Qatar Remains Bullish On LNG Markets

Qatar Petroleum remains bullish on long term LNG marketsThough much of the world is calling for the end of natural gas usage as it seeks to decarbonize the planet, legacy gas producer Qatar is ramping up its long term liquefied natural gas (LNG) forecast.State-run gas giant Qatar Petroleum (QP) said in a bond prospectus that global demand for LNG will continue to climb over the next two decades, helping shore up sustained use of the super-cooled fuel and as such its own profitability.QP expects natural gas demand to grow at a rate of 1.5% a year, driven higher by economic expansion and a broad shift away from dirtier-burning coal. It then sees demand peaking around 2040, roughly 15 years later than forecasted by the Paris-based International Energy Agency (IEA), advisor to most major economies except China.The IEA said in its Net Zero by 2050 report that gas would peak as early as the mid-2020s. It goes on to forecast that by mid-century gas usage will plunge as much as 55% lower 2020 levels.QP, however, sees even more upside for LNG than overall gas usage, with the super-cooled fuel growing 3.6% per annum to 2040 even as gas demand itself starts to decline, with the LNG market continuing to expand until the end of that decade.Qatar to Reclaim Top SlotLast year, Qatar lost its top LNG slot on a liquefaction capacity basis to Australia, a position it aims to win back. Aussie liquefaction capacity for its part by last year was at 88.6 million tonnes per annum (mtpa), to Qatar’s 77.5 mtpa, followed by the US (48.7 mtpa), Indonesia (32.1 mtpa), and Malaysia (30.5 mtpa). A plethora of other producers, including Russia, also have sizeable liquefaction capacity, while many also have plans to expand that capacity if market conditions fall into place.QP’s arguably bullish forecast comes as the energy giant not only tries to reclaim the top liquefaction capacity slot but on a scale that initially shocked markets when first announced nearly two years ago.It’s now ramping up development at its existing North Field East, the world’s largest LNG project, which will increase QP’s total capacity to 110 mtpa by 2025 and a record-breaking 126 mtpa by 2027 – likely cementing its lead until the end of LNG usage as a major power generation fuel.However, QP’s forecast, though seemingly self-serving, appears to be mostly on mark. Though much of Europe, the US and even South Korea, Japan and even Australia, start to pivot to more renewables (wind, solar, and now even blue and green hydrogen development), the rest of the world will take much longer to catch up.Asia, which already accounts for around 70% of global LNG demand, will see that percentage increase even more over the next two decades. China, now poised to overtake Japan as the top LNG importer, will lead the charge, followed by India which last year pledged to become a natural gas-based economy, moving from the fuel making up 6.2% of its energy mix in 2020 to as much as 15% by 2030.As such, both Asian giants, with a total population exceeding 2.7 billion people, will still rely on gas for power generation, transportation and industrial usage well into the mid part of the century.China, for its part, has pledged that gas make up as much as 15% of its energy mix by decades’ end, with more earmarks after that. To accommodate these pledges both countries have been and will continue to ramp up LNG infrastructure development.While LNG demand in legacy buyers Japan, South Korea and Taiwan, will likely flatten over the forecast period due to more renewables and in Japan also a forecasted return to nuclear power, Southeast Asian economic upstarts the Philippines and Vietnam (with the Philippines’ population around 110 million and Vietnam soon to pass 100 million) are currently building out LNG infrastructure to pivot away from coal usage. The two are also building out renewables infrastructure, but it will still be hard pressed to exceed 10% of their respective energy mixes by the next decade.Vietnam already has two LNG import terminals in the south under construction, with a least six more approved by the national government and as many as 22 LNG-to-power projects green lighted in its soon to be released Power Development Plan (PDP8).Thailand will also rely more on imported LNG as its own domestic natural gas reserves in the Gulf Of Thailand are depleted. Demand for the fuel in Indonesia and Malaysia, both LNG producers, is also projected to increase amid economic and population growth, with more production being used domestically than for export.Moreover, South Asia will create substantial LNG demand over the next two decades, including Pakistan, Sri Lanka and Bangladesh as they respectively try to pivot away from coal used for power generation. Other countries in the region are also considering LNG import terminals.Enter Royal Dutch ShellQP however isn’t alone in its bullish LNG forecast. Oil and gas major Royal Dutch Shell, the world’s largest LNG player, who was ordered by a Dutch court to reign in its carbon footprint even faster than the company had planned, sees the fuel playing a key role in global decarbonization, often putting it at odds with those that see gas and LNG, being, at best, used as a transition fuel while renewables are put in place.In its yearly Shell LNG Outlook 2021 released at the beginning of the year, it predicted that global LNG demand will reach 700 million tonnes by 2040. Pre-Covid demand in 2019 stood at 358 million tonnes, while it increased only marginally last year amid a plethora of shutdowns worldwide due to the coronavirus pandemic.This year, however, LNG usage has staged a recovery as major economies start to reopen, in lock step with spot prices for the fuel reaching seasonal highs above the $12 per million British thermal unit (MMBtu) price point in Asia, with Dutch Title Transfer Facility (TTF) prices, Europe’s main gas benchmark, breaching the $10/MMBtu price point.

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