Page 10 - GLNG Week 22

GLNG COMMENTARY GLNG

The deal has come at
the right time for the
shipyards, which faced
a decline in orders
otherwise.

$3bn or more, depending on QP’s requirements said. “As I have previously stated, we are moving
and the extent of China’s LNG shipbuilding full steam ahead with the North Field expansion
capacity expansion. projects,” he continued.
The moves to secure such high levels of LNG “With the conclusion of these milestone
shipbuilding capacity come as Qatar works on agreements, we have everything in place to com-
its North Field expansion project, which under- mence the largest LNG shipbuilding programme
pin its ambitions to raise its liquefaction capacity in history,” al-Kaabi said.
from 77mn tonnes per year currently to 126mn The vessels will serve both QP’s North Field
tpy by 2027. This aggressive expansion is seen expansion and the company’s Golden Pass LNG
by some as going against the tide as others delay terminal in the US, which is also currently under
construction on new liquefaction projects. construction. In line with its broader expansion
There was previously more consensus on push, QP has also asked US regulators for per-
LNG demand outstripping supply again in the mission to increase the capacity of Golden Pass,
second half of the 2020s. However, since the even as other liquefaction projects on the US
current oversupply has been exacerbated by the Gulf Coast are being delayed. (See: Golden Pass
coronavirus (COVID-19) pandemic, doubts are LNG files for capacity expansion as cargo cancel-
starting to emerge about the longer-term appe- lations bite US exporters, page 15)
tite for new LNG export capacity. Some of the new vessels will also replace part
Qatar appears undeterred, however. This is of Qatar’s existing fleet, and will themselves be
despite the fact that QP also said recently that equipped to run on LNG thanks to dual-fuel
it would cut its capital spending by around 30% engines that QP described as being of the “latest Doubts are
this year. QP’s CEO, Saad al-Kaabi – who is also generation”.
the Qatari Minister of State for Energy – has While rival LNG exporters – notably the starting to
maintained that even as the spending revisions US – also have plans to add more liquefaction emerge about
are worked out, QP’s LNG expansion plans capacity, they appear to be far more cautious in
remain on track. He has also said QP will not cut the face of the market downturn, perhaps with the longer-term
its exports in the face of weak demand. the exception of QP’s terminal there. The advan-
Qatar’s push for LNG dominance has led tage for QP is that it has the backing of its gov- appetite for
to some worries, however, that it could push ernment, whereas many of its rivals are private
already low spot prices for the fuel down even players that are likely to be considerably more new LNG export
further. For now, though, it appears that export- sensitive to current market conditions. capacity.
ers elsewhere in the world are far more likely to QP also benefits from being one of the low-
scale back in response to market conditions. est-cost producers of LNG, as well as being
positioned within relatively easy reach of both
What next? European and Asian markets. For US or Aus-
Indeed, al-Kaabi’s comments on the shipbuild- tralian rivals, meanwhile, there are more risks
ing deal this week serve to highlight how aggres- associated with costs and greater distances to
sively Qatar is pursuing its expansion plans. market. With this in mind, QP may see this as a
“The signing of today’s agreements with the good time to edge them out and gain additional
three esteemed Korean companies reflects our market share. Its gamble, however, could prove
commitment to the North Field expansion pro- to be a costly one if lower LNG prices are here for
jects, even during these extraordinary times,” he longer than previously expected.™

P10 www. NEWSBASE .com Week 22 05•June•2020