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Can Any Country Dethrone Qatar As Top LNG Exporter?

By now it should be clear that Qatar has no intention of giving up its slot as the world's top LNG player, both in terms of exports and liquefaction capacity. While Australia did pass the middle eastern gas producer briefly a few months ago, Qatar will ramp up its liquefaction capacity from 77 million tons per annum (mtpa) to 110 mtpa within five years, making it difficult for both Australia and the U.S. to catch up.

Now, Qatar is also talking up its LNG game in Asia, which represents 72 percent of global LNG demand, with that demand projected to increase to at least 75 percent amid increased usage of the super-cooled fuel from China. China's historic increase in both piped natural gas and LNG comes as the country fulfills a government mandate that natural gas makes up at least 10 percent of its country's energy mix by 2020 to offset record air pollution levels, particularly in its major urban centers. Further earmarks are in place to 2030 as well.

"Asia is the biggest market for LNG, or fuels in general because that is where [economies are growing], and that is where the need is," al-Kaabi said. "For us, the Asian market is a fundamental market and we have great relationships politically with all the Asian countries," Qatar's Energy Minister Saad Sherida al-Kaabi said in an interview with Nikkei Asian Review on Thursday. He also mentioned Japan, which is currently the world's largest LNG importer, followed by China and South Korea.  "Japan, in particular, has a very special place in our heart, and we are looking to extend our contracts with Japanese companies," al-Kaabi said.

al-Kaabi said that in the aftermath of the Fukushima nuclear disaster, Qatar canceled LNG shipments to other destinations, diverting them instead to Japan and selling them at contract prices, despite gas prices being "very high" at the time, the report added. "We wanted to show the people of Japan our respect," he said.

However, what he failed to address was that much of that supply was still attached to restrictive long-term contracts that eventuality forced Japan to turn to India and others to try at the time to bring more control over contractual LNG deals. Japan also saw the formation of what is now the world's largest buyer of LNG when Tokyo Electric Power and Chubu Electric Power formed JERA to have more buying power in LNG markets as well as integrating the value chain from upstream fuel investment and procurement through power generation

Related: Permian Production To Break 4 Million Bpd In March

Due to increased LNG usage in Asia, particularly Japan after Fukushima, spot LNG in Asia breached the $20 per million British thermal units (MMBtu) mark in February 2014. Since then, amid more supply coming from new projects in Australia and the U.S., markets have been in a multi-year supply overhang with a corresponding downward trajectory in prices.

In fact, LNG spot prices in Asia have hit a 17-month low, an unusual development for this time of year. Spot prices for March delivery to Asia LNG-AS fell to $6.50/MMBtu last week, down 20 cents from the previous week to their lowest since Sept. 8, 2017, trade sources said. Lower prices come amid tepid demand in North Asia and warmer than usual temperatures for this time of year.

Going forward, al-Kaabi said that by the end of 2019 Qatar will likely raise the bar again, developing natural gas fields in Africa and North America to maintain its top spot and keep up with Asian demand. Not only will more demand be coming from China, but also from Pakistan as that country develops its LNG import sector to offset record energy supply shortages that have caused persistent blackouts, the Philippines too as it tries to put in place its first working LNG import terminal before its main source of natural gas in its offshore natural gas field runs out in less than five years, from India, Bangladesh, Thailand and in time Vietnam.

By Tim Daiss for Oilprice.com

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Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets… More