Mon, Jul 17, 2017 - Page 6 News List

Qatar LNG exports have to be closely monitored

By Young Chea-yuan 楊之遠

Just as several Arab nations, including Saudi Arabia, were putting pressure on Qatar by releasing a list of 13 demands for Doha to comply with, Qatar Petroleum announced that it would boost natural gas production in the North Dome Field in the Persian Gulf, Qatar’s portion of the world’s largest oil and natural gas field, by 30 percent over the next five to seven years. This means Qatar will be producing one-thirds of the world’s total natural gas output. The field, the world’s largest non-associated natural gas field, has a capacity of 2 million cubic meters of extractable natural gas.

The main reason Qatar wants to increase the production of liquefied natural gas (LNG) is that it wants to attract Asian customers, including Taiwan, China, India, Japan and South Korea, and start a price war with its competitors, such as the US, Russia and Australia, in the hope of reducing the economic effects of the embargo imposed by the other Arab states.

The move will exacerbate the situation in the LNG market, where supply already exceeds demand.

Chinese and Turkish oil companies are considering joining the Qatari investment in expanding the natural gas production there.

However, the Arab coalition against Qatar has issued a warning, saying that it would impose further sanctions against Doha, including forcing foreign oil companies planning to invest in Qatar to choose between Qatar and the rest of the Arab nations, adding to the political tensions in the natural gas market.

The Qatari natural gas field has lower production costs due to certain geological advantages. The nation also has better technologies for developing them, so, in principle, in the absence of any outside interference, Qatar would most likely come out on top in this particular competition, making it the world’s biggest LNG exporter.

Qatar’s closest competitor is Australia. Over the past 10 years or so major Western oil companies, such as Royal Dutch Shell and Chevron, have been investing in heavy metals and large-scale natural gas development, expecting to replace Qatar as the world’s largest exporter by 2019 and dominating the international market.

In addition, US President Donald Trump is vigorously pursuing ways to speed up production of shale gas in the US and is looking for buyers. The US is offering central and eastern European nations favorable terms, such as assistance in expanding and setting up energy infrastructure like import terminals and gas pipelines, in an effort to reduce their reliance on Russia for natural gas.

Last year, Qatar’s total LNG export volume was approximately 100 billion cubic meters, most of which was sent to Japan, South Korea and India. Taiwan imported 8.2 billion cubic meters, representing about 45 percent of the nation’s total imported natural gas. Consequently, if Qatar starts increasing LNG production, Asian consumers stand to gain from it, at least theoretically.

The dispute between Qatar and other Arab states has yet to be resolved.

If Qatar refuses to compromise and does, indeed, ramp up its production, this would incense the other Arab nations, which might implement even harsher sanctions in retaliation.

This would only escalate the crisis and it is difficult to foresee what will come out of it. For this reason, the stable supply of LNG from Qatar is a factor that Taiwan needs to consider.

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