Qatar will stick to its gas development plans: Apicorp

Amid a triple whammy facing the world, Qatar will stick to its original gas development plans.

Albeit with a delayed final investment decisions (FID) in the energy sector across the region, Qatar will maintain its plan to increase its liquefaction capacity to 126 mtpa (170 bcm/y), up from 77 mtpa (105 bcm/y) today, capitalising on its low-cost position, Apicorp (Arab Petroleum Investment Corporation) noted in its “MENA Energy Investment Outlook 2020-2024” released yesterday.

Qatar will want for strategic reasons to gain and preserve market share, particularly in the established Asian market and in new markets. In 2019, Qatar maintained its top exporter status with 173.9 mmtpa, edging Australia, in a global liquefaction capacity market of 427 mmtpa.

Apicorp, which projected a $173bn net reduction in the investment in energy sector for the next five years compared to its 2019-23 Investment Outlook, noted that the energy sector is currently facing a triple crisis: the COVID-19-related health and economic crisis, the tensions between market forces and management in the oil sector, and a possible looming financial crisis.

However, the gas value chain registered the highest increase in planned investments compared to the 2019 outlook at $28bn, or 13 percent signalling the developing of unconventional gas in the GCC, and increasing production capacity in Qatar. The 2020-24 total committed and planned investments in Mena are expected to be in excess of $792bn, down from $965bn in last year’s five-year outlook.

Planned upstream spending has been cut by 20-30 percent across the board. “The triple crisis currently affecting the world, led to sharp cuts in capital expenditures, practical restrictions to projects and supply chains. Entering 2020, Mena countries had substantial financial reserves, almost $1trillion, and some countries were even underleveraged. Yet with governments mobilizing extensive stimulus packages to fight the direct and indirect effects of the COVID-19 pandemic, the five-year energy investment plans, even if reduced by 20 percent, will still require substantial input from a bearish private sector. The current vicious circle of low revenue, low investment, low output needs to be broken, and a virtuous cycle of investments in lower cost, lowercarbon, sustainable assets needs to be induced,” Dr. Ahmed Ali Attiga, Chief Executive Officer Apicorp said.

2019 was a record year for new LNG project announcements, even excluding Qatar’s recent drive. However, a combination of weaker gas demand and falling gas prices has jolted these plans. Globally and in Mena, Apicorp expects the majority of LNG final investment decisions (FID’s) to be postponed to 2021, at best. The truth is that of the +700 MMtpa of active LNG proposals, 55 percent of LNG capacity aiming to reach FID in 2020 was US projects. Qatar was next at 15 percent.

In general, planned projects face delays because of local workforce disruption, delays in selection of contractors and partners, closure of Asian modules fabrication facilities and travel restrictions. An oversupplied LNG market with global gas prices at the hubs expected to remain below $4/MMbtu for 2020 and below $6/MMbtu during 2021 discourages players to pursue additional gas developments. They prefer to postpone FIDs wherever possible.

However, in the region, the majority will stick to gas development plans for domestic or strategic reasons. However, a decrease in industrial demand is testing several countries’ gas plans.

The energy sector is poised for a new wave of consolidations and M&As, particularly in oil and gas services and supply. Iraq, with the highest committed investments in the energy sector , presents the highest uncertainty as delays or cancellations in the short to medium term are increasingly likely. By contrast, the GCC region’s committed investments increased by 2.3 percent in Apicorp’s 5-year outlook compared to a 6 percent decrease in the Mena region as a whole, signifying a higher execution rate in the GCC.
Source: The Peninsula Qatar