Qatar LNG Production Capacity to Increase to 77 Million Tons of LNG per Year by End of 2010

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Researched by Industrial Info Resources (Sugar Land, Texas)--The relatively small Middle Eastern country of Qatar is set to begin producing 77 million tons per year of liquefied natural gas (LNG) by the end of this year. This production capacity will be by far the largest in the world. Qatar's LNG production capacity has increased greatly from its production total of 38 million tons per year in 2008 and its capacity rating of 54 million tons per year in January 2010.

The completion of three new LNG production trains this year and the ramping up of production from recently completed trains will close the gap between 54 million and 77 million tons per year of LNG production. Qatar Liquefied Gas Company Limited (Qatargas) (Doha, Qatar) will be completing the company's Train 6 in June and Train 7 in September 2010. Both trains will have a production capacity of 7.8 million tons per year. Qatargas completed trains 4 and 5 last year. These trains each have a capacity 4.7 million tons per year and are fully operational. Ras Laffan Liquefied Natural Gas Company (RasGas) (Doha) plans to start up its final LNG production train this year. This expansion will complete RasGas's rapid growth to one of the world's premier LNG companies after making its first LNG shipment in 1996. Contributions by both RasGas and Qatargas helped push the economic growth in Qatar to approximately 11% in 2009.

Global demand for LNG in 2010 is expected to be 197 million tons, which is an increase of approximately 25 million tons per year over 2009, but less than the expected 209 million- to 241 million-ton increase that was predicted before current global economic conditions.

If the demand for LNG remains at 197 million tons, then Qatar will be the supply source for 39% of the world's LNG, if all of the country's LNG production capacity is fully utilized. One of the results of this lowered demand was that RasGas placed new projects in a holding pattern while watching global developments and studying the effects of the rapid development of the North Field, the world's largest known reservoir of conventional natural gas, with an estimated 900 trillion cubic feet of reserves and the source of its LNG.

Qatar is currently targeting China and India for future long-term growth in the demand of LNG and is making inroads in Taiwan, South Korea and Japan, all of which have mature LNG markets. In 2007, the Asian market accounted for approximately 112.7 million tons of demand per year of LNG. Japan, South Korea and Taiwan top the list of Asian countries that import LNG.

China's largest offshore oil producer, CNOOC Limited (NYSE:CEO) (Hong Kong), signed an agreement in 2009 to increase its LNG purchases from Qatar to meet China's future long-term domestic demand. China, which received its first LNG cargo in 2006, plans to construct more than 10 LNG receiving and regasification terminals on its eastern coast to meet the Chinese government's target to double the use of cleaner burning natural gas in place of other fossil fuels. In 2008, in order for Taiwan's state-run CPC Corporation (Taipei) to secure LNG supplies, the company purchased a 5% stake in RasGas's LNG Train 5, which came online in 2009. CPC has an existing contract of 3 million tons per year from RasGas, but Taiwan's demand for LNG is expected to increase from 9.4 million tons in 2008 to 16 million tons in 2010.

In 2010, Qatar is expected to supply Japan with 11 million tons of LNG, up from 6 million tons per year in 2009. Qatar plans to become Japan's largest supplier of LNG by doubling shipments to the resource-poor island nation by the end of 2010. This relieves the pressure on Japan's securing new supplies of LNG at a time when Indonesia, which is Japan's top supplier of LNG is considering cutting shipments to Japan in half during 2010.

This comes at a time when Japan and Russia are still at odds over the production destination of LNG produced on the island of Sakhalin. Japan, which is the world's largest importer of LNG, is estimated to have imported 65 million tons in 2009. Only a few years ago, Japan sourced approximately 50% of its supply from Indonesia, Malaysia and Australia, while Qatar accounted for only 11% of Japan's supply. Japan now purchases approximately 70% of Qatar's oil and will add Qatar as its largest supplier of LNG.

Japan has reciprocated in several ways for this arrangement. Japan signed several financing agreements for projects to be located in Qatar. Most of this capital has flowed from Japan's Bank for International Cooperation, which is rumored to have signed several financial agreements with Qatar Petroleum Corporation (Doha). Qatar increased its LNG exports to South Korea to 7 million tons in 2009 and is exporting 7.5 million tons per year to India. Qatar considers India to have a great deal of potential when it comes to future LNG growth markets.

All of Qatar's LNG is produced by RasGas and Qatargas, which are in turn majority-owned by Qatar Petroleum Corporation.

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