Easwaran Kanason

Co - founder of NrgEdge
Last Updated: April 8, 2017
1 view
Business Trends
image

In 2005, the tiny Persian Gulf nation of Qatar declared a moratorium on production at its North Field. Natural gas from this giant field, part of a larger reservoir that straddles Qatari and Iranian borders, had helped Qatar ramp up production, eight years after it exported its first cargo of LNG to Spain in 1997. The halt came as a bit of a surprise back then, seen as limiting, but in hindsight was a great move. Existing projects with partners ExxonMobil, Shell and Total were more than enough to vault Qatar to become the largest LNG exporter in the world, and there were technically challenging projects like the Pearl and Oryx Gas-to-Liquids (GTL) refineries that demanded attention.

The logic, then, was to prevent overexploitation of the precious North Field, particularly since it was shared with Iran, where it is known as South Pars. Detailed studies on the structure of the field have estimated that, at current production rates, Qatar still has about 135 years of gas reserves underground. With most of the giant Qatari projects now complete, the country can afford to exploit a little more. So 12 years later, the moratorium has been lifted.

Qatar Petroleum (QP), the state oil firm, intends new development to be confined to the southernmost part of the North Field, running almost onshore, contributing a 10% increase – or 2 bcf/d or 400,000 barrels of oil equivalent in national production. It comes after QP merged its two gas subsidiaries – RasGas and Qatargas – into a single entity called Qatargas in December 2016, streamlining the business structure of its gas operations. Together with partners ExxonMobil, Total, Shell and ConocoPhillips, the new Qatargas will operate all Qatari LNG production, while the newly-established Ocean LNG will manage the international marketing of all Qatari LNG.

Put all of those announcements together and the picture is clear; Qatar is moving aggressively to retain its crown as the world’s top LNG exporter, fending off Australia, the USA and Russia as they ramp up their respective output. The flurry of LNG production has resulted in global installed LNG capacity of over 300 million tonnes a year, while only around 268 million tonnes of LNG were traded in 2016, Thomson Reuters data shows. That has helped pull down Asian spot LNG prices LNG-AS by more than 70 percent from their 2014 peaks to $5.65 per million British thermal units (mmBtu).

With LNG prices already waning due to the existing and growing glut, what good will it do for Qatar to add more to the mix?

Qatar's decision to lift the moratorium is indicative that the country will not just do nothing while other large producers pick-up more customers in a growing market. For one thing, Qatari costs are low. Qatari LNG is already one of the cheapest to produce in the world, and any new North Field output can be tapped back into infrastructure already in place – allowing Qatar to better weather low LNG prices than say Australia, where Chevron has had to deal with massive ramp-ups in costs for the Gorgon and Wheatstone.

Secondly, the QP announcement pointedly did not mention whether the new gas will become LNG. Which means Qatargas is looking at other options. More GTL and Gas-to-Petrochemical projects, perhaps? Or perhaps feeding the natural gas demand of its Gulf neighbours? The UAE, Bahrain, Oman, Kuwait and Saudi Arabia are short on natural gas, so a trans-Arabian Peninsula pipeline might be just what is needed. QP Chief Executive Saad al-Kaabi told reporters at Qatar Petroleum's headquarters in Doha, "What we are doing today is something completely new and we will in future of course share information on this with them (Iran)."

The lifting of the North Field moratorium also comes just in time since Qatar’s domestic oil and gas production is plateauing, kicking off the next phase of Qatari growth. And when that next phase begins to end, well, Qatar still has a whole lot more of the North Field to tap into.  Saad al-Kaabi continued to say that "For oil there are people who see peak demand in 2030, others in 2042, but for gas, demand is always growing."

