Bloomberg
King of LNG Undercuts Rivals to Keep Dominating World Market
(Bloomberg) — The world’s top exporter of liquefied natural gas is ramping up production dramatically and undercutting competitors in a bid to squeeze them out the market.Qatar is dropping prices and pushing ahead with a $29 billion project to boost its exports of the fuel by more than 50%, stymieing the prospects of new plants elsewhere. It’s also established a trading team to compete in the nascent spot market and pushing into Asia more aggressively, according to people familiar with the matter.The strategy marks a shift for Qatar, which has barely raised production in the past five years and traditionally prioritized prices over market share. Increased competition, especially from the U.S. and Australia, has forced the Persian Gulf state to become more nimble and attract buyers in Asia, a hot spot for gas demand.The global transition to renewable energy is adding to the country’s sense of urgency. While LNG was until recently touted as a bridge from coal and oil to the likes of solar and wind power, it’s falling out of favor with some governments as they step up efforts to slow climate change.“Qatar’s expansion plan is so huge that there are questions on the need for other supply options,” said Julien Hoarau, head of EnergyScan, the analytics unit of the French utility Engie SA. “It’s still the number one, but the U.S. has never been so close, so Qatar needed to move if it wanted to keep its leading position.”The U.S. came close to overtaking Qatar’s monthly exports for the first time in April, while Australia has been neck-in-neck with the Middle Eastern nation for the last year, according to ship-tracking data compiled by Bloomberg. As Gulf Coast projects develop, the U.S. is slated to briefly become the world’s top supplier by 2024, before Qatar regains that status later in the decade, according to BloombergNEF.Several factors are playing into Qatar’s hands. China, one of the fastest growing LNG markets, has been reluctant to import more from the U.S. or Australia due to trade and geopolitical tensions.But Qatar’s main advantage is that it has the world’s lowest production costs thanks to an abundance of easy-to-extract gas, most of it contained in the giant North Field that extends into Iran.Bonds ComingQatar’s state energy company, which may soon sell up to $10 billion of bonds to fund the gas expansion, said the project will be viable even with oil at $20 a barrel, 70% less than current levels. LNG contracts are typically linked to oil.That’s enabling Qatar Petroleum to set pricing below what other exporters can manage, according to traders. The firm has sold LNG in recent months at around 10% of Brent crude prices, including to China and Pakistan, whereas it used to set the level at 15%.“Nobody can compete with Qatari costs,”…
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