All Qatari LNG trains are up and running again, following a comprehensive maintenance schedule during the second quarter this year, according to comments from its two main production and marketing companies RasGas and Qatargas. The news comes as some market tightening in the global LNG spot market was reported, leading spot prices in Asia to almost reach US$8/mmBtu.
“I can confirm that all RasGas trains are fully operational,” a spokesperson for RasGas told Reuters, immediately fuelling market fears that the overall remaining weakness in global LNG demand would be exacerbated and that spot prices would be put under pressure.
IHS Senior Middle East Energy analyst Samuel Ciszuk’s note on energy developments follows:
Despite short-term spot price fluctuations, the global LNG market looks oversupplied this year, given weak demand in Europe and diminishing U.S. gas import demand due to the North American shale gas boom. This has given rise to rumours about Qatari price-founded production shut-ins made to strengthen markets—similar to OPEC’s efforts to rein in oil production in order to strengthen prices.
Such notions forget a few key differences, however. There is no good business reason for Qatar to take it upon itself to rein in production and risk losing market shares to its competitors, without making sure that they share the burden equally. Even so, Qatar is only now completing its rapid LNG production capacity ramp-up, in effect making it eager to take more market share from its competitors (meaning that its interest in co-ordinating production cuts is minimal for the moment), while trying to undercut them where possible on prices might be tempting (although the lion’s share of Qatar’s gas is sold under long-term contracts).
Also, Qatar is able to produce LNG more cheaply than almost all others, given the vast amounts of associated condensate produced from its North Field gas deposit, which goes a very long way towards paying for the operation of its liquefaction trains in itself. All these points make Qatar rather disinterested in cutting back its own production—alone or together with its competitors—and also gives the emirate a very low price sensitivity compared to its LNG-exporting peers.
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