Page 7 - DMEA Week 17 2021

DMEA COMMENTARY DMEA

well, as it is one of its most prominent investors liquefaction capacity even further to 126mn tpy
and employers. Total’s connection to the Afri- later in the decade.
can people goes far beyond its investments at a These aggressive Qatari expansion plans
macro level. While many other multinational make it more challenging for LNG projects else-
companies have left the continent, Total has where to proceed. Indeed, two of the proposed
remained, and we believe this commitment to liquefaction projects on the US Gulf Coast
the continent and Mozambique specifically will have been scrapped since the start of this year.
continue to remain.” The cancellation of one of these, Galveston Bay
LNG, has been attributed to challenges related to
Economic impact its location; however, market conditions remain
Even if Total goes forward with the project, how- challenging for many proposed new LNG export
ever, the delays and contract cancellations stem- plans.
ming from the declaration of force majeure will The US is not the only country where devel-
hurt Mozambique’s economy. opers are backing away from LNG project pro-
In the near term, they will reduce the vol- posals. In March, Chevron announced that it
ume of money flowing into the country and the had ceased directing any further funding to the
number of local workers and companies hired. proposed Kitimat LNG project in Canada, hav-
But they will also push back the date at which ing tried and failed to sell its 50% stake in the
Maputo will be able to start collecting its share project.
of earnings from Mozambique LNG. According All of these developments suggest that
to previous reports, the scheme is expected to despite LNG’s relative resilience during the early
generate nearly $31bn in budget revenues over months of the coronavirus (COVID-19) and the
a period of 25 years. dramatic spike in demand for the super-chilled
Furthermore, Total’s decision to declare force fuel over the Northern Hemisphere’s winter,
majeure on Mozambique LNG could influ- conditions remain challenging for developers.
ence ExxonMobil’s approach to the proposed And in that context, the deferral – or even loss
Rovuma LNG project, which targets offshore gas – of Mozambique LNG’s projected volumes of
fields near Area 1. The super-major has already 12.88mn tpy may boost competitors’ medi-
slashed its capital expenditure budget this year um-term prospects.
and has indicated that it will focus on a hand- Analysts including Tudor, Pickering, Holt
ful of its most profitable projects. This bodes ill & Co. (TPH) anticipate that LNG supply could
for Rovuma LNG, as the turmoil in northern overwhelm demand over the 2026-2030 period.
Mozambique makes the way forward for the Similarly, the Norwegian consultancy Rystad
project even more challenging. Energy has previously warned that if Qatar
pushes ahead with its LNG expansion ambitions
Global context – as it is now doing – potential projects elsewhere
Outside Mozambique, Total’s woes may come as in the world could face a grim outlook in com-
a relief for competitors in other regions that are petition against Qatar’s low break-even prices.
hoping to build new liquefaction capacity in time In the longer term, however, the outlook is
to meet demand from the middle of the decade. different. Another consultancy, Wood Macken-
Competition has increased dramatically in zie, recently warned of a supply gap of 50mn tpy
the LNG market in recent years, with new pro- in 2030, and its director of LNG, Giles Farrer, has
jects starting up in several countries, including said he expects the shortfall to widen to more
the US, Russia and Australia. Now Qatar is try- than 170mn tpy by 2035.
ing to regain its dominance of the LNG market In the shorter term, though, LNG produc-
by expanding capacity while slashing costs. ers rely in large part on off-take agreements to
Indeed, Qatar Petroleum’s recent final invest- underpin the financing plans for their devel-
ment decision (FID) on the North Field East opments, and while there has been anecdotal
(NFE) expansion is set to raise the country’s evidence of more demand for the fuel since the
liquefaction capacity from the current level winter, few new long-term supply deals have
of 77mn tpy to 110mn tpy by 2026. QP has been announced. Indeed, Qatar has dominated
described NFE as the largest LNG project ever the handful of long-term supply deal announce-
to be sanctioned, and it is planning to raise its ments that have been made in recent months.™

Week 17 29•April•2021 www. NEWSBASE .com P7