Read more:
qatar lng qatar petroleum north field south pars iran qp ras gas qatar gas
3
2 0

Something interesting to share?
Join NrgEdge and create your own NrgBuzz today

Latest NrgBuzz

Asset Works - Fleet Management Software

Asset Works FleetFocus fleet management software is a powerful solution designed to help asset- and infrastructure-intensive organizations control costs and streamline operations. By tracking vehicle location and maintenance history, fleet managers can extend the useful life of their fleet and prevent costly downtime. With preventive maintenance scheduling, work order and labor tracking, and parts and inventory tracking, FleetFocus helps fleet managers maximize efficiency while minimizing expenses. As a result, Asset Works fleet management solutions deliver industry-leading value for fleet managers around the world.

Support: [email protected]


May, 24 2022
Where to buy your Gun Parts from?

It is important to know where to gun parts from. There are many places you can buy them from, but it is important to choose the right place so that you get the best quality and service. There are many places where you can buy gun parts from. You can buy them from gun stores, online retailers, and even at a flea market.



One of the best places to buy gun parts from is Always Armed.They have a wide range of products available, they offer great customer service, and they have convenient shipping options.



Buying gun parts can be a difficult task. There are many different types of firearms and there is a huge variety of gun parts. The right place to buy gun parts depends on what you are looking for and what kind of firearm you have.



If you are looking for a specific part, then your best bet is to search online. You can find the part that you need at an affordable price and it will be delivered right to your door. If you want to save time, then this is the best option for you. If not, then your local gun store might be the best option for you because they have many different types of firearms as well as all kinds of other equipment that might come in handy for hunting or shooting sports.



When it comes to buying gun parts, you need to be very careful. There are a lot of scams out there and some companies just want to take your money and never send you the goods. 

May, 20 2022
High Oil Prices and Indonesia’s Ban on Oil Palm Exports

Supply chains are currently in crisis. They have been for a long time now, ever since the start of the Covid-19 pandemic reshaped the way the world works. Stressed shipping networks and operational blockages – coupled with China’s insistence on a Covid-zero policy – means that cargo tanker rates are at an all-time high and that there just aren’t enough of them. McDonalds and KFCs in Asia are running out of French fries to sell, not because there aren’t enough potatoes in Idaho, but because there aren’t enough ships to deliver them to Japan or to Singapore from Los Angeles. The war in Ukraine has placed a particular emphasis on food supply chains by disrupting global wheat and sunflower oil supply chains and kicking off distressingly high levels of food price inflation across North Africa, the Middle East and Asia. It was against this backdrop that Indonesia announced a complete ban on palm oil exports. That nuclear option shocked the markets, set off a potential new supply chain crisis and has particular implications on future of crude oil pricing and biofuels in Asia.  

A brief recap. Like most of Asia, Indonesia has been grappling with food price inflation as consequence of Covid-19. Like most of Asia, Indonesia has been attempting to control this through a combination of shielding its most vulnerable citizens through continued subsidies while attempting to optimise supply chains. Like most of Asia, Indonesia hasn’t been to control the market at all, because uncoordinated attempts across a wide spectrum of countries to achieve a similar level of individual protectionism is self-defeating.

Cooking oil is a major product of sensitive importance in Indonesia, and one that it is self-sufficient in as a result of its status as the world’s largest palm oil producer. So large is Indonesia in that regard that its excess palm oil production has been directed to increasingly higher biodiesel mandates, with a B40 mandate – diesel containing 40% of palm material – originally schedule for full implementation this year. But as palm oil prices started rising to all-time highs at the beginning of January, cooking oil started becoming scarcer in Indonesia. The government blamed hoarding and – wary of the Ramadan period and domestic unrest – implemented a Domestic Market Obligation on palm oil refineries, directing them to devote 20% of projected exports for domestic use. Increasingly stricter terms for the DMO continued over February and March, only for an abrupt U-turn in mid-March that removed the DMO completely. But as the war in Ukraine drove prices even further, Indonesia shocked the market by announcing an total ban on palm oil exports in late April. Chaotically, the ban was first clarified to be palm olein only (straight refining cooking oil), but then flip-flopped into a total ban of crude palm oil as well. Markets went haywire, prices jumped to historical highs and Indonesia’s trading partners reacted with alarm.

