Qatar is set to boost its natural gas production despite the recent plummet in global prices, banking on a sustained demand for the cleaner fuel across Europe and Asia.
Saad al-Kaabi, head of QatarEnergy, revealed on Sunday plans for a significant expansion of liquefied natural gas (LNG) production, aiming to add 16 million metric tons annually to its operations.
This expansion initiative will elevate its total capacity to 142 million tons per year (tpy).
The announcement from Qatar coincides with a notable decline in Asian LNG prices, reaching a nearly three-year low due to warmer-than-usual temperatures during the Northern Hemisphere winter, which have dampened demand.
LNG, being gas cooled to a liquid state for transport by ship, plays a pivotal role in global energy trade.
The surge in gas prices across Asia and Europe in 2022, prompted by Russia’s invasion of Ukraine and the ensuing disruption in gas supplies, saw the United States emerge as the world’s leading LNG exporter in 2023, surpassing Qatar.
However, Qatar’s contributions helped mitigate the shortfall.
Kaabi’s announcement follows a decision by U.S. President Joe Biden to halt approvals for new LNG export terminals pending environmental assessments.
This move has drawn concerns from gas importers regarding future energy security on a global scale.
Kaabi underscored the continued growth of Asian gas markets and the enduring necessity of gas in Europe, stating, “We still think there’s a big future for gas for at least 50 years forward and whenever we can technically do more, we’ll do more.”
He highlighted the significance of Asia’s expanding gas demand driven by population growth.
With this expansion, Qatar anticipates boosting output from its North Field to 142 million tpy by 2030, marking an 85% increase from current levels.
Despite the price downturn, major gas producers such as the U.S., Australia, and Russia remain committed to increasing output, anticipating further demand growth amid concerns about the future viability of gas in the energy transition towards cheaper green energy alternatives.
Analysts at Goldman Sachs foresee a prolonged period of oversupply in LNG markets, exacerbated by Qatar’s expansion plans, potentially leading to downward pressure on global gas prices.
Qatar’s expansion announcement bolsters its position as a reliable and low-cost LNG supplier, especially in the wake of the U.S. regulatory pause.
QatarEnergy has already secured supply agreements with partners in Europe and Asia for the North Field expansion project, previously slated to commence production in 2027.
Exploration activities in the North Field’s western region have paved the way for further expansion opportunities.
Kaabi mentioned that the project’s cost would run into billions of dollars, with preliminary engineering studies underway.
The expansion entails the construction of two additional LNG trains, supplementing the six already in progress for earlier expansions.
Regarding partnerships for the new trains, Kaabi stated that QatarEnergy would proceed with the engineering phase independently before deciding on potential collaborations.
The North Field, shared with Iran as South Pars, stands as the world’s largest gas field, underlining Qatar’s pivotal role in the global gas market.