Analysis: Qatar's LNG delays affect 2010 forecast

IHS's Samuel Ciszuk said the Barclays report reassesses the bringing onstream of the Qatargas III, Train 6 facility which is likely to be started up d

Barclays Capital has downgraded Qatar’s estimated total LNG production forecast for 2010 by as much as 27% owing to a large number of maintenance stoppages in the first half of the year and the delay of two LNG mega-trains. Bloomberg reported a research note from the bank’s New York-based analysts as saying "The delayed start up of two key liquefaction facilities should push growth into 2011…in our view, global LNG markets will be adequately supplied in 2011, but unlikely to run into an oversupply train-wreck".

IHS senior Middle East energy analyst Samuel Ciszuk said that importantly, the report reassesses the Qatari schedule to bring its penultimate LNG mega-train onstream by November, saying that the Qatargas III, Train 6 facility is more likely to be started up during the first quarter of 2011. “Qatargas had announced success in rolling back much of the delays suffered during the contracting market’s overheating in 2006–08,” he said. “Consequentially, Barclays Capital estimates that the last mega-train, Qatargas IV, Train 7, will not come onstream before the second quarter of 2011.”

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Added to the resulting lower production is the large number of shut-ins during the first half of this year, which—according to IHS figures—is likely to have lowered total output by as much as 10%.

Last month, Qatar's Deputy Prime Minister and Minister of Energy and Industry and Chairman of Qatar Petroleum (QP) Abdullah bin Hamad Al Attiyah said that Qatar’s production capacity of LNG will soon reach 77 million tonnes per annum (mtpa), adding that the sixth and seventh production lines of Qatargas are expected to begin production in the “very near future”.

Significance

According to Ciszuk, as the Barclays Capital estimate indicates, the Qatari LNG ventures have been managing their market presence carefully, choosing to schedule maintenance work when gas markets have been weak, and to some extent reducing efforts to catch up on the yet-to-be-commissioned trains.

“At the same time the emirate’s production capacity has been high enough to allow it to supply all actual demand and raise its market share in some key competitive markets such as Europe—it has not played market regulator and cut production in order to prop up prices,” said Ciszuk.

“That is in line with its overall strategy, based on having some of the market’s lowest production costs—and consequently some of its highest margins.”

Ciszuk added: “Notably, Barclays Capital’s estimate that global gas markets will be adequately supplied in 2011 also seems to be a vote of confidence in the ability of Qatar’s two LNG producing ventures—Qatargas and RasGas— to plan their market positioning ultimately in their own best interest.”