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Qatar LNG Exports Outlook

Poised to sustain position as number one LNG exporter, lowest-cost producer

Qatar is the world’s largest LNG exporter, with 82 MMt in exports in 2017, placing it ahead of Australia, Malaysia and Nigeria. The United States will emerge as a competitor in terms of market share to Qatar in the coming years, having become a net exporter in 2016.

Qatar’s LNG production comes from seven LNG projects, each majority-owned by Qatar Petroleum (QP), a state-owned firm whose net liquefaction capacity exceeds that of any other company. To streamline its operations and LNG marketing, QP merged its Qatargas and RasGas joint ventures into a single entity under the Qatargas name at the start of 2018. Through these joint ventures, QP has long-term fixed destination deals with many of the world’s major LNG buyers. The single entity’s new marketing system will allow volumes to flow more freely between the Pacific and Atlantic basins, offering QP an edge against growing supply competition.

Qatar shows no signs of relinquishing its position in the global market. In 2017, QP lifted its moratorium on new gas production from the North Field that feeds its liquefaction plants and has since announced plans to build three new LNG megatrains. With these moves, QP is making a concerted effort to increase its LNG capacity so that Qatar can remain the global leader in LNG exports despite rapid export capacity expansion in Australia and the United States.

Thanks to its low upstream costs supported by associated liquids revenue, Qatar has earned a reputation as the lowest-cost producer of LNG. Maintaining this status would not only enable Qatar to continue its LNG expansion, it would also allow it to displace potential rivals. QP is well-placed to crowd out other potential new liquefaction capacity around the world—even in the US—due to Qatar’s superior economics. This could force competitors seeking to bring new projects online during the planned Qatargas expansion to delay startup, given their likely inability to compete with Qatar’s attractive LNG exports price when seeking buyers.

Which countries import LNG from Qatar?

Qatar primarily exports LNG to its traditional markets in Europe and Asia, but has increasingly sent volumes to new markets since 2015. While its main export markets include South Korea, India, Japan and China in Asia, and Italy, UK and Spain in Europe, Qatar has moved to secure market share in emerging importers like Thailand, Pakistan, Poland, Kuwait and Bangladesh. This strategy has two benefits: first, Qatar’s contracts with established customers in east Asia will expire in the early 2020s and questions remain over their renewal; and second, the new importers help balance seasonal export dynamics for Qatar, with Japan and Korea absorbing exports during cold weather months and Middle Eastern countries doing the same during hot weather months.

During the past few years, Qatar’s share of exports to Asia has risen while shipments to Europe have fallen. In 2018, Qatar delivered 71% of its exports to Asia as a whole through July, with total loaded volumes of 34 MMt in line with record highs set in 2013 during the aftermath of the Fukushima disaster. Although emerging importers like Pakistan have become increasingly important to Qatar, volumes to Qatar’s older Asian customers—Japan, Korea, Taiwan, India, and China—were also up through the first seven months of 2018 behind strong demand from South Korea and China in the early part of the year. Europe’s share of Qatari volumes, meanwhile, has fallen to its lowest levels in a decade due to QP’s active approach to new importers as well as price premiums in Asia.

Such fluctuations are part and parcel, however, of Qatar’s LNG flexible export strategy. With around 60% of its current contract portfolio having flexible destinations, Qatar has been able to adapt quickly to market shifts. Before the Fukushima disaster, Qatar sent close to half of its volumes to Europe; after, Qatar pivoted quickly, sending two-thirds of its exports to Asia in response. Once Asian demand stabilized, Qatar diverted volumes to South Asia and the Middle East, particularly Egypt, which rapidly became a significant market. A tighter market and a cold winter prompted a return to high Asian spot prices in late 2016, prompting Qatar to refocus on Asia.

Experts

Gautam Sudhakar

Mr. Sudhakar leads development of analytics platforms for the gas and LNG research practices, and he is an expert in short- and long-term LNG market fundamentals. He also specializes in gas and LNG company strategy analysis and has authored numerous reports on global supply and demand outlooks, LNG trade evolution, project economics, and contracting patterns. Mr. Sudhakar holds a Bachelor of Science in foreign service from Georgetown University and a master's degree in economics from The Johns Hopkins University, United States.

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Terrell Benke

Ms. Benke's expertise includes competitive strategy analysis of the major players in the global gas industry, with emphasis on risk analysis of the LNG value chain, value chain modeling, and supply-side fundamentals. Her responsibilities include management oversight of the IHS Markit LNG and LNG Analytics retainers. Previously, she managed the gas subscriptions practice at PFC Energy (now IHS Markit) for eight years. Earlier in her career, Ms. Benke worked in various capacities in the energy industry, including developing analytic, strategic, and commercial expertise in LNG at Chevron and El Paso Corporation. While at Enron and Resources for the Future, she held commercial and analytic roles in the deregulating electricity business. Ms. Benke holds a Bachelor of Arts with distinction from the University of Virginia, United States, and an MBA with honors in finance from the University of Chicago, United States.

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Shankari Srinivasan

Shankari has specific expertise in global gas market fundamentals analysis, price forecasting, company strategy and scenario planning. She has authored numerous reports. Prior to joining IHS Markit, Ms. Srinivasan was Head of Energy Fundamentals at Centrica in the United Kingdom. She has covered the European gas market for many years and authored a number of reports as researcher and then leader of the European gas practice at CERA, which is now part of IHS Markit. She has also assessed the European and Russian gas markets with the International Energy Agency. Ms. Srinivasan previously worked at a New York brokerage firm as a corporate equity analyst. She holds three degrees from US Universities, a Bachelor of Arts from Brown University, a Master of Science from New York University, and a Master of Science from University of Pennsylvania. She also holds an Executive MBA from Cranfield University, United Kingdom.

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