Qatar’s ‘risky’ LNG ramp-up

Buyers of Qatari LNG could lobby for a 'risk discount,' one analyst said. (Reuters)
Updated 15 November 2017
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Qatar’s ‘risky’ LNG ramp-up

LONDON: Qatar’s decision to significantly expand output of liquefied natural gas (LNG) from the massive North Field in the Arabian Gulf carries significant risk, according to US-based research group Rapidan Energy Group.
Even though maritime routes through the Gulf, Strait of Hormuz and the Suez Canal have remained open to tankers carrying Qatari LNG in the wake of the dispute between Doha and some of its Arab neighbors, initial fears they could be closed will not be lost on potential buyers, said the consultancy’s New York director Leslie Palti-Guzman.
Speaking to Arab News, she said buyers could lobby for a “risk discount” on price as the standoff had exposed Qatar’s geopolitical and geographic vulnerability.
“At the end of the day, the LNG business relies on the safety of shipping lanes but there is diminished market confidence in Qatar,” said Palti-Guzman.
Qatar’s decision earlier this year to boost capacity to 100 million tonnes by 2022 would mean oversupplying an already glutted market — something that would probably keep down spot prices to about $6 per million British thermal units (mbtu), or perhaps even $5 per mbtu, she added.
Extra Qatari supply would also likely lead to lower global liquefaction utilization rates at soon-to-be launched facilities, making them less economic.
A decision to lift a 2005 moratorium on additional production from North Field was made before the standoff with other Gulf states, which erupted in June. But since then, Qatar has detailed an aggressive expansion strategy — one that was likely to be only “half successful,” said Palti-Guzman.
North Field currently accounts for nearly all of Qatar’s gas production and around 60 percent of its export revenue. On the basis of North Field reserves, Qatar has grown its LNG exports from 1.9 million tonnes in 1997 to a record 78.7 million tonnes last year, according to Platts.
A major challenge for Qatar is renewing 8 million-plus tonnes of expiring long-term LNG contracts.
“These days, buyers want flexibility and they want short-term. They are not looking for a 20-year long-term supply contracts; buyers will want to hedge in order have energy security,” said Palti-Guzman, alluding to Qatar.
The LNG market has become ferociously competitive. Not only is there a threat from US shale but also a significant challenge from Australia, trading houses and over-committed buyers which, like Qatar, are targeting potential customers in South Asia and the Middle East.
Additionally, new players such as India and Japan are up and coming, while in the Middle East, the Russians have been increasingly active.
Putin said earlier this year Russia wanted to be the world’s largest LNG producer. According to Russian media, Bahrain has been holding talks about buying LNG from Gazprom, Rosneft, or both.
While Qatar is currently the world’s largest LNG exporter and lowest-cost producer, it remains to be seen how well it can adapt to new market conditions.
One development that suggests it can is its involvement in an extension project at Golden Pass LNG terminal in Texas. The expansion would enable the facility to export LNG as well as take in imports. The venture is a partnership between Qatar Petroleum International and ExxonMobil affiliates.
Palti-Guzman said Golden Pass shows Qatar can achieve two goals. One is being able and willing to bypass the geopolitical risk around the Strait of Hormuz by having supply outside Qatar for the first time. The second would allow it to optimize its portfolio by opening up arbitrage opportunities between different global LNG markets.
“So there is a commercial aspect, but the main driver remains very strategic,” she said.
Less promising, Palti-Guzman said, is Qatar’s determination to stick to oil indexation and a reluctance to accept emerging Asian hub-based prices. That illustrates Qatar’s resistance, on some levels, to the gradual shift to flexible pricing — resistance that may have to be addressed in the not-too-distant future, she added.


Microsoft beats Wall Street targets on cloud services revenue

A Microsoft logo is seen in Los Angeles, California US, in this November 7, 2017 photo. (REUTERS)
Updated 20 July 2018
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Microsoft beats Wall Street targets on cloud services revenue

  • Revenue for the company’s LinkedIn business and job network grew 37 percent from the year-ago quarter, while its Dynamics 365 online business application suite posted a 61 percent increase
  • Net income rose to $8.87 billion, or $1.14 per share, from $8.07 billion, or $1.03 per share, in the year-ago fourth quarter

NEW YORK: Microsoft Corp. on Thursday posted quarterly profit and revenue that beat analysts’ estimates, as more businesses signed up for its Azure cloud computing services and Office 365 productivity suite.
The company’s flagship Azure cloud product recorded revenue growth of 89 percent in the fourth quarter ended June 30. Its shares rose nearly 4 percent in after-hours trading.
Much of Microsoft’s recent growth has been fueled by its cloud computing business, which has benefited from companies rushing to shift their workloads to the cloud to cut data storage and software costs.
“The combination of the cloud, which is a megatrend that’s going to last for years to come, and the execution, this is company that knows how to sell and be innovative — it’s hard to argue with anything here,” said Tom Taulli, InvestorPlace.com analyst.
Microsoft shares have risen 180 percent since Satya Nadella took over as chief executive in 2014, refocusing the company on cloud computing rather than PC software. Its market cap edged above $800 billion for the first time earlier this month.
Azure has a 16 percent share of the global cloud infrastructure market, making it the second-biggest provider of cloud services after Amazon.com Inc’s Amazon Web Services, according to April estimates by research firm Canalys.
Revenue at Microsoft’s productivity and business processes unit, which includes Office 365, rose 13.1 percent to $9.67 billion, topping analysts’ average expectation of $9.65 billion, according to Thomson Reuters I/B/E/S.
“This was another gem of a quarter from Microsoft as Nadella’s cloud vision is coming to fruit on the heels of massive Azure growth and secular tailwinds,” said Daniel Ives at research firm GBH Insights.
Revenue for the company’s LinkedIn business and job network grew 37 percent from the year-ago quarter, while its Dynamics 365 online business application suite posted a 61 percent increase.
The combination of those two services highlights Microsoft’s rise as an alternative to Salesforce.com Inc, which dominates the customer relationship management market, said Johnny Won, founder of Hyperstop, a tech consultancy firm.
“It seems like this is actually a formidable threat to Salesforce,” Won said.
Overall, the Redmond, Washington-based software maker’s revenue rose 17.5 percent to $30.09 billion, above expectations of $29.21 billion.
Net income rose to $8.87 billion, or $1.14 per share, from $8.07 billion, or $1.03 per share, in the year-ago fourth quarter. https://bit.ly/2uOF9W1
Excluding certain items, Microsoft earned $1.13 per share, while analysts had expected $1.08.