Page 7 - MEOG Week 20
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particularly challenging for US LNG producers that have only recently started operations, Qatar itself would also take a hit.
how the country proceeds will illustrate its expectations of which route could be more prof- itable – and given the danger of negative pricing, shutting in production may be the more prudent course of action.
According to Bloomberg, Qatar now appears to be slowing shipments to Europe after they peaked in April. Meanwhile, 17 LNG tankers – which the news service notes is a high number for this time of year – are currently idling off the country’s coast.
Qatar may be planning to redirect cargoes to Asia as demand in China, India and elsewhere recovers. But Asian demand is not anticipated to recover quickly, and the International Gas Union (IGU) warned recently that the current over- supply could last into the middle of the decade, beyond the recovery from COVID-19.
In a battle for market share, Qatar would have an edge on its rivals; its plant at Ras Laffan pro- duces the world’s third-cheapest LNG, according
to consultant Rystad Energy. Even so, tumbling prices are pushing Qatar’s LNG toward break- even levels.
If Qatar’s actions end up hurting prices, this could lead to renewed calls for an OPEC-style gas cartel that takes co-ordinated action. But given expectations that Qatar likely will not have any choice but to curtail some of its production, there is still plenty of optimism that the country would be more cautious than that.
Negative gas prices would be especially dam- aging for U.S. operators that only recently started production and are still burdened with heavy expenditures. Sub-zero prices could also cause delays for any liquefaction projects yet to secure financing.
Producers in the U.S. have higher costs than Qatar and will probably cut output after custom- ers cancelled several shipments for June. Norway and Russia have already trimmed gas exports to Europe.
“The next step would be for Qatar to reduce its production,” said Bros, the harvard energy associate. “It won’t have any other choice.”
Week 20 20•May•2020 w w w . N E W S B A S E . c o m P7
