London (Platts)–03Dec2018/859 am EST/1359 GMT

     Qatar’s decision to become the first Middle East member country to leave OPEC and focus on its core strength of gas exports has stunned the cartel. Qatar’s energy minister Saad Al-Kaabi said Monday that the gas-rich sheikhdom will exit the oil producer group on January 1 after 57 years of membership to concentrate on building its position as the world’s top LNG supplier.

     OPEC is scheduled to meet on December 6-7 and potentially agree to cut output to support falling prices. S&P Global Platts Analytics forecasts a 1.2 million-1.4 million b/d reduction from October levels.

     “This suggests that Qatar may have an agenda to raise production whilst others in OPEC are curbing production, although Qatar’s oil output has been very steady in recent years with limited prospects of increases (given maturing fields),” said Ehsan Khoman, Head of MENA Research and Strategy at MUFG.

     The following are the key facts around Qatar’s energy repositioning.

    

     TRADE FLOWS

     **Qatar Petroleum plans to raise its total production to 6.5 million b/d of oil equivalent (boe/d) in the next decade, from around 5 million boe/d at present.

     **A relatively small crude producer within OPEC, Qatar pumped just over 600,000 b/d last month. This accounts for less than 2% of OPEC’s production, according to an S&P Global Platts survey. Its three main crude grades are Al Shaheen, Qatar Marine and Qatar Land, which are shipped almost exclusively to refiners in Asia/Far East.

     **Al-Shaheen is its largest field, pumping around 300,000 b/d of medium-heavy, sour crude.

     **Qatari condensate, natural gas liquids and non-conventional output — mostly from the North Field – averaged around 1.24 million b/d in 2017. This is the second largest non-crude OPEC output behind Saudi Arabia, according to the International Energy Agency. The IEA estimates Qatar’s non-crude liquids output will increase by 70,000 b/d to above 1.30 million b/d by 2023.

     **Adding in natural gas, supplied to its neighbors by pipeline and globally as LNG, which amounts to around 3.2 million boe/d, and the nation’s output rises to the equivalent of 5 million boe/d.

     **Qatar is the world’s largest LNG supplier, having exported 78.8 million mt of LNG in 2016. This accounts for more than 30% of a total global supply of 257.8 million mt. An increasing share of its production is being delivered to emerging Middle Eastern buyers, including Egypt and Jordan. Qatar has been exporting about 300 million cu m/d of LNG so far in 2018.

     **Doha plans to boost LNG output to 110 mt/year by 2024 by adding liquefaction capacity. In 2018, Qatar contracted 35.6% of its LNG to Europe, 56.9% to Asia Pacific, 21.6% to the Middle East, with the rest to North America and unknown destinations, according to S&P Global Platts LNG Navigator.

     **Saudi Arabia and the United Arab Emirates have maintained a political and economic boycott on Qatar since June 2017, accusing it of supporting terrorism. Doha denies the charges and says the boycott is aimed at impinging on its sovereignty. Qatar insists the move to leave OPEC is a strategic, not a political decision.

    

     PRICES

     **Oil prices have plunged 30% since peaking at $86/b on October 3. Markets cooled in Monday trade after surging more than 5% on news of improving US-China trade relations over the weekend. Commerzbank said in a research note that “it remains to be seen whether Qatar will sign up to the production cuts even as a non-OPEC member. Qatar recently produced 610,000 b/d and contributed 38,000 b/d to the production cuts.”

     **LNG prices remain under pressure amid warmer temperatures in the Northern Hemisphere, with more warm winter months projected in the world’s top three LNG importing countries — Japan, China and South Korea. The downward trajectory in oil prices is also weighing on LNG, especially spot prices in Asia, which represents nearly three-quarters of all global LNG demand.

    

     INFRASTRUCTURE

     **Qatar supplies 2 Bcf/d of gas to the UAE and Oman via the Dolphin pipeline. With a capacity of 3.2 Bcf/d, it is the only pipeline transporting natural gas across borders between Arabian Peninsula countries.

     **In the summer, gas deliveries through the pipeline are augmented on an intermittent basis. Excess gas supplies often become temporarily available from Qatar Petroleum in summer due to seasonally depressed LNG demand.

     **Qatar Petroleum plans to develop a new gas project in the southern sector of the North Field. The company has entrusted Qatargas to execute this megaproject. In January, Qatar merged its two LNG producers — Qatargas and RasGas — under a single operator, Qatargas. Its shareholders include Qatar Petroleum, ExxonMobil, Total, ConocoPhillips, Shell, Mitsui and Marubeni.

     **The company announced in 2017 that a self-imposed moratorium on developing the North Field, the world’s biggest natural gas field, had been lifted after more than a decade. Qatar declared a moratorium in 2005 on development of the North Field, at the time saying it needed time to study the impact on the reservoir from a rapid increase in output.

     **Qatar’s huge offshore gas and condensate field, known in that country as North Field, straddles its maritime border with Iran, which calls the field South Pars. Together, the two sides of the field contain as much as 1.4 Tcf of proven gas reserves, making it the world’s largest conventional non-associated gas field. Abu Dhabi is reliant on North Field gas.

     **Total also has a 20% interest in the upstream portion of the Qatargas 1 LNG consortium and is a partner in Qatar’s Laffan refinery, which processes natural gas condensate, and will participate in a project to double processing capacity to 300,000 b/d.

     **Doha also plans to build the largest ethane cracker in the Middle East. Qatar is investing in chemical and industrial plants to diversify its exports away from oil and liquefied gas.

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