AlwaysFree: Clock Is Ticking for Qatar to Sell Its LNG

• The country sees supply deals this year as it competes with rival projects, which can only be beneficial for buyers. 

According to Bloomberg article published on May 23, 2023, Qatar needs to sell a massive amount of liquefied natural gas into a market that in a few years could be oversupplied.

The world’s top exporter shocked the industry a few years ago by announcing a 60% boost in production through 2027. It was a classic move to grab market share and elbow out rivals in the US and Australia.

Since then, Qatar has found only a few buyers for the new supplies. 

Part of the problem is timing. The world needs LNG now, but not so much from the middle of the decade when the start of the projects is likely to coincide with those in the US and several other places. That means buyers aren’t in any rush to sign long-term agreements with Qatar as they seek to negotiate lower rates.

Another issue is Doha’s insistence on strict contract terms. These include 20-year commitments for deliveries that must be sent to specific destinations and cannot be easily diverted. The clause has stalled talks with buyers from Germany to Japan, countries where future demand is almost certain.

The market will be on alert for comments about these terms and long-term prospects from officials in Doha and energy companies at the Qatar Economic Forum that started Tuesday. The country’s Energy Minister Saad Al-Kaabi said at the conference that the transition to cleaner energy will trigger gas shortages. It will need to make the most of it. 

The Middle Eastern nation has agreed deals for roughly 6 million tons per year of supply from its North Field East and North Field South expansions. That’s just a fraction of the total 49 million ton capacity which will start up in stages from about 2026 to 2027, but al-Kaabi expects contracts to be tied up by the end of this year. 

This will most likely play out in one of two ways:

1) Qatar is about to embark on one of the most ambitious LNG deal-making efforts in the industry’s history, offering competitive prices or more lenient terms that will get consumers lining up to take supply.

Or,

2) The country will have so much LNG available when these projects start that it will flood the spot market with spare shipments, pushing down prices in the second half of the decade.

Either way, buyers win.

Tags: AlwaysFree,English,Gas,Middle East,Qatar