• 2 days U.S. On Track To Unseat Saudi Arabia As No.2 Oil Producer In the World
  • 3 days Senior Interior Dept. Official Says Florida Still On Trump’s Draft Drilling Plan
  • 3 days Schlumberger Optimistic In 2018 For Oilfield Services Businesses
  • 3 days Only 1/3 Of Oil Patch Jobs To Return To Canada After Downturn Ends
  • 3 days Statoil, YPF Finalize Joint Vaca Muerta Development Deal
  • 3 days TransCanada Boasts Long-Term Commitments For Keystone XL
  • 3 days Nigeria Files Suit Against JP Morgan Over Oil Field Sale
  • 3 days Chinese Oil Ships Found Violating UN Sanctions On North Korea
  • 3 days Oil Slick From Iranian Tanker Explosion Is Now The Size Of Paris
  • 4 days Nigeria Approves Petroleum Industry Bill After 17 Long Years
  • 4 days Venezuelan Output Drops To 28-Year Low In 2017
  • 4 days OPEC Revises Up Non-OPEC Production Estimates For 2018
  • 4 days Iraq Ready To Sign Deal With BP For Kirkuk Fields
  • 4 days Kinder Morgan Delays Trans Mountain Launch Again
  • 4 days Shell Inks Another Solar Deal
  • 5 days API Reports Seventh Large Crude Draw In Seven Weeks
  • 5 days Maduro’s Advisors Recommend Selling Petro At Steep 60% Discount
  • 5 days EIA: Shale Oil Output To Rise By 1.8 Million Bpd Through Q1 2019
  • 5 days IEA: Don’t Expect Much Oil From Arctic National Wildlife Refuge Before 2030
  • 5 days Minister Says Norway Must Prepare For Arctic Oil Race With Russia
  • 5 days Eight Years Late—UK Hinkley Point C To Be In Service By 2025
  • 5 days Sunk Iranian Oil Tanker Leave Behind Two Slicks
  • 5 days Saudi Arabia Shuns UBS, BofA As Aramco IPO Coordinators
  • 5 days WCS-WTI Spread Narrows As Exports-By-Rail Pick Up
  • 5 days Norway Grants Record 75 New Offshore Exploration Leases
  • 6 days China’s Growing Appetite For Renewables
  • 6 days Chevron To Resume Drilling In Kurdistan
  • 6 days India Boosts Oil, Gas Resource Estimate Ahead Of Bidding Round
  • 6 days India’s Reliance Boosts Export Refinery Capacity By 30%
  • 6 days Nigeria Among Worst Performers In Electricity Supply
  • 6 days ELN Attacks Another Colombian Pipeline As Ceasefire Ceases
  • 6 days Shell Buys 43.8% Stake In Silicon Ranch Solar
  • 7 days Saudis To Award Nuclear Power Contracts In December
  • 7 days Shell Approves Its First North Sea Oil Project In Six Years
  • 7 days China Unlikely To Maintain Record Oil Product Exports
  • 7 days Australia Solar Power Additions Hit Record In 2017
  • 7 days Morocco Prepares $4.6B Gas Project Tender
  • 7 days Iranian Oil Tanker Sinks After Second Explosion
  • 9 days Russia To Discuss Possible Exit From OPEC Deal
  • 10 days Iranian Oil Tanker Drifts Into Japanese Waters As Fires Rage On
Alt Text

European Gas Struggles Leave Bulgaria In A Tight Spot

Europe’s drive to diversify natural…

Alt Text

China's Gas Production Hits Three-Year High

In December 2017 China pumped…

Energy Tribune

Energy Tribune

Our motto is “Leading the debate. Beating the Street.” We publish on the Web to help you understand the key issues in the energy sector…

More Info

Qatar: The World’s Biggest LNG Producer Holding Onto it’s Gas

Qatar: The World’s Biggest LNG Producer Holding Onto it’s Gas

On paper, it should be a perfect match. Qatar has huge amounts of gas to export and its neighbours are desperately prowling for reliable energy supplies to power their emerging economies.

But Qatar’s recent decision to rule out significant gas exports to its allies in the Gulf Cooperation Council from a huge gas project inaugurated earlier this month illustrates just how acute the gas needs are among some of the globe’s biggest oil producers.

The new Qatari jewel is the second phase of Al-Khaleej Gas, which is now producing about 1.25 billion cubic feet a day, equivalent to about 17% of the country’s production. Combined with AKG-1, the two projects account for more than a quarter of the country’s overall output. (Most of the remainder is liquefied and exported around the world.)

