Petrotahlil :Qatar will lose its title as the world's largest exporter of liquefied natural gas (LNG) within the next year, as Australia ramps up production on a slew of multi-billion dollar export projects.
"Australia and Qatar continued to jostle for the title of the world's largest LNG exporter over the first five months of 2019," the Australian government said in a recent report.
Australia exported more LNG than Qatar in November 2018 and April 2019. But now, the U.S Energy Information Administration (EIA) says Australia is on track to consistently export more LNG than Qatar, as recently commissioned projects such as Wheatstone, Ichthys, and Prelude ramp up production.
Prelude, Royal Dutch Shell's floating LNG facility in a remote field northeast of Broome in Western Australia, shipped its first LNG cargo to customers in Asia in June.
The landmark facility, capable of holding 175 Olympic-sized swimming pools of LNG in its storage tanks alone, was the last of eight new LNG projects that came online in Australia between 2012 and 2018.
The new facilities have pushed Australia's export capacity from 2.6 billion cubic feet per day (bcf/d) in 2011 to more than 11.4 bcf/d in 2019. The EIA says Australia has already surpassed Qatar in LNG production capacity.
More supply will pressure spot prices
The ramp up of new capacity and exports combined with fragile demand from key customers in Japan, China and South Korea has resulted in a drastic decline in spot LNG prices since late 2018.
Fears of cooling global growth and a protracted trade war between the U.S. and China is also keeping a lid on LNG.
"We're probably already at the floor price for this year," Nicholas Browne, director of Asian gas and LNG research at Wood Mackenzie, told CNBC's "Capital Connection."
"There is more supply coming in, not just from Australia and the Prelude and Ichthys project which is ramping up, but also in the U.S. where there is more LNG coming from Cameron, from Shell's Elba Island, as well as from the Freeport project, so we're anticipating a repeat of this year's conditions next year," he added.
Competitive prices to sustain demand
While Australia ramps up, Qatar is unlikely to stay idle. The country plans to boost its LNG capacity by early 2024 to 110 million tons a year, up from around 77 million tons a year, according to Reuters.
"China can't absorb all of this new LNG which is coming into the market," Browne said, adding that while prices are down, they're not out.
"When we look beyond this period of oversupply, I think the fundamental demand story in Asia is very strong, which is why we see so many companies targeting Asia and looking to develop projects now," he added.
Trade war worries could impact demand
Respected industry CEOs have also sounded the alarm on the battle for LNG supremacy.
"There is no doubt the expansion of the Australian LNG production is a significant factor in the market," said Peter Botten, a veteran oil and gas executive serving as managing director of Australia and Papua New Guinea (PNG) listed Oil Search.
The firm operates all of PNG's oil fields and has sizeable interests and partnerships in various LNG projects.
"I think the next couple of years is going to see a balancing out of supply and demand, and maybe even a tightness in demand in the 2021, 2022, 2023 timeframe," he added.
"You also have a lot of projects coming online in 2024 and 2025, so I think the market will be well supplied in that period of time and in the second part of the next decade — all of which plays on a likely scenario that LNG prices will remain very competitive, and that's only good for demand growth," Botten said.
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