Qatar’s plans to reclaim the LNG throne will make Middle East 2021’s global sanctioning epicentre

Qatar’s move to sanction the $30bn North Field Expansion project puts the country on track to return as the world’s largest LNG producer by 2030, according to a Rystad Energy report. Qatar’s liquefaction capacity will rise to 110mn t/y, or 18% of the global total, which is currently estimated at 600mn t/y at the end of the decade. More projects are expected to be sanctioned as LNG demand will grow faster than supply, says the market analyst.

Utilisation rates will not necessarily match the producers’ capacity in 2030. Rystad Energy expects Qatar’s production in 2030 to reach 107mn t/y, almost full capacity utilisation and about 22.5% of the so far global sanctioned supply of 476mn t/y at the end of the decade. The US, on the other hand, will likely produce 98mn tonnes of LNG by 2030, equivalent to a yearly utilisation rate of 91% of its total capacity. Australia is expected to see a significantly lower utilisation rate, averaging 86% of currently sanctioned capacity and producing about 76mn tonnes in 2030.

The North Field Expansion (NFE) project is also making the Middle East the world’s top region for oil and gas project sanctioning in 2021. Rystad Energy expects rising oil prices to trigger sanctioning of global projects worth about $100bn this year, of which the Middle East is set to contribute almost 40%, or $40bn.

More than 26 Middle Eastern projects worth a total of about $50bn have been delayed over the past year, with NFE making up the lion’s share as it was pushed to 2021. As this year got underway, the region had projects worth $98bn due for sanctioning from 2021 to 2023.

With NFE now sanctioned, further investment commitments largely depend on developments in the UAE, where ADNOC aims to boost oil and gas production capacity and has a $40bn project pipeline till 2025. In Saudi Arabia, the oil price downcycle has hit ongoing bidding processes and Rystad Energy estimates the giant Zuluf oil development, worth $12bn, will be sanctioned in 2023. Recovering prices are also expected to spur sanctioning activity in other parts of the region, especially in Oman, Iraq and Iran.

Among global LNG producers, Australia currently has the largest operating capacity of 88mn t/y but will be surpassed by Qatar and the US in the coming decade as new liquefaction capacity is commissioned. The only Australian project Rystad expects to reach a final investment decision (FID) in 2021 is Woodside’s 4.5mn t/y Pluto Train 2 project, which would be developed together with the Scarborough upstream asset.

The US currently has 107mn t/y of sanctioned LNG capacity, including 36mn t/y under construction. Port Arthur LNG, Driftwood LNG, Plaquemines LNG and Freeport T4 have all signed long-term contracts or secured equity from LNG buyers, but would still need new deals to secure financing and move forward.

Based on current sanctioning, Qatar is in the lead to be liquefaction capacity king in 2030, but there is a catch. ‘According to Rystad Energy’s base case, global LNG demand will reach about 580mn tonnes by 2030, leaving significant room for bringing new LNG projects forward. We forecast that 104mn t/y of new LNG supply must be sanctioned in the coming five years to meet the gap between actual supply and demand in 2030,’ says Sindre Knutsson, Vice President at Rystad Energy’s gas markets team.