Qatar is poised with a “lose-lose” situation as the global gas markets face their own turmoil, amid weak demand, low prices and high storage levels.
According to a Bloomberg report earlier this week, the world’s largest LNG exporter may soon have to choose between curbing production or igniting a battle for market share.
“Qatar stands to lose no matter which choice it makes,” the report said.
That’s because if the country continues to increase production and flood the market, prices will continue to decline and government revenues from LNG sales will shrink. A production cut could also enable Australia to overtake Qatar as the world’s No 1 LNG exporter, Kallanish Energy notes.
If it chooses to slash prices to secure market share, similar to what Saudi Arabia did in the oil markets, Qatar could exacerbate the crash in prices. This could lead to negative LNG prices, similar to what happened in the U.S. last month — when traders and producers were paying buyers to take their WTI futures contracts.
Gas storage capacity is already an issue in Europe, with stocks higher than expected at this time of the year.
Qatargas, the state gas company of Qatar, currently operates 14 LNG trains with a total production capacity of 77 million tonnes per annum. The company is undergoing a massive expansion project, which will increase capacity to 126 Mtpa by 2027.
This post appeared first on Kallanish Energy News.