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Qatar Petroleum enters North American natural gas market

April 22, 2013
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LNG tanks
At present Qatar is the world's largest LNG exporter, with an export capacity of around 78 million tons per year (mtpa).

The dramatic increase in shale gas output in the United States in recent years has transformed the domestic energy sector but it has also had far-reaching implications in global markets. Many countries have had to adjust their policies to reflect this change and a number of major players have had to take a step back and reconsider their moves.

One of these is Qatar, which used to see the United States as a lucrative market for its liquefied natural gas (LNG) exports. However, the fact that the country started producing its own natural gas to meet its needs meant that importing LNG from Qatar was no longer necessary. Since Qatar Petroleum did not want to leave the North American market altogether, it had to shift its focus and plan a different strategy.

So, instead of delivering natural gas to North America, Qatar Petroleum is going to start its own E&P operation there. This has been confirmed by the announcement that Qatar Petroleum and its MOU partner, Centrica, have acquired Canadian assets worth $1 billion from Suncor Energy.

Changed geopolitical landscape

The deal grants Qatar Petroleum a 40 percent ownership of the assets, located in three Canadian provinces, including British Columbia, where Kitimat has the potential to turn into a major LNG exporting hub over the next few years, Energy Business Review pointed out.

A more detailed look at where Qatar Petroleum stands on the world's energy map reveals just how significant this move is. At present Qatar is the world's largest LNG exporter, with an export capacity of around 78 million tons per year (mtpa) and all of it is operated by Qatar Petroleum.

The country's nearest rivals export less than half of that amount. Indonesia is the second largest exporter but its capacity reaches 34 mtpa, followed by Malaysia at 24 mtpa and Australia at 23 mtpa. All these countries have been trying hard to close the gap with Qatar. Australia, for example, has launched a major project to boost its natural gas industry by 2020.

Wasted efforts

However, these plans are starting to go to waste, as a number of key projects are being cancelled or delayed for different reasons -- mostly due to a lack of skilled workers and a sharp increase in projected costs. One of the projects, Chevron's Gorgon LNG project, is estimated to cost $50 billion. Meanwhile, plans in emerging markets that could potentially export LNG, such as Mozambique, are not likely to be implemented in the near future, so Qatar looks to be unthreatened in its position as the global leader of gas exports. Yet it still moved into the North American market.

Since Qatar Petroleum relied on the North American market for a significant part of its profit, it had to act quickly to try to offset closing export opportunities. While its Canadian venture seems to be a good solution, Qatar Petroleum will not stop there. Together with partner ExxonMobil, the company has submitted plans to convert its 15.6 mtpa import facility in Texas into an export terminal of the same capacity, in an effort to make up for some of the shortfall by profiting on U.S. exports in the future.

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