Qatar’s deputy prime minister and energy minister, Abdullah al-Attiyah, recently said that all of the gas production from AKG-2 would be used to meet domestic demand, especially for electricity generation, and to continue feeding the relentless double-digit economic growth of the past few years.

Qatar is already the world’s biggest LNG producer. It’s also a growing player in gas-to-liquids. But over the next decades, the country’s domestic gas demand is expected to double. And that increased gas demand can be seen throughout the region as oil-rich countries work to grow their economies, especially for petrochemical and industrial sectors, as well as domestic desalination and electricity demand.

Regional electricity demand is expected to increase annually by more than 6% and it is already competing with gas demand from petrochemical plants, with countries like Kuwait forced to prioritize power over industrial output.

Attiyah said Qatar might have some gas leftovers for its neighbors in the summer when global gas demand declines, in contrast to the Gulf’s. But for several reasons, especially price, the country’s rulers have balked at approving more long-term gas supply offers from its neighbors, despite intense diplomatic overtures from the United Arab Emirates, Oman, Kuwait and Bahrain.

“It’s a very serious problem without an easy solution,” said Jonathan Stern, director of gas research in the Oxford Institute for Energy Studies and an author of a soon-to-be-published book about the GCC’s gas conundrum.

“It makes you wonder why they refuse to pay Qatar market prices for gas,” Stern said. “Somehow they find it easier to justify to their population that they burn oil, like Saudi Arabia, or buy LNG from somewhere else, like Kuwait.”

The uncertainty over Qatari gas exports to other GCC countries has been brewing for years. But the options are running out. In 2005, Qatar imposed a moratorium on new developments on its North Field, the largest single field in the world, holding almost 15% of the world’s proved conventional gas reserves.

But in 2007, Qatar went ahead with plans to export 2 bcf/d of gas at bargain prices to the UAE and Oman via the Dolphin Project. Since then, all GCC countries, except for Saudi Arabia, have fruitlessly negotiated with Qatar for additional gas and underwater pipeline interconnections. But irreconcilable pricing differences and border disputes have derailed all of them.

“The message coming out of Qatar is that they are not in the charity business. In other words [Gulf neighbors] have to pay what other countries are paying, which means LNG prices,” said Stern.

LNG prices have dropped recently as low as $4 per million British thermal units, but are expected to increase once demand picks up. Qatar’s long-term contracts are benchmarked to oil and are reportedly worth at least twice current spot prices.

Even with market prices, Gulf countries have few options, a fact illustrated by the energy planning: the UAE wants to build two huge nuclear reactors while leaving its huge sour gas reserves undeveloped; Saudi Arabia is increasingly burning oil to meet growing power demand (by 2012, that consumption could hit 2 million barrels per day); Kuwait is importing gas using a floating LNG facility, but very little from Qatar, and all countries, except for Saudi Arabia, are in talks to build pipelines to connect to Iran, the only other potential regional supplier.

Iran and Qatar Natural Gas

Iran and qatar Natural Gas
Source: BP Statistical Review, By: Seth Myers

Border disputes have also frustrated Qatar. Dolphin, the only existing pipeline connection, was almost derailed by Saudi Arabia after claiming the pipeline was laid in its territorial waters. Saudi Arabian also denied permission for a second pipeline to Kuwait that would have transited Bahrain. In the last year alone, there have been two skirmishes over disputed territorial waters.

The least exposed is Saudi Arabia, not only because it has huge gas reserves, but also because it can resort to the oil alternative thanks to its spare production capacity. For the rest though “it’s not a solution unless they are prepared to raise domestic gas prices, which is politically unacceptable. You’re looking at fairly substantial economic and political issues,” Stern said. “It has to do with the domestic price reform that is not happening in their region,” Stern said. Economic growth and political stability in the rest of the countries is tied to cheap energy.

“For me the extraordinary thing is in countries like the UAE with huge quantities of sour gas. It has taken so much time to develop because investors are not confident they will make money,” Stern said.

Late last month ConocoPhillips pulled out of a $12 billion sour gas contract over concerns that the UAE’s subsidized consumer and industrial prices would undermine the project’s profitability.

The next chance for Qatar’s neighbors to have another shot at negotiating will not come at least until 2014 when another project, Barzan, comes on line with at least 1.5 bcf/d of capacity. But the Qataris are already in talks to supply gas to Lebanon and Turkey and they are reportedly even considering building a pipeline to Europe. Why? Because those customers are willing to pay market prices.

By Andres Cala

Source: Energy Tribune




Back to homepage


Leave a comment
  • Anonymous on June 07 2010 said:
    This is a valuable article. I consider something like this in my new energy book, but this article is more up to date. Among other things it says something about just how rich the Gulf states are.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News