• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 10 days Does Toyota Know Something That We Don’t?
  • 4 days America should go after China but it should be done in a wise way.
  • 10 days World could get rid of Putin and Russia but nobody is bold enough
  • 6 hours "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 12 days China is using Chinese Names of Cities on their Border with Russia.
  • 6 hours The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 1 day Even Shell Agrees with Climate Change!
  • 3 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 4 days How Far Have We Really Gotten With Alternative Energy
  • 12 days CHINA Economy Disaster - Employee Shortages, Retirement Age, Birth Rate & Ageing Population
  • 13 days Putin and Xi Bet on the Global South
Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

Can The U.S. Compete With Qatari LNG?

Qatar's recent announcement that it would build the world's largest LNG production facility did not prompt any applause from other LNG producers. Now, the tiny Gulf nation is also cutting its prices and expanding into the spot market to retain its number-one position in LNG exports. This could result in the death of some planned U.S. LNG projects.

U.S. liquefied natural gas quickly became a threat for the world's top exporter. While Qatar is still the cheapest LNG producer, the abundance of shale gas made it cheap and competitive in some markets, which in turn led to a flurry of LNG projects as the U.S. staked its claim on the international market. 

The country quickly found a place among the world's largest exporters, thanks not least to the fact that U.S. LNG producers index their gas to Henry Hub benchmarks rather than crude oil. The quickly growing spot market for LNG was also favorable for these producers. No wonder so many more projects followed the first wave of LNG capacity. Yet not all of them made it, and more are under threat of becoming commercially unviable.

Some already have: the list of LNG projects awaiting a final investment decision has shrunk in the last year and while part of the reason was the pandemic, the other part was that the economics for most of these projects had changed. According to Wood Mackenzie, this year, no new LNG project in the United States will reach a final investment decision, either. The reason: it's tough to find long-term buyers.

"Generally, we've seen a slowdown in the pace of sales contract activity," said Wood Mackenzie's principal analyst for North American LNG, Alex Munton, as quoted by Natural Gas Intelligence. "Pre-FID projects will continue to struggle to secure buyers, given the huge wave of LNG currently under construction globally. For that reason, we see a limited window to project FIDs in the U.S. for the next couple of years."

Related Video: Michigan - Enbridge Pipeline War Hits Climax

Competition is certainly tough in the LNG space, and with Qatar firmly on the path to securing its number-one spot over the long term, it will get even tougher. There are many LNG producers around the world, but they are all higher-cost than Qatar.

"Nobody can compete with Qatari costs," according to Jonathan Stern, a senior research fellow at the Oxford Institute of Energy Studies, as quoted by Bloomberg in a recent report. "They can do whatever they like and everybody will have to respond the way they can. And, especially when the market is in surplus and prices are low, that will impact the competition's profits."

One might reasonably ask why bother with LNG then if nobody can compete with Qatar on prices. The reason to bother is that large buyers like to have the comfort of supply diversity, and this makes them willing to pay a little more—or a lot more in some cases—to avoid being completely dependent on a single, albeit lowest-cost, producer.

Yet cost is important, and for some import markets, so are emissions. Europe is a big consumer of gas, but it is also a big proponent of renewable energy and low emissions. At the moment, renewable energy is winning the fight when it comes to new electricity generating capacity.

"Most European utilities don't want to touch gas-related projects with a barge pole as companies seek to improve their ESG metrics, improve valuation and avoid stranded asset risks," said Bloomberg Intelligence analyst Elchin Mammadov earlier this month.

What's worse, per a Bloomberg report from earlier this month, European utilities are trying to come up with alternative uses for liquefied natural gas because there is not enough demand for it for electricity generation.

So, Asia remains the key focus for U.S. LNG producers. The problem here is that it is also the key focus for every other LNG producer in the world, from Qatar to Mozambique and Australia.

"With the Qataris adding more capacity at a very cheap cost, it does not make financial sense for U.S. companies to be building greenfield projects," Reuters quoted Matt Smith, commodity research director at Clipper Data as saying this week. Smith said that in the current supply environment it made a lot more sense to add trains to already existing facilities.


There are currently three or four LNG projects in the U.S. that plan to have a final investment decision by the end of the year. Tellurian appears confident it would be able to make a final investment decision on its Driftwood project this year. Sempra Energy, on the other hand, has pushed the FID for its Port Arthur LNG project to next year. This is the latest in a series of delays in the final investment decision on the project.

Finding long-term buyers to make the necessary commitments for a whole new LNG plant was hard even before the pandemic. Now, with Qatar on the warpath, Wood Mackenzie's forecast may turn out accurate, and all of these FIDs planned for this year might get pushed forward to 2022 or later. Worse, the projects might get shelved as Europe snubs hydrocarbon LNG and Asian buyers shun long-term contracts that secure the money for new LNG facilities that cost billions to build.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Mamdouh Salameh on May 23 2021 said:
    No it can’t but US LNG will still get a share of an expanded global LNG market expected to almost double to 700 million cubic metres by 2030 from 376 in 2020. Each of the major players namely Qatar, Australia, the United States and Russia have plans to expand their production capacity in order to get a bigger share of the market.

    Despite the somewhat bullish expectation of the US LNG sector, several large-scale projects have already been discontinued over the past months citing continued uncertainty in global markets.

    Qatar, the world’s largest LNG producer, exporter and also the cheapest is boosting its annual production capacity from 77 million tons to 110 million tons with production starting from the new production phase by the fourth quarter of 2025 and reaching full capacity by late 2026 or early 2027.

    Russia’s number two gas producer Novatek plans to build out its LNG export capacity up to 70 mtpa by 2030. This, in turn, dovetails into Russia’s plans for LNG production of 80-140 mtpa by 2035, which would be greater than that of the world’s two largest producers Qatar and Australia.

    While US LNG will definitely get a share of the global LNG market by virtue of the size of the market, it will face tough competition from Qatar and Russia both of which can easily beat US LNG on price.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News