There are early signs of a new wave of deposition in liquefied natural gas, a cleaner cousin of oil. The industry is trumping new capital control, but it may not be enough to stop another move.
This week, Qatar signed an expansion of 40% of its LNG production capacity. The Petrostate’s North Field project, completed in 2026, ranks as the largest single investment in fuel ever approved.
Even after a traumatic 2020, it may be difficult for the industry as a whole to resist competitive responses. LNG – the liquefied, shippable version of gas that heats homes and generates power around the world – plays a key role in the strategies of the five major oil and gas “supermajors”. It has better growth opportunities and emits less greenhouse gases than oil, but offers a more experienced business model than renewable energy.
LNG projects often take four to five years to build and require buyer promises covering 80% to 90% of production to secure funding. Until recently, gas buyers had moved away from contracts, instead preferring to buy on the spot market at persistently low prices, but a recent spike in rod- Asian LNG measurements remind consumers of the dangers of this approach. Customers are increasingly demanding long-term supply contracts, creating an opportunity to finance new projects.
The danger is that everyone is moving at the same time. Cuts in capital spending after last year’s fall in commodity prices boosted many LNG plans. Regenerating them all would bring in an extra billion metric tons of fuel each year, according to consulting firm Rystad Energy. That’s nearly 10 times what it expects to be required by 2030.
Even now, global gas supply is outstripping demand. The Asian benchmark jumped nearly 10-fold in the second half of last year, but largely due to four temporary factors: a cold winter, traffic tags in the Panama canal, a shortage of LNG boats and Beijing’s ban on imports. Australian coal. Prices have already fallen back. New LNG vessels and Chinese plans to build more local gas storage capacity will further reduce pressure.
Over the next few years, demand for gas is likely to grow globally. Emerging markets need more as their economies develop. So resources will change as they change from coal to gas. However, there is great uncertainty about the route, and the reduction in greenhouse gas emissions will cut gas use as well.
All said, by 2030 the world will need another 104 million metric tons of new LNG supplies, according to Sindre Knutsson, an analyst at Rystad Energy. Qatar’s new project will bring nearly a third of that amount. In addition to the supermajors, other LNG producers in Russia, Australia and the US are all willing to offer more. The place could get very crowded.
Demanding adequate supply contracts is an obstacle to any new LNG investment, but even that is not a guarantee of a good return. Qatari’s subsequent expansion could offset other projects: Qatar’s balancing costs on LNG delivered to Asia are $ 4 per million British thermal units, compared to around $ 7 for U.S. producers.
The supermajors wrote about $ 70 billion in oil and gas assets last year. That’s a reminder of the huge risk in fossil fuel investment: The results of these multidisciplinary LNG projects won’t be apparent for years. Gas may seem like a safer bet than oil for a disarmed world, but it faces many of the same challenges.
Write to Rochelle Toplensky at [email protected]