A Little Less Rich: Qatar Gas Dominance Challenged
Comment of the Day

April 02 2014

Commentary by David Fuller

A Little Less Rich: Qatar Gas Dominance Challenged

This is an informative article from Bloomberg, covering much more than the title suggests.  Here is the opening:

Blazing gas flares 70 meters high brighten the night sky above Qatar’s Ras Laffan Industrial City. The 295-square-kilometer complex houses the world’s largest assemblage of liquefied natural gas plants and the biggest port for LNG exports on the globe. Ras Laffan chills to a fluid more gas in a year than Canada consumes and then ships it to run electric plants and warm homes from Tokyo to Buenos Aires. The gas facilities within its grounds produce almost a third of the world’s LNG exports, Bloomberg Markets will report in its May issue.

The government takes every precaution against sabotage. Entry to the Industrial City for those who don’t work there is severely restricted; photography inside the facility is forbidden. Ras Laffan is what makes Qatar the richest nation in the world, with a per capita income for its citizens of $101,000 in 2012, according to International Monetary Fund data.

The greatest threat to Qatar’s enormous wealth is competition. Other nations are challenging its LNG dominance. Australia is constructing liquefaction plants that will more than triple its annual LNG-manufacturing capacity to 85 million tons by 2018, surpassing Qatar, according to data compiled by Bloomberg Industries.

David Fuller's view

Who are some of the big winners and losers as gas production expands?

Established gas exporters over the last decade or more have will have less of a monopoly, for sure, but I would not worry too much about Qatar.  It has a small population and has anticipated the challenge by expanding its gas development to other countries. 

Russia is probably more vulnerable and this may be a factor behind Putin’s territorial interests in Eastern Europe.  For instance, he would undoubtedly like to have control of Ukraine’s apparently vast reserves of shale oil and gas, currently undeveloped. 

Japan is currently by far the biggest importer of LNG and is paying a high current price of $16.90.  Energy costs are Japan’s biggest problem. This is far more important that the often cited population decline, given this increasing era of robotics, an industry in which Japan excels.  Among developed economies, Japan will be a major beneficiary of lower energy prices, although this may take time.  

Western Europe also has very high energy costs and is doing very little to alleviate the problem, so far, despite the region’s dependence on Russian gas.  That was a wake-up call and European Union countries could produce their own gas from shale resources.  Currently, they are too dependent on inefficient and unpredictable wind farms, and having to burn more coal as a consequence.  This is ironic for a region that wants green energy, which it will not have enough of until more efficient solar panels become readily available. 

Australia is set to become the leading supplier of LNG by 2018, according to the article above.  This will further increase Australia’s investment appeal as a first world resources market.   

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