Qatar Explores Boosting Its LNG Expansion as Gas Demand Booms
Qatar Explores Boosting Its LNG Expansion as Gas Demand Booms
(Bloomberg) -- Qatar is sounding out buyers about a further expansion of its liquefied natural gas capacity, according to people familiar with the matter, as Europe rushes to secure supplies in the wake of Russia’s war in Ukraine.
State-run Qatar Energy is talking to gas buyers about whether to enlarge a $30 billion project started in 2021 to build six gas-liquefaction plants, the people said, asking not to be identified. The company is assessing the cost of adding at least one more unit and how much interest there is for additional gas from customers, including some in China.
The talks are at an early stage and QE may stick with its existing plan, which will boost its maximum annual output by 60% to almost 130 million tons by 2027. The first gas isn’t expected to hit the market until 2025.
The company didn’t respond to a request for comment.
Qatar’s discussions underscore how quickly the long-term outlook for LNG has changed since Russia’s invasion. Europe is desperate to reduce its reliance on Russian energy, and a standoff over President Vladimir Putin’s demand that gas be paid for in rubles rather than euros or dollars has added urgency to their efforts.
Germany, which got more than half its gas imports last year from Russia, has pledged to fast-track the construction of its first LNG import terminals. The U.S. also unveiled a deal in late March that will see it boost supplies to Europe as soon as this year.
Several senior European Union officials -- including the bloc’s top diplomat, Josep Borrell, and Germany’s Economic Minister Robert Habeck -- have traveled to Qatar in the past month to discuss gas supplies. Habeck said German-based utilities should start negotiating multi-year supply contracts with the Persian Gulf state, which is the world’s biggest LNG exporter.
Qatar’s expansion project, the largest in the LNG market’s history, was met with skepticism when it was announced in 2019. Some analysts said gas demand would drop rapidly in the coming decades as the world transitioned from fossil fuels to renewable energy. Soon after, the coronavirus pandemic caused gas prices to sink to record lows.
Prices have now rebounded almost to all-time highs. Morgan Stanley forecasts global LNG consumption will rise 60% through 2030, mostly due to Europe’s pivot away from Russian energy.
Qatar’s six new units -- in which gas is compressed and cooled to 258 degrees below Fahrenheit (-161°C), allowing it to be shipped around the world -- will each be able to produce 8 million tons of LNG per year.
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