The current energy market crisis could benefit Qatar and fuel a second gas boom, PwC said in a report, as cited by the Gulf Times.
The world’s top exporter of liquefied natural gas three years ago surprised markets by lifting a drilling moratorium from the offshore North Field, which it shares with Iran. In 2019, Qatar then said it would boost LNG production from 77 million tons currently to 126 million tons by 2027. The decision seemed to be motivated both by growing demand for LNG and also growing competition, notably from Australian and U.S. projects.
In February this year, the country decided to delay the North Field expansion amid the slump in LNG prices driven by a global oversupply, but the plan through 2027 remained. Now, Qatar is set to benefit from this glut.
“The most important economic development in many years was the surprise announcement by Qatar Petroleum in November that new appraisals had extended estimates of both the geographic scope and volume of North Field,” PwC said in its report. As a result of these new appraisals, the North Field—the largest gas field in the world—has been found to extend onshore as well, with reserve estimates doubled to 1,760 trillion cu ft of gas and 70 billion barrels of condensates.
Meanwhile, many private companies, especially in the United States, are being forced to delay the construction of more LNG capacity because of the price depression. Some projected facilities may never see the light of day unless gas prices improve soon. Against this background, Qatar will win more market share as the competition shrinks, as it remains the cheapest LNG producer.
“Even at current production levels, analysis from the IMF and ratings agencies give Qatar the lowest breakeven oil price in the region and the Minister of Finance has said the breakeven price should fall further to under $40 after 2022, even before the new LNG capacity comes online,” PwC analysts said in the report.
By Charles Kennedy for Oilprice.com
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