Energy News Today

Qatar Could Throw A Wrench In America’s Ambitious LNG Plans

U.S. domestic demand for natural gas has been falling for a year now, according to EIA data. The authority expects demand will continue down this year as well because of cheap renewables and coal. And yet, production is on the rise—a combination that makes U.S. gas producers increasingly dependent on export markets. Reuters’ John Kemp wrote in a recent column that while U.S. natural gas production grew at some 4.3 percent between 2015 and 2020, domestic consumption of the commodity only increased at half that rate. Exports—via pipelines and as LNG—were what absorbed the excess. In a best-case scenario, they will continue to absorb it. In a worst-case scenario, competition on the LNG market could hit U.S. producers hard.

Exports of American liquefied natural gas to the three top importers in Asia hit a record in February, reaching 3.2 million tons in February amid colder than usual weather for that time of the year. The February export amount was two and a half times greater than the previous monthly record set by U.S. exporters.

LNG exports to Asia also surged by as much as 67 percent last year, which is certainly good news for producers and liquefiers. What’s not so good is that exports to Asia represented about half of all U.S. LNG exports last year.

It’s obvious that Asia is the key market for LNG exporters: the continent is currently moving from coal to gas for its power generation and will drive demand for the commodity for probably decades to come. The problem with that, for U.S. LNG producers, is that they’re not alone on the market.

The biggest threat comes from Qatar—reigning top LNG exporter and low-cost producer—which recently announced plans to expand its production capacity significantly.

Related: Iran Could Soon Officially Return 2 Million Bpd Of Oil To Global Markets

In February, Qatar announced the final investment decision on what it says will be the world’s largest LNG project, boosting the tiny Gulf nation’s annual total from 77 million tons to 110 million tons—a 40-percent capacity increase. The capacity increase will cost $28.75 billion and should become operational by 2025.

Yet there is something even more significant in the Qatari project than its sheer size. The North Field East Project will feature a carbon capture and sequestration system, according to operator Qatar Petroleum. This means that the gas produced there will have a lower carbon footprint than LNG produced without a CCS system, which is most LNG today.

Here’s why this is important. Last year, French Engie canceled a $7-billion deal for the acquisition of a stake in the Rio Grande LNG project of NextDecade. The cancellation, according to media reports, came after pressure from the French government, which was worried about the emissions footprint of the natural gas that would be liquefied at the facility.

Now, Europe is not Asia, for sure, but it is quite a big LNG buyer, too, and another key market for U.S. exporters of…

Read More: Qatar Could Throw A Wrench In America’s Ambitious LNG Plans

2021-04-11 16:00:00

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