Singapore (Reuters)-Qatar Petroleum, the world’s largest producer of liquefied natural gas (LNG), is increasing pressure on high-cost competitors through bold expansion plans that will increase supply over the next decade and may further depress prices .
As competitors are struggling to break even due to falling prices, the Qatar company announced last month that by 2026, in the first phase of its largest North Field LNG expansion, it will increase LNG production by approximately 40% to 1.1 per year. Million tons (mtpa).A single LNG project once approved.
The company is expected to announce a second-phase expansion plan this year, increasing its LNG production capacity to 126 metric tons per year by 2027, which is sufficient to meet the total import demand of Japan and South Korea, the world’s largest and third largest LNG importers, respectively.
Credit Suisse analyst Saul Kavonic (Saul Kavonic) said Qatar’s marketing has the potential to weaken competing suppliers and has helped put downward pressure on LNG contract prices in the past two years.
“With this decision, (Qatar) will once again reaffirm its leading position as the world’s largest LNG supplier,” said Chong Zhixin, director of research company IHS Markit.
“This decision to move on will definitely exclude other players. We expect that the company will need to conduct a long-term serious review of their projects to determine whether they can find a competitive advantage in this competitive field.”
Qatar accounts for one-fifth of the global LNG supply and is already the lowest-cost LNG producer so far.
The break-even price of goods shipped to the top markets in Northeast Asia is estimated to be approximately US$4 per million British thermal units (mmBtu), while the break-even price of goods from Russia, Mozambique and the United States is approximately US$1 million per million British thermal units (mmBtu) $5 to $8, said Alex Dewar, senior director of the company.The Energy Impact Center of the Boston Consulting Group (BCG).
According to analysts, the combination of North Field’s expansion, expiring contracts with existing buyers, and its planned US joint venture Golden Pass terminal means that by 2027, the gas giant may have about 70 to 75 metric tons. Of unsigned LNG sales.estimated.
Qatar Petroleum is ready to cut prices to secure transactions, just as a new 10-year Brent crude oil price “slope” signed with Pakistan last month is 10.2% and Brent crude oil price is 13.37% with a slope of 15 The one-year deal signed in 2016 was one of the lowest prices ever.
The contract price of LNG is usually expressed as a “slope” relative to the price of Brent crude oil, that is, a percentage of that price.
“It will be difficult to compete with them at these prices, so what other sellers may be able to compete with is to provide more flexibility,” a source from a competing supplier told Reuters. He was not authorized to speak but asked not to be named. .With the media.
For example, Qatar Petroleum Company usually sells its goods on delivery on delivery (DES), which makes it difficult for buyers to redirect goods when they are suddenly not needed.Therefore, a competitor who offers a sale or the option to let the buyer cancel the purchase within a specified period may win the business.
Several traders said that the company also signed a long-term agreement with Vitol last month to supply LNG to Bangladesh and is active in the spot market by offering competitive prices.
Traders said that since its establishment at the end of last year, its newly established trading arm, Qatar Petroleum Trading Company, has won several tenders for the supply of spot goods to Pakistan, India and Taiwan.
Giles Farrer of Wood Mackenzie said that Qatar’s entry into northwestern Europe is also expected to increase after Qatar gained regasification capacity at its Grain Island in the UK and Montour terminals in France last year.
Analysts said that despite this, the company will still be forced to find new sources of demand for its large number of unsigned contracts.
“China is likely to be a key focus because it is still generally under-represented in its investment portfolio and will remain the fastest-growing LNG import market,” Duwa said, adding that Qatar may also have more The sales target is positioned in India and Southeast Asia.
“Qatar’s expansion should extend the period during which the market may need more new supplies beyond 2028,” said Credit Suisse’s Kavonic.
“Given that Qatar’s trading volume has not yet locked houses, if other projects make a final investment decision (FID) in the short term, it may cause oversupply during 2026-2028, which may put downward pressure on spot prices during this period. period.”
Post time: Dec-27-2021