22 April 2013 – The global impact of the U.S. shale gas boom was in further evidence this week as Qatar Petroleum, along with its MOU partner, Centrica, made its first move into the North American exploration and production (E&P) market in a $1 billion acquisition of Canadian assets from Suncor Energy. North America had been earmarked by Qatar as a guaranteed market to sell its copious Liquefied Natural Gas (LNG) export capacity in, but the U.S. Shale boom has turned this idea on its head, as the middle-eastern NOC becomes the latest foreign power to move into the North American E&P arena. The assets being acquired (to be 40% owned by Qatar Petroleum) are well spread over the country in 3 provinces, and the British Columbia set of the assets will no doubt form a potential export opportunity as Kitimat becomes Canada’s LNG exporting center in the coming years.
A look at Qatar Petroleum’s world-standing will shed light on just how significant a move this is, and just how big an impact the shale boom is having on world energy markets. Qatar is the world’s largest LNG exporter by a significant distance with around 78 million tonnes per year (mtpa) of export capacity, and Qatar Petroleum is the operator of all of it. Its nearest rivals, including Indonesia (34 mtpa), Malaysia (24 mtpa) and Australia (23 mtpa), are dwarfed in comparison. Efforts to catch up with Qatar have been led by the Australians, with plans in place to expand the industry in that country significantly by 2020. But these plans are beginning to fall into ruin, as many projects are being cancelled or delayed for various reasons, chiefly a lack of skilled labor and extreme rises in projected costs – Chevron’s Gorgon LNG project is now projected to cost $50 billion, for example. Plans in new regions of potential LNG exports, such as Mozambique/East Africa, are likely to be a long way off into the future, so Qatar, on the face of it, looks to be in an extremely strong position as the global leader of gas exports. Yet it still moved into this new market.
Recent years have seen Indian, Chinese and other far-eastern NOC’s moving into the North American market following the U.S. shale gas boom, countries without strong domestic markets, but this is arguably the first time a reasonably stable world gas power has felt the need, or has been forced, to join the party. Even as recently as the company’s 2011 Annual Report, Qatar Petroleum lists North America as the target market for its LNG Production “mega-trains” 6 & 7 at its Ras Laffan complex. Whilst the company also listed more ensured markets of Asia and the Middle East as destinations, these “mega-trains” have a total capacity of 15.2 mtpa, and the potential income from exporting this amount of gas to the U.S. had to be replaced, as the LNG import terminals on the American east coast became obsolete and began to sit idle after shale gas began to quickly flood the domestic market.
In the company’s first move to combat the potential harm caused by the shale gas boom, Qatar Petroleum, along with partner ExxonMobil, submitted plans to the relevant authorities to convert its 15.6 mtpa import facility at Sabine Pass, Texas, into an export terminal of the same capacity, in a clear effort to recoup some of the shortfall back by profiting on U.S. exports in the future. However, this follow-up move into Canadian E&P provides a more immediate solution to Qatar’s problem, with net 2P reserves of around 390 bcfe (90% gas) and net production of 100,000 mcfe/d. In fact, this move is not really any different to what Woodside Petroleum are planning, the company is reportedly in talks over acquiring Canadian gas assets, and Woodside is a company who recently shelved an LNG project in Australia to look for a cheaper option, standing it in stark comparison to the world leader in LNG exports.
Widescale exports of U.S./North American shale gas may be as far as 3 to 5, even 10 years into the future, so for the time being, shale gas will remain trapped within those borders. But now the world leading gas exporter has got involved, the global impact of the U.S. shale boom is extremely hard to deny, no matter how trapped the physical quantities of gas may well be.
*Mark Young, Evaluate Energy