New Articles

Qatar’s Strategies Towards Building a Sustainable and Resilient LNG Supply Chain

LNG supply chain

Qatar’s Strategies Towards Building a Sustainable and Resilient LNG Supply Chain

According to Exxon Mobil’s Outlook for Energy (2017), the global market for natural gas (NG) should expand by around 45% over the next 20 years with demand for liquefied natural gas (LNG) expected to grow by more than 2.5 times within the same period. Acknowledged as a low carbon-intensive fossil fuel, natural gas is a cleaner, environmentally-friendly, and sustainable option for energy transition that reduces the use of high carbon-intensive fossil fuels, such as coal and crude-oil distillates. Natural gas is also ideal for increasing energy efficiency on the basis that energy release per mass during NG combustion is the highest amongst fuels (fossil- and biomass-based). Moreover, the amount of energy produced from renewables cannot supply global demands for a complete replacement of fossil fuels.

Accordingly, the LNG market is becoming highly competitive with more than 20 countries already supplying customers around the world. Major suppliers currently include Qatar, Australia, Malaysia, Russia, United States, Nigeria, Indonesia, Algeria, Egypt, to name but a few. Increased capital expenditure in the sector is coming and new LNG players are expected to enter the market in the years ahead. These include countries around the Eastern Mediterranean; the United States Geological Survey (U.S. Geological Survey Fact Sheet 2010 – 2014) estimates that the Levant Basin (involving Cyprus, Egypt, Israel, Lebanon, Palestine, and Turkey) contains 122.4 trillion cubic feet of technically recoverable gas.

In such a competitive environment, Qatar managed to maintain its position as the largest LNG exporter in the world (at 77.8mn tons) in 2019 (2020 World LNG Report), and is massively investing to preserve its role as the main global player. Qatar’s future strategies not only include the expansion of production capabilities by around 64% by 2027 to reach 126 million tons of LNG per annum (The Peninsula Qatar, 2019), but also its shipping capabilities through investment in a new fleet of LNG carriers. For instance, on June 1 this year, Qatar Petroleum announced the signing of the largest LNG shipbuilding agreement in history to secure more than 100 ships valued in excess of QR 70 billion to cater for its LNG growth plans (The Peninsula Qatar, 2020). Additionally, Nakilat, the shipping arm of Qatar’s LNG, will significantly increase its current 15% share of the global LNG fleet carrying capacity and will remain the largest owner of LNG carriers in the world for the coming decades.

This strategic investment will propel Qatar from being the world’s largest LNG exporter and producer to a globally-recognized champion of LNG supply chains. As things stand, an LNG supply chain commonly consists of three main links: exploration and production; treatment and liquefaction; and shipping and distribution. Expanding shipping capabilities will definitely strengthen the third link of Qatar’s LNG supply chain, whereas the first two links are already very well established.

By owning and controlling the whole LNG supply chain, Qatar has acquired a significant competitive advantage and moved further ahead of the competition in the LNG market. For instance, by owning independent shipping capabilities on top of well-established production and liquefaction facilities, Qatar will be better prepared and ready to respond to future unexpected risk events. Crucially, the country will also be able to recover quickly from any potential disruptions.

Accordingly, Qatar is building one of the most effective and resilient LNG supply chains in the world. The resilience of the country’s LNG supply chains will also increase international buyers’ trust and confidence in Qatar as a reliable LNG exporter. This reputation will in turn consolidate Qatar’s actual portfolio and help earn new market share. Being seen as a reliable supplier is extremely important in a business environment driven by oil-indexed long-term contracts of 15-25 years. Moreover, being the largest owner of LNG carriers in the world will provide Qatar with a huge competitive advantage in the spot and short-term markets. For instance, the LNG market was traditionally dominated by long-term contracts covering 20-25 years. However, thanks to the emergence of new suppliers and consumers, spot market purchases of LNG have also become a common practice. Indeed, spot and short-term LNG trades made up 32 percent of overall import volumes in 2018 (EnergyWorld, 2019) and are expected to rise over the coming years.

