Australia, U.S. LNG Exports Turn Up The Volume On Global Market Leader Qatar
Qatar, the world’s leading exporter of liquefied natural gas (LNG), is on the verge of losing its crown to Australia, with the U.S. catching up on both, according to latest market assessments, as new projects Down Under and plentiful American shale supplies prop up rivals’ export volumes.
Despite LNG spot prices being in decline since Q4 2018 in lucrative Asian markets, a string of Australian projects coming onstream continue to add to headline volumes. These include Prelude, Shell’s floating LNG facility in Western Australia, which shipped its first LNG cargo to customers in Asia in June, alongside Wheatstone and Ichthys.
According to the U.S Energy Information Administration (EIA), these new facilities have raised Australia’s total export capacity from 2.6 billion cubic feet per day (bcf/d) back in 2011 to over 11.4 bcf/d in 2019.
The EIA also reckons Australia has already surpassed Qatar in LNG production capacity, and often exported more LNG than its Middle Eastern rival at various points between Q4 2018 and Q2 2019, if not consistently.
All the while, U.S. exports of LNG continue to rise despite fears of a global trade war and the ongoing spat between Washington and Beijing. Deliveries to facilities producing U.S. LNG for export rose to a monthly record in July 2019, averaging 6.0 (Bcf/d) equating to 7% of the total American dry natural gas production, according to data from OPIS PointLogic Energy.
Given that additional Cameron, Freeport, and Elba Island LNG trains are tipped to add to 2020 volumes, alongside cargo dispatches from Sabine Pass and Cove Point export terminals, expect more of the same from U.S. exporters.
Such a growth trajectory leads the International Energy Agency (IEA) to predict the U.S. will surpass Australia as the world’s leading LNG exporter by 2024, which for its part, will have surpassed Qatar by 2022, even if the immediate tussle for market supremacy is likely to be between Doha and Canberra, according to the Australian Government.
What’s more, regional differentials are narrowing, resulting in the diversion of many U.S. LNG cargoes to Europe, despite Asia being exporters’ first choice. For example, the spread between Japan spot LNG and U.K. NBP/TTF prices was ~$1.20/MMBtu in Q4 2018, but nearly halved to a low of ~$0.65/MMBtu in Q2 2019, thereby aiding a rising U.S. LNG market in Europe, according to industry sources.
Key issue to watch here is how Qatar is responding to market challenges in both Europe and Asia, with its current LNG export levels similar to that of Australia of around 11.3-11.5 bcf/d, according to data aggregators. The EIA reckons Qatar’s exports volumes are currently behind that of Australia, ahead of a full picture emerging for 2019 once year-end data is in.
Qatar currently holds 25% of the global market share, and famously quit oil cartel OPEC in December 2018 following the severing of diplomatic ties with neighbors Saudi Arabia and United Arab Emirates. While many attributed the move to diplomatic tensions, Qatar’s official stance remains that it quit what’s essentially an oil producers’ group to concentrate efforts on its “core export” product – LNG.
Barely months before heading for the OPEC exit door, Qatar Petroleum, the country’s state-owned energy company, had announced it would increase the capacity of its LNG expansion project by adding a fourth train that would raise production capacity by 43%; from 77 million tons per year (or 10.13 bcf/d) to 110 million tons per year (14.47 bcf/d) by Q1 2024.
The additional supply move lifted Qatar’s moratorium on the development of its section of the South Pars/North Dome; the world’s largest natural gas field that it shares with Iran. Whichever way you look at it, LNG spot prices will remain under pressure, with good news for importers as major exporters get into an almighty tussle.