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29 March 2024

Low prices don't affect Qatari gas profits

Gas prices low despite strong recovery in 2009. (AFP)

Published
By Nadim Kawach

A sharp decline in global gas prices over the past two years is a source of concern to Qatar but it will not affect profitability of the Gulf country’s mammoth gas projects, according to a key Saudi bank.

Despite their strong recovery in 2009, gas prices are still far below their level during 2008 mainly because of oversupply in the world market and a massive increase in unconventional gas output in the US from shale deposits, the Saudi American Bank Group (SAMBA) said in a study.

“While oil prices have enjoyed a strong recovery from their 2009 lows, gas prices continue to be subdued reflecting the excess supply on the market as a result of weaker demand and the dramatic increase in unconventional gas production in the US from shale deposits,” SAMBA said.

Its figures showed average gas prices for the year to date currently stand at around $4.65 per million BTU (British Thermal (Unit).

Although up 11.8 per cent on the 2009 average, this is still considerably below the $10 per million BTU highs of 2008 and $6.30-7.50 per million BTU averages for 2006 and 2007, according to the study.

“Lower gas prices are a concern for Qatar, particularly as it works to bring on stream two remaining 7.8 million tonnes per year LNG mega-trains, but do not affect the overall profitability of its operations,” it said.

“The cost of getting LNG to market is reported to be less than $2 per million BTU, and analysts believe that Qatar can still penetrate the United States market at prices around $3.30 per million BTU.”

In addition, the associated condensate (NGL) production from the LNG plants helps make them profitable, particularly with oil prices holding at $70-80 a barrel. “Recent data shows that Qatar’s NGL output has averaged 822,000 barrels per day through June, an increase of 14 per cent over

the 2009 average and further large increases are in the pipeline. By 2011, Qatar’s NGL output is estimated to be running at over one million bpd.”

NGLs are components of natural gas that are liquid at surface in field facilities or in gas- processing plants. Natural gas liquids can be classified according to their vapor pressures as low (condensate), intermediate (natural gasoline) and high (liquefied petroleum gas) vapour pressure.

NGLs include propane, butane, pentane, hexane and heptane, but not methane and ethane, since these hydrocarbons need refrigeration to be liquefied.

Qatar controls the world’s third largest natural gas deposits after those in Russia and Iran. They are estimated at around 900 trillion cubic feet and are concentrated in the enormous offshore North Field.

Qatar, a small OPEC oil producer, launched mega LNG projects in early 1990s to tap the North Field, the world’s largest single reservoir of non-associated gas.

The country is targeting LNG production of around 77 million tonnes by the end of 2011 but it has not ruled out more projects in the future, depending on demand.

The steady and rapid rise in LNG sales turned Qatar into one of the wealthiest nations in terms of GDP per capita income and allowed it to record large fiscal and current account surpluses.

The country’s economy has also recorded one of the highest growth rates in the world over the past few years.

State-owned Qatar Petroleum, which manages the nation’s hydrocarbon resources, has approved a staggering QR145 billion (Dh147 billion) for oil and gas projects in the current five-year plan ending in 2013.

The investments include around QR23 billion in crude oil capacity expansion, QR61.8 billion in LNG projects, QR16.1 billion in petrochemicals, QR18.9 billion in energy industrial cities and the rest in refining and gas processing.

Oil expansion projects are expected to boost Qatar’s crude production capacity from around 844,000 barrels per day at the end of 2009 to 1.055 million bpd at the end of 2010, according to the study.

Qatar’s LNG production peaked above 40 million tonnes in 2009 and output is projected to hit the 77-million-tonne target by the end of this year or in early 2011 to allow Qatar to maintain its position as the largest LNG supplier in the world after overtaking Indonesia three years ago.