The natural gas export market is more difficult and complex to steer than for oil and definitely not for the weak of heart, Qatar Petroleum (QP) CEO Saad Sherida Al-Kaabi said Tuesday.
The world’s biggest liquefied natural gas (LNG) producer is attempting to keep its grip on the No. 1 position with the two-phase expansion at North Field, Al-Kaabi said at CERAWeek by IHS Markit.
Al-Kaabi discussed the role of natural gas going forward during a half-hour discussion with ExxonMobil CEO Darren Woods and IHS Markit Vice Chairman Daniel Yergin. Yergin quizzed the executives about what direction the global LNG business is going as deep-pocketed players vie for market control.
“I don’t think in the conventional way of thinking of commodities that LNG today can be considered a commodity,” Al-Kaabi said when asked where gas trading ranks with other commodities. As an example, he noted that global gas prices can “shoot up” with the outage of a single LNG train in Australia.
“It’s very difficult to consider LNG similar to oil,” he said, as oil storage “is easy” and does not require refrigeration. For LNG, “not many projects can go forward” without a sales and purchase agreement, or SPA.
“It’s a more difficult market…sort of a big boy game,” Al-Kaabi said.
Buyers for now also are “shying away from going into long-term contracts,” he said. “It’s been a buyers’ market for some time.”
The “coronavirus repercussions” led to delayed investment decisions. Sanctionings are picking up, which means buyers may go back to longer term contracts to ensure “security of supply.”
That analysis is “spot on in respect to how the markets work,” Woods said. Supply security is key, he noted.
“As the market continues to grow, obviously, we see the spot market growing some, but I don’t see that displacing long-term contracts, given the criticality of supply and security,” said the ExxonMobil chief. “We see long-term contracts for some time.”
State-owned QP ensures it has stability in its massive LNG projects by inviting international companies to become partners. Having skin in the game by a variety of players leads to “certainty of the costs” to advance the business, Al-Kaabi said.
[We want to hear from you! NGI is collaborating with industry participants to develop independent market-driven LNG price indexes. Please contact us for more information.]
Bids to bring on partners for QP’s $28.75 billion, 33 million metric ton/year (mmty) North Field East (NFE) expansion are expected to be announced in the next six months. NFE would boost Qatar’s LNG production capacity to 110 mmty from 77 mmty.
Partners would take on about 30% of the development costs. A process to launch bids to join in the second expansion phase, North Field South (NFS), would follow.
“We look for ExxonMobil to be one of the partners going forward,” Al-Kaabi said. “We have always had excellent partnerships” for the gas developments,” and ExxonMobil “is the biggest partner we have in LNG now.”
Among other things, the two partner in the 18.1 mmty Golden Pass LNG export project underway on the Upper Texas coast near Freeport.
QP shares ExxonMobil’s “set of values,” Woods said. “We are very focused on meeting the world’s needs,” and “going it the right way with integrity. Our partnership is very very strong on a number of different levels.”
Developing the North Field gas expansion was paused last year because of the coronavirus, but since the start of the year, things have moved into high gear.
A $2 billion-plus engineering, procurement and construction contract to expand NFE’s LNG storage and loading facilities was awarded Monday. Another contract last month was given to construct four mega-trains.
The preliminary groundwork for NFS could kick off in nine months or so, by the end of 2021 or in early 2022, Al-Kaabi said. NFS would add another two trains, bringing the field’s LNG capacity capacity to 126 mmty.
“We are very confident that…this gas will be needed for future growth,” he said.
Woods said gas demand growth is a foregone conclusion in the years to come. However, it’s not all about Asia.
“The biggest opportunity for growth” primarily is in undeveloped nations, Woods said. He estimated that 85% of the energy growth going forward is in countries that are not part of the 37 countries within the OECD, aka the Organisation for Economic Co-operation and Development. “As that economy grows, as people’s lives get better, gas will play a key role.”
© 2021 Natural Gas Intelligence. All rights reserved.
ISSN © 1532-1231 | ISSN © 2577-9877 | ISSN © 1532-1266 |