“With the development of Qatar, L.N.G. came of age,” says chief gas strategist at market research firm HIS, Michael Stoppard.
It started with a discovery by Royal Dutch Shell in the 1970’s. The world’s largest supply of natural gas was found in Qatar’s North field, but the quality of infrastructures and the level of demand was not enough to make this find profitable until 20 years later. And Shell was ready to come back for the supply.
Other investors such as Total, Exxon, and ConocoPhillips appeared to develop the field, but Shell’s influence still dominates the area today.
The company’s expansion into natural gas lead to Qatar developing a market around the commodity. Once a poor country with an economy based on fishing and pear diving, Qatar now has massive natural gas processing plants for collection and export.
Last year, Qatar produced nearly one-third of the world’s natural gas supply. Before the shale boom, that supply was to be sent to the U.S. and Europe. Now it instead goes to Asia: China, Japan, India, and South Korea.
This follows the trend of the oil market towards Asia, but with an added benefit: China is working towards a cleaner energy portfolio, and of the three main fossil fuels, natural gas is the cleanest.
It also gives Qatar a huge advantage in the market: a massive supply that can meet a massive demand.
Qatar has invested in equally massive physical assets to make this possible. First, the country has some of the largest and most advanced natural gas processing plants. One plant, the Qatargas 4, is about three-fifths of a mile wide.
The capacity this kind of plant offers means Qatar can not only produce in large quantities, but that it can offer that product at low prices. Qatar’s natural gas and LNG can be produced at about $2 per million British thermal units as opposed to the $8-$12 prices found in the U.S., Australia, and East Africa.
The size can also be seen in the LNG fleets. Shell-operated Al Rekayyat stretches 1,000 feet long and can carry about 217 thousand cubic meters or 7.7 million cubic feet of liquefied natural gas. That amounts to between $30 and $40 million worth in one ship.
Head of Shell’s global gas business Maarten Wetselaar says, “Even if you begged us on your knees for a slot, I don’t think in the next 12 months we could accept another cargo.” Qatari gas exported by Shell’s ships is clearly in high demand.
To continue reading…