The industry has recently seen the European gas demand rebound following a previous downward trend. The question being asked now is, what are the drivers of this and will they continue?
Keen to hear more about LNG imports into Europe and exactly how the Asian market development will impact not only pricing but availability too, Gastech Insights spoke with Sheikh Mohamed Althani, Chairman of Mohajl Group.
Gastech Insights: The industry continues to see more LNG exports from the US. How will their abundance of natural gas compete with Qatar’s export market?
Sheikh Mohamed Althani: It is a fact that the phenomenal growth in US LNG export capacity which is expected to reach around 70 MTA by 2020 will pose a challenge to LNG and natural gas exporters including Qatar. However, the anticipated rapid and healthy global demand growth of natural gas and LNG particularly in Asia and other emerging economies will gradually absorb the current excess and the market will find its balance again before entering another recovery and supply tightening cycle sometime in the middle of the next decade.
So in short, I would say that as long as LNG demand is showing a robust growth, there is room for additional supplies not only from the US but also from other sources underpinned by consumers desire to diversify their supply portfolio and exposure.
The most significant impact of US LNG exports, in my opinion, will come from the contractual flexibility including the freedom of destination and the pricing structure embedded in US supply commitments which will definitely change the way LNG is traded globally. Indeed, the current abundance and low price environment of US natural gas resources combined with the flexible commercial structure of its LNG export arrangements are helping the global LNG trade expansion and will ultimately result in increased "commoditization" of LNG which I believe is good for the industry.
Gastech Insights: How will the development of gas projects in Southeast Europe such as the Trans Adriatic Pipeline impact the global market?
Sheikh Mohamed Althani: South Eastern Europe has inherited old and insufficient gas infrastructure from the Soviet Bloc era and since has suffered from a lack of new investment and over-dependence on supplies from Russia. New pipelines such as TAP will definitely improve the gas supply security of the region and if adequately integrated and interconnected to other cross European grids will facilitate access to other gas supply options.
However, in addition to new pipelines, the region needs to develop LNG receiving facilities such as the Croatian terminal on the Adriatic Sea and other projects to make LNG directly accessible to countries such as Bulgaria and Romania. It is unlikely that such infrastructure projects once fully developed and operational would have any significant impact on the global gas market because new supplies will mostly contribute to unlock unsatisfied regional demand and improve security of supply.
Gastech Insights: Could you share your opinion on the recent EU investigation into Qatar’s LNG destination clauses?
Sheikh Mohamed Althani: We know that similar investigations were conducted earlier by the EU targeting other major gas suppliers (Sonatrach, Gazprom) with the objective to remove the destination restrictions from the gas/LNG supply contracts. Whilst it is too early to make concluding comments on this case as the investigation has just been announced, it came as a surprise to the market considering the extremely positive role and beneficial contribution of Qatar LNG to the EU gas supply security over the last two decades.
Gastech Insights: Why should industry players attend the 2018 European Autumn Gas Conference?
Sheikh Mohamed Althani: The European gas market is becoming more important to the industry players especially with US gas becoming a practical destination due to the proximity of distance. Moreover, the desire to reduce reliance on the Russian pipeline, the European domestic production is in decline and the Algerian exports are uncertain. The European economies are in a gradual recovery and the switching from coal to gas due to environmental pressure makes it quite inserting for many.
All of the above makes the gas and LNG industry in particular very interesting for all participants to listen to the latest on these fronts.
If you would like to hear more great insights from Sheikh Mohamed Althani, register to attend the 2018 European Autumn Gas Conference!
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