Qatar will face problems in exporting liquefied natural gas (LNG) this year as its superior production and export facilities meet undeveloped import capabilities of consuming nations, analysts and a new market report say.
"If owners of Qatari LNG want to ship product to the US or other Atlantic Basin markets in one of the new jumbo Q-Flex or Q-Max tankers, they will find few terminals able to accommodate them this year or well into next," World Gas Intelligence (WGI), a subsidiary of energy information company Energy Intelligence said.
Qatar recently incorporated Q-Max vessels into its fleet. Each of these vessels holds up to 256,000 cubic metres of LNG. Once gasified this is equivalent to five billion cubic feet of gas.
LNG analysts say that this will particularly affect Qatar's need to deal in spot trade as its new trains begin production. Qatar is on its way to produce 77 million tonnes of LNG by 2012, which will be the highest production capacity in the world. Several of its trains are coming online in 2009, 2010 and 2011. The emirate needs to enter into spot trades as its long term contracts with East-Asia remain satiated.
"There are some conversions or planned conversions of regasification terminals to be able to accommodate these larger tankers, though there are obviously many places where they cannot go. The inability of terminals to accommodate the largest ships will impose some constraints on the LNG trade this year," said Nikos Tsafos, an analyst (upstream and gas) with PFC Energy.
Tsafos said the impact may, however, be subdued when Qataris resort to using smaller ships for transport. Besides, the Qataris also plan to use ship to ship transfer facility in future, he added.
The situation will bring new trouble to Qatar. LNG prices have fallen to a sixth of their value since their $25/MMBTU peak price in summer the last year, market feedbacks indicate. In a report titled "Swimming in natural gas", Francisco Blanch, a Merrill Lynch energy analyst recently said the supply of the clean fuel may outstrip its demand manifold this summer further plummeting its price to $0.70/ MMBTU. The main suppliers affected by Qatari vessels not finding proper accommodation abroad are partners in the various Qatari mega-projects coming on stream in the next two years, WGI said. "These are state Qatar Petroleum (QP), Exxon Mobil, Total, ConocoPhillips and Royal Dutch Shell. Although destination clauses in contracts have been eliminated, infrastructure considerations will restrict where the LNG can go."
Analysts say that since long term contracts for LNG ensured development of larger terminals in the East, it is the West that will face problems. "Only one terminal on the other side of the Atlantic Basin can currently handle the Q-Max tankers, either, and that is owned by Qatargas-2 partners QP, Exxon and Total," WGI said.
By mid-2010, and certainly by the end of 2012, many more terminals will have completed expansion projects to accommodate the bigger vessels, it added.
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