Page 5 - DMEA Week 06 2021

DMEA COMMENTARY DMEA

Emboldened by low costs likely to reach 107mn tpy by the end of the dec-
The FID comes after a turbulent year for the ade. The US will likely be producing at a rate of
global LNG industry. A sizeable glut in supply 98mn tpy by that stage, or 91% of its capacity,
began emerging in 2019 and only grew larger last while Australia’s utilisation will only be 86%, or
year as the coronavirus (COVID-19) pandemic 76mn tpy, according to Rystad.
sapped demand. After record numbers in the Expectations are that the market will tighten
previous year, only one FID was taken on new by the time NFE is up and running, and QP has
liquefaction capacity in 2020, at Sempra Energy’s already booked some of its planned capacity spe-
Costa Azul export project in Mexico. cifically for buyers in Europe. “I’m not worried
Qatar has nevertheless pushed ahead with about the marketing side of it,” al-Kaabi said.
NFE, emboldened by its low costs of production. Qatar also wants to build carbon, capture and
“At a long-term breakeven price of just storage (CCS) capacity to store NFE’s emissions,
over $4 per mmBtu, it’s right at the bottom of in order to assuage increasingly climate-con-
the global LNG cost curve, alongside Arctic scious LNG buyers, particularly in Europe.
Russian projects,” Wood Mackenzie research Renewable energy will also play a major role in
director Giles Farrer commented. “Qatar is powering its facilities.
pursuing market share. This FID is likely to QP still wants to bring on board partners
put pressure on other pre-FID LNG suppliers, at NFE, even though it has said it is willing to
who may find Qatar has secured a foothold in go ahead with the project alone if necessary. A
new markets.” decision on partnerships will be made by the
QP is also working on a second expansion end of this year, al-Kaabi said. ExxonMobil,
phase known as North Field South (NFS), Royal Dutch Shell, Total and ConocoPhillips are
which would take its capacity to 126mn tpy. It long-serving partners at existing Qatari LNG
hired McDermott for front-end engineering plants.
and design (FEED) work on the project last QP began shortlisting partners for NFE in
month. And according to al-Kaabi, the exporter 2019, and had intended to make its choices last
is currently evaluating a further increase beyond year, but the coronavirus pandemic disrupted
126mn tpy. the process. The FID demonstrates QP’s confi-
Wood Mackenzie estimates that QP will dence in the project, although the exporter will
have more than 75mn tpy of uncontracted LNG still want partners to share costs and risks and
volumes to sell by 2027, representing 70% of its assist with offtake.
supply portfolio. With 110mn tpy of total pro- According to al-Kaabi, QP is in talks with
duction capacity by 2030, Qatar will account for Exxon, Chevron, ConocoPhillips and others to
nearly a fifth of the global total. take a 30% stake in the expansion. Several Asian
However, Norwegian consultancy Rystad LNG buyers are also interested in participating
Energy estimates that its actual production is and QP is assessing their offers, he said. ™

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