Why Australia leads Qatar as the world largest LNG supplier
This winter, the liquefied natural gas (LNG) market experienced a different focus as US gas exports were challenged by weaker Asia demand. That kept the global LNG market under pressure and led to weaker prices than previous winters.
At the same time, LNG shipping data shows that lately Australia has beaten Qatar as the world largest LNG supplier. Australia now produces 83 million tons per year of nameplate liquefaction capacity, versus Qatar’s 77 million tons per year. Moreover, Australia still has more room for near-term production upside.
Ship-tracking data from Reuters indicated that Australia exported 97 LNG cargoes, or around 6.58 million tons, in November 2018, and Qatar 82 cargoes, or 6.31 million tons.
Qatar's November exports decline on a month-on-month basis was attributed to planned maintenance.
Australia is already on the path to regaining the role of largest LNG exporter from the summer of 2019, when the Prelude and Ichthys floating liquefied natural gas (FLNG) facilities will be fully ramped up.
Qatar does not offer flexible LNG contracts as it imposes destination restrictions selling to end users only to ensure the LNG is not resold or traded afterward in order not to affect its market share.
China will likely be key to determining Australia’s exports over the next five or six years, before the upcoming Qatari expansion makes itself felt.
Australia will benefit more than Qatar from the strong Chinese demand growth with lower shipping costs.
China imported 17.4 million tons of Australian LNG in 2017, 10 million tons more than it bought from Qatar. Over the first 10 months of this year, it imported 18.4 million tons from Australia and 7.6 million tons from Qatar. Most of Australia's LNG exports reach the strong LNG markets in the Asia-Pacific region and India, while Qatar’s location cannot help with the Australian competition except on sales to Europe and Latin America.
Australia’s ascent to the top may push Qatar to come up with a different marketing strategy to regain the title of top world LNG exporter.
Although Qatar was the largest LNG exporter in 2016, Doha's marketing strategies failed to compete with Australia and the US, which both added significant supplies to the global LNG market.
Australia is now becoming an increasing threat to Qatar’s position in the Asia-Pacific, while Qatar has lost the dominance of LNG market share to new supplies coming online, primarily from Australia, that meet the increasing demand from China and India.
One of the biggest challenges that Qatar now faces is its own LNG marketing strategies that cannot be overcome because its LNG is priced off crude oil at relatively high offsets.
Moreover, Qatar does not offer flexible LNG contracts as it imposes destination restrictions selling to end users only to ensure the LNG is not resold or traded afterward in order not to affect its market share.
With the changes in LNG supply and demand dynamics, Qatar is not considering adopting new marketing strategies to overcome those marketing challenges.
Hence Qatar will be losing huge market share in high-demand regions for LNG, and will not have room to place its new output coming during the medium term.
• Faisal Mrza is an energy and oil marketing adviser. He was formerly with OPEC and Saudi Aramco. Twitter:@faisalmrza