Joko Widodo has said that the ban will be indefinite until domestic cooking oil prices ‘moderate’. With the global situation as it is, ‘moderate’ is unlikely to be achieved until the end of 2022 at least, if ‘moderate’ is taken to be the previous level of palm oil prices – roughly half of current pricing. Logistically, Indonesia cannot hold out on the ban for more than two months. Only a third of Indonesia’s monthly palm oil production is consumed domestically; the rest is exported. An indefinite ban means that not only fill storage tanks up beyond capacity and estates forced to let fruit rot, but Indonesia will be missing out on crucial revenue from its crude palm oil export tax. Which is used to fund its biodiesel subsidies.

And that’s where the implications on oil come in. Indonesia’s ham-fisted attempt at protectionism has dire implications on biofuels policies in Asia. Palm oil prices within Indonesia might sink as long as surplus volumes can’t make it beyond the borders, but international palm oil prices will remain high as consuming countries pivot to producers like Malaysia, Thailand, Papua New Guinea, West Africa and Latin America. That in turn, threatens the biodiesel mandates in Thailand and Malaysia. The Thai government has already expressed concern over palm-led food price inflation and associated pressure on its (subsidised) biodiesel programme, launching efforts to mitigate the worst effects. Malaysia – which has a more direct approach to subsidised fuels – is also feeling the pinch. Thailand’s move to B10 and Malaysia’s move to B20 is now in jeopardy; in fact, Thailand has regressed its national mandate from B7 to B5. And the reason is that the differential between the bio- and the diesel portion of the biodiesel is now so disparate that subsidy regimes break down. It would be far cheaper – for the government, the tax-payers and consumers – to use straight diesel instead of biodiesel, as evidenced by Thailand’s reversal in mandates.

That, in turn, has implications on crude pricing. While OPEC+ is stubbornly sticking to its gentle approach to managing global crude supply, the stunning rebound in Asian demand has already kept the consumption side tight to match that supply. Crude prices above US$100/b are a recipe for demand destruction, and Asian economies have been preparing for this by looking at alternatives; biofuels for example. In the past four years, Indonesia has converted some of its oil refineries into biodiesel plants; in China, stricter crude import quotas are paving the way for China to clamp down on its status of a fuels exporter in favour of self-sustainability. But what happens when crude prices are high, but the prices of alternatives are higher? That is the case for palm oil now, where the gasoil-palm spread is now triple the previous average.

Part of this situation is due to market dynamics. Part of it is due to geopolitical effects. But part of it is also due to Indonesia’s knee-jerk reaction. Supply disruption at the level of a blanket ban is always seismic and kicks off a chain of unintended consequences; see the OPEC oil shocks of the 70s. Indonesia’s palm oil export ban is almost at that level. ‘Indefinite’ is a vague term and offers no consolation to markets looking for direction. Damage will be done, even if the ban lasts a month. But the longer it lasts – Indonesian general elections are due in February 2024 – the more serious the consequences could be. And the more the oil and refining industry in Asia will have to think about their preconceived notions of the future of oil in the region.

End of Article

Get timely updates about latest developments in oil & gas delivered to your inbox. Join our email list and get your targeted content regularly for free or follow-us on LinkedIn.

Market Outlook:

  • Crude price trading range: Brent – US$110-1113/b, WTI – US$105-110/b
  • As the war in Ukraine becomes increasingly entrenched, the pressure on global crude prices as Russian energy exports remain curtailed; OPEC+ is offering little hope to consumers of displaced Russian crude, with no indication that it is ready to drastically increase supply beyond its current gentle approach
  • In the US, the so-called NOPEC bill is moving ahead, paving the way for the US to sue the OPEC+ group under antitrust rules for market manipulation, setting up a tense next few months as international geopolitics and trade relations are re-evaluated

No alt text provided for this image

Learn more about this course

May, 09 2022