$13bn Qatargas 2 online today
Posted on 06 April 2009 with no comments from readers
The world’s largest liquefied natural gas project, the $13 billion Qatargas 2, is being inaugurated today and will be supplying up to 20 per cent of the UK’s gas requirements as its own natural gas is exhausted.
Will the global economic crisis undermine the business plan behind this massive project? Gas prices are linked to oil prices and are likely to fall as major economies reduce their demand for energy.
Long-term contracts
However, LNG is sold mainly on long-term contracts, although there is also a spot market. This makes investment in LNG infrastructure a more predictable business model than oil.
Besides as Qatargas CEO Faisal Al Suwaidi told the Financial Times the crisis means that new gas projects around the world are likely to be delayed, and that should result in a ‘big supply gap’ in five years time.
Indeed, the biggest sources of new supply are going to be Qatargas 2, and Qatargas 3 and 4 due to come online later this year. Qatargas 3 and 4 will supply the US and European markets.
Energy giants like Shell see LNG as the fuel of the future because it is a clean and environmentally friendly fuel available at relatively low cost. Qatar has plans in place to boost its LNG output from 31 to 77 million tons by 2012.
Mr. Al Suwaidi admits to short-term concerns about gas prices in the global economic recession but says that ‘in the longer term the fundamentals are the same’.
Moratorium on expansion
Qatar has placed its own moratorium on developing new projects in the North Field – the world’s largest natural gas reserve – because of ‘delays in completing a study into the field’s reservoirs’ which sounds a handy excuse for holding back spending plans.
So even the mighty Qatar is bending to the downturn in global economies. If global oil prices were still at the level of last summer perhaps those studies would be hurried up.
However, the bankers who have funded the expansion of the LNG sector in Qatar will note a realistic approach to business expansion that bodes well for the future.
