Spending to create new natural gas liquefaction capacity in the United States may get Qatar Petroleum International (QPI) more bang for the buck than developing additional liquefaction projects at home, according to Wood Mackenzie.
In a report titled “What next for Qatar and LNG?” Wood Mackenzie notes that QPI owns the Golden Pass regasification terminal on the U.S. Gulf Coast. QPI and partner ExxonMobil Corp. are considering redevelopment of Golden Pass as a liquefaction facility. As a result, LNG from Golden Pass could be baseloaded into the UK, backfilling Qatari LNG that is being re-directed east, to Asian markets, Wood Mackenzie said.
“A Golden Pass liquefaction project could offer advantages over some other proposed U.S. LNG projects, including lower development costs and less financing challenges” said Wood Mackenzie’s Noel Tomnay, head of global gas research. “In addition, the combination of QPI’s underutilized regasification capacity in the UK and Qatar’s excess LNG shipping capacity could provide a sunk-cost economic advantage of some US$1-1.50/MMBtu over other proposed U.S. LNG export projects for European supply.
“The bolstering of Europe’s, and specifically UK’s, energy security of supply through the facilitation of LNG exports from the U.S., combined with Qatari energy investment in North America, would strengthen Qatar’s geopolitical hand,” he said.
By contrast, development of new LNG capacity in Qatar could be value-destructive, according to the consultancy. Restricting new Qatari LNG capacity helps protect the value of Qatar’s existing contracts, some of which expire within the next 10 years and will be subject to price negotiations.
ExxonMobil is a major investor in Qatar and is actively promoting a Golden Pass LNG development. Wood Mackenzie estimates that ExxonMobil’s gas and LNG position in Qatar represents 19% of its upstream value.
Separately, Suncor Energy recently agreed to sell onshore natural gas-weighted properties in the Western Canadian Sedimentary Basin for US$986 million to a newly established North American partnership of UK utility Centrica plc and QPI (see NGI, April 22).
There is no guarantee that liquefaction development and LNG exports from Qatar’s existing Golden Pass facility will achieve the necessary export regulatory approvals. Golden Pass is a ways down on the U.S. Department of Energy’s (DOE) queue of U.S. non-Free Trade Agreement (FTA) LNG exports project approvals (see NGI, Oct. 15, 2012).
However, the project could benefit from future legislative and FTA agreements. “The Expedited LNG for American Allies Act of 2013” bill promoting U.S. LNG exports to North Atlantic Treaty Organization countries is to be presented to the U.S. congress and the U.S. and EU are negotiating an FTA agreement (see NGI, Feb. 4) “A successful conclusion to either of these initiatives could enable Golden Pass LNG exports to the UK,” said Tomnay.
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