Page 8 - GLNG Week 07

GLNG COMMENTARY GLNG
Qatar reportedly delays partner selection for LNG expansion
Qatar is reported to have delayed its selection of foreign partners for its North Field expansion project, amid a slump in LNG prices
PERFORMANCE
WHAT:
Qatar is in the process of selecting partners for its North Field expansion but the process has reportedly been delayed.
WHY:
The collapse in LNG prices will affect the project’s economics.
WHAT NEXT:
New liquefaction facilities starting up around the world will exacerbate the LNG supply glut.
THE global LNG supply glut – and the result- ing collapse in prices for the super-chilled fuel – may be starting to a ect plans being developed by Qatar to expand its liquefaction capacity. is week, Reuters reported four sources familiar with the situation as saying the Middle Eastern country had delayed the process of selecting Western partners for its North Field Expansion project.
e reported delay is the latest of several that have cropped up for the expansion project. And it may come as no surprise, given the extent to which the collapse in LNG prices is a ecting the economics of new developments.
e news comes a er Qatar raised its LNG production outlook in late November 2019 on positive results from drilling and appraisal work at the North Field. e country announced that it now anticipates producing 126mn tonnes per year (tpy) of LNG by 2027, up by about 64% from current levels of 77mn tpy. It had previously been targeting around 110mn tpy by 2024.
LNG prices were already languishing when this was announced. And the continued down- ward price trend in recent weeks, exacerbated by a drop-o in Chinese demand following the coronavirus outbreak, may now be giving Qatar
and its would-be partners reason to reassess the economic viability of the expansion plan.
Second thoughts?
Qatar is the lowest-cost producer of LNG. is, combined with the country’s extensive gas reserves and the favourable terms it o ers for participation, has led to international oil com- panies (IOCs) being willing to invest up to tens of billions’ worth of dollars into Qatari LNG previously.
The latest expansion phase was expected to see similar trends play out at rst. Six IOCs had been shortlisted as potential partners, and state-owned Qatar Petroleum (QP) had initially said it would announce which companies it had selected in the rst quarter of 2020. But Reu- ters cited four sources, which were reportedly involved in the talks, as saying the Qatari com- pany was planning to take more time to decide on partner selection a er raising its LNG pro- duction target.
“I think Qatar has decided to firm up the capex of the project before they go to interna- tional oil companies. I think the decision should be ready by the end of 2020,” one of the sources involved in talks said.
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w w w . N E W S B A S E . c o m Week 07 20•February•2020