain its LNG supply leadership position in the world, Australia needs to ensure its involvement in this next wave of investment.”
Other rivals are also slowing down. The US — which has access to cheap shale gas supplies — was originally projected to overtake Australia in just five years, according to some calculations, if its export ambitions hit their targets.
However, projects are now looking more susceptible given plummeting energy markets and record low spot prices in Asia which have made the North American market less attractive.
Australia faces a $20bn plunge in LNG export revenue in 2020-21 due to plummeting oil prices in a hit three times as large as official government forecasts, consultancy EnergyQuest estimates.
Gas export revenues in the next financial year will tumble by 40 per cent to $30bn from $50bn in 2019-20, reflecting the oil crash.
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