Page 7 - MEOG Week 07 2021

MEOG COMMENTARY MEOG

A sizeable glut in supply began emerging in 98mn tpy by that stage, or 91% of its capacity,
2019 and only grew larger last year as the corona- while Australia’s utilisation will only be 86%, or
virus (COVID-19) pandemic sapped demand. 76mn tpy, according to Rystad.
After record numbers in the previous year, only Expectations are that the market will tighten
one FID was taken on new liquefaction capacity by the time NFE is up and running, and QP has
in 2020, at Sempra Energy’s Costa Azul export already booked some of its planned capacity spe-
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 over storage (CCS) capacity to store NFE’s emissions,
$4 per mmBtu, it’s right at the bottom of the in order to assuage increasingly climate-con-
global LNG cost curve, alongside Arctic Russian scious LNG buyers, particularly in Europe.
projects,” Wood Mackenzie research director Renewable energy will also play a major role in
Giles Farrer commented. “Qatar is pursuing powering its facilities.
market share. This FID is likely to put pressure QP still wants to bring on board partners
on other pre-FID LNG suppliers, who may find at NFE, even though it has said it is willing to
Qatar has secured a foothold in new markets.” go ahead with the project alone if necessary. A
QP is also working on a second expansion decision on partnerships will be made by the
phase known as North Field South (NFS), end of this year, al-Kaabi said. ExxonMobil,
which would take its capacity to 126mn tpy. It Royal Dutch Shell, Total and ConocoPhillips are
hired McDermott for front-end engineering long-serving partners at existing Qatari LNG
and design (FEED) work on the project last plants.
month. And according to al-Kaabi, the exporter QP began shortlisting partners for NFE in
is currently evaluating a further increase beyond 2019, and had intended to make its choices last
126mn tpy. year, but the coronavirus pandemic disrupted
Wood Mackenzie estimates that QP will the process.
have more than 75mn tpy of uncontracted LNG The FID demonstrates QP’s confidence in
volumes to sell by 2027, representing 70% of its the project, although the exporter will still want
supply portfolio. With 110mn tpy of total pro- partners to share costs and risks and assist with
duction capacity by 2030, Qatar will account for offtake.
nearly a fifth of the global total. According to al-Kaabi, QP is in talks with
However, Norwegian consultancy Rystad Exxon, Chevron, ConocoPhillips and others to
Energy estimates that its actual production is take a 30% stake in the expansion. Several Asian
likely to reach 107mn tpy by the end of the dec- LNG buyers are also interested in participating
ade. The US will likely be producing at a rate of and QP is assessing their offers, he said.™

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