x Abu Dhabi, UAEMonday 24 July 2017

Chance for Qatar in US gas glut

Qatar Petroleum (QP) could reconfigure its US import terminal to export gas in a bid to cash in on the US supply glut arising from the shale gas revolution, says Qatar's deputy prime minister.

The US, a long-time importer of gas, was a natural target market for Qatar untilfracking made the production of gas in deep rock formations commercially viable. Eddie Seal / Bloomberg News
The US, a long-time importer of gas, was a natural target market for Qatar untilfracking made the production of gas in deep rock formations commercially viable. Eddie Seal / Bloomberg News

Qatar Petroleum (QP) could reconfigure its US import terminal to export gas in a bid to cash in on the US supply glut arising from the shale gas revolution, says one of Qatar's prime ministers.

The multibillion-dollar facility was procured before the US began producing abundant quantities of natural gas from hydraulic fracturing - or "fracking" - a process used to unlock the gas in shale rock.

"I think yes, why not?" said Abdullah bin Hamad Al Attiyah, who is also a former chairman of QP, when asked whether QP's Golden Pass liquefied natural gas (LNG) regasification terminal in Texas would be converted.

"It's not very attractive to sell gas into the US market," Mr Al Attiyah said.

"The world needs a lot of gas, and I think [US] shale gas will play a role in that."

His comments came as QP's minority partners in the project enter discussions over exporting shale gas as LNG from Alaska, and the first conversion of an import terminal is drawing close.

With a production capacity of 77 million tonnes per year, Qatar is the world's largest exporter of LNG.

The US, a long-time importer of gas, was a natural target market untilfracking made the production of gas in deep rock formations commercially viable.

"People used to say that shale gas couldn't compete with natural gas … In my 40 years in the industry, I have learnt one thing: don't believe in forecasts," Mr Al Attiyah said at the Gulf Intelligence Forum held in Abu Dhabi this week.

Shale gas has pushed US domestic gas prices below the international average and has opened the door to the US becoming a gas exporter. A host of import terminals, built on the assumption of continued inflows, stand ready to be converted for export.

Converting a terminal involves the expensive task of adding cooling units to liquefy gas.

A terminal in Texas owned by Cheniere Energy is tipped to become the first facility to be repurposed, and the reconfiguration could be complete by 2015.

Last week, the three major gas producers in Alaska, BP, ConocoPhillips and ExxonMobil, announced that they were in discussions about building an LNG terminal to export the state's gas to the Asia-Pacific market.

"What we see is a strong, good Asian-Pacific market and that's where we think Alaska gas should go," said Jim Mulva, the ConocoPhillips chief executive. ExxonMobil and ConocoPhillips are QP's minority partners in the Golden Pass terminal, which became operational last March.

Golden Pass will not be used to ship Alaskan gas, and ambitions to export US gas could be hampered by the government's caution.

After approving Cheniere's terminal adaption, the US department of energy has initiated a study over the impact of the project on domestic gas prices. The department could stall on further permits until the study is complete, and the results could also prove prohibitive, said Mike Zenker, a gas analyst at Barclays Capital in the US.

The high cost of adding liquefaction units, and a limited demand for gas internationally, will restrict the number of export terminals in North America for the foreseeable future.

"We peg it at two, partly because there is not an unlimited appetite on the market to take volumes, and partly because of the limitations of putting projects together that are financeable," Mr Zenker said.

 

fneuhof@thenational.ae

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