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Qatar can survive the global gas glut

Steel News - Published on Tue, 08 May 2012

New oil supply will weaken Qatar’s grip on energy markets by the second half of the decade which may knock some of the swagger out of the high spending nation but the fallout is likely to be limited.

The emirate is used to twists in energy markets. The multi billion dollar expansion of its liquified natural gas facilities, completed last year was expected to cater to US demand. That market is now almost self sufficient. But growing demand from Asia has been further boosted by the shutdown of nuclear power plants in Japan following last year\'s earthquake which increased the country\'s reliance on gas.

According to Bernstein Research, double digit gas demand growth in emerging markets, and limited new supply for now, mean that gas markets and spare LNG export capacity could tighten until 2014.

Then the picture becomes more challenging. Bernstein reckons that spare capacity could almost double from current levels to over 10% of global demand by 2017. The US itself is expected to start exporting LNG in 2016. Exports will also begin to rise from Australia, which is forecast to overtake Qatar as the world\'s largest producer of LNG by 2020.

Yet the emirate remains well positioned to defend its market share. Much of Qatar\'s gas is thought to be sold under long-term contracts, of 10 years or more. The cost of the gas after production and delivery to Asia is estimated to be around USD 4 per million British thermal units. But industry experts say that the revenue generated from selling the condensate liquids produced alongside the gas takes Qatar\'s effective production cost for LNG down to almost zero.

Even if global prices fall due to oversupply and restructuring of contracts away from an oil linked mechanism, Qatar has wiggle room. This year the emirate is expected to generate hydrocarbon revenue of almost USD 100 billion, generating a current account surplus of USD 54 billion.

Source - Reuters

Posted By : admin on Tue, 08 May 2012
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