To sum up, by expanding its LNG shipping capabilities on top of its well-established production and liquefaction facilities, Qatar is building a holistic, efficient and resilient LNG supply chain. This will provide the country with a unique and significant competitive advantage in a highly competitive LNG business landscape.

__________________________________________________________________

Dr. Adel Elomri and Dr. Brenno Menezes are Assistant Professors at the College of Science and Engineering, Hamad Bin Khalifa University.

       

This article is submitted on behalf of the author by the HBKU Communications Directorate. The views expressed are the author’s own and do not necessarily reflect the University’s official stance.

Trade Group Urges DOE to Speed LNG Export Applications

Los Angeles, CA – Despite its recent approval of a pair of major liquified natural gas (LNG) export operations, the US Department of Energy (DOE) needs to speed-up the process of green-lighting a number of other proposed LNG projects, says the American Petroleum Institute (API).

Charging that “dozens of other permits still face lengthy delays,” the trade group is urging the White House “to accelerate this process and work with leaders in Congress who have shown they are ready to strengthen America’s position as an energy superpower,” according to the industry group.

Both Sempra Energy’s Cameron LNG project in Louisiana and the Carib Energy LLC project in Florida were cleared for LNG exports to countries like those in the European Union that don’t have a free-trade agreement with the US.

The Federal Energy Regulatory Commission granted the $10 billion Cameron project a construction license in June after it was issued a conditional export permit by the Energy Department earlier in the year. Its Louisiana facility will be able to export up to 1.7 billion cubic feet of natural gas a day for up to 20 years.

The Carib Energy project was approved under a new process that allows the DOE to issue decisions on applications only after federal environmental reviews are completed.

An environmental review was waived for Carib Energy, a subsidiary of the Crowley Maritime Corp, because the exports would be coming from an existing natural gas liquefaction facility that’s already undergone the necessary assessments.

Carib’s operation would move up to 0.04 billion cubic feet a day of gas in ISO-certified LNG shipping containers to countries in the Caribbean and Central and South America.

09/25/2014

Sempra LNG Export Terminal Gets Green Light

San Diego, CA – The Federal Energy Regulatory Commission (FERC) has given Sempra Energy subsidiary, Cameron LNG, permission to site, construct and operate a natural gas liquefaction and export facility at the site of the company’s LNG (liquefied natural gas) receipt terminal in Hackberry, Louisiana.

The FERC permit is one of the last major regulatory approvals required to start construction on the $9 billion to $10 billion natural gas liquefaction facility.

The authorization approves the development of the three-train liquefaction facility that will provide an export capability of 12 million tons per year of LNG, or approximately 1.7 billion cubic feet per day (Bcfd).

The agency also authorized a subsidiary of California-based Sempra Energy to construct a 21-mile, 42-inch natural gas pipeline expansion of the Cameron Interstate Pipeline, new compressor station and ancillary equipment that will provide natural gas transportation for the liquefaction facilities.

Earlier this year, Cameron LNG was awarded conditional approval from the U.S. Department of Energy (DOE) to export LNG to countries that do not have free trade agreements with the US, including Japan and European nations.

Subject to a final investment decision to proceed by each party, the finalization of permits, project financing and other conditions, Sempra Energy will have an indirect 50.2-percent ownership interest in the Cameron LNG operation and the related liquefaction project.

The remaining portion will be owned by affiliates of GDF Suez S.A., Mitsui & Co Ltd., and a joint venture headed by the Mitsubishi Corporation.

“The liquefaction project is an international collaboration with our partners from Japan and France to create a world-class facility to deliver reliable LNG supplies for more than 20 years to some of the largest LNG buyers in the world,” said E. Scott Chrisman, vice-president of commercial development for Sempra LNG and project leader for the Cameron LNG liquefaction project.

06/20/2014