Page 5 - DMEA Week 22

DMEA COMMENTARY DMEA

Infrastructure at Qatar’s
super-giant North Field
project.

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

Week 22 04•June•2020 www. NEWSBASE .com P5