Excellent article that summarizes the global gas market which is likely to see a production glut and low prices for the foreseeable future, especially so with Qatar's decision to lift the production moratorium on the world's biggest natural gas field, the North Field.
Four countries are vying to be the world’s biggest exporter: Qatar, the current leader, with 78 million tons per year capacity (10.3 billion cubic feet of gas per day), is likely to be overtaken by Australia this year. The U.S., awash with cheap shale gas, is building five projects totaling 74 million tons per year, and expansions could boost this further. On Thursday, Russian President Vladimir Putin said his country would become the top exporter, though that seems a distant aspiration... New supplies are also set to come from big fields off Mozambique and Tanzania. Gas is easy to find around the world; the tough part is getting it to market at a competitive price.
All these aspirants now realize the giant of the LNG world is back in the game. With its prolific reservoir, existing infrastructure and large scale, new Qatari LNG should again be the world’s cheapest to produce. Developing more at home will be lower-cost and less risky than searching for gas in Morocco and Cyprus, which QP recently entered. Qatargas may even be able to inexpensively de-bottleneck existing "trains" (LNG-producing units), rather than having to construct new ones at a cost of some $14 billion. So, this move is partly about deterring new LNG projects, with the threat of new ultra-competitive Qatari gas arriving around 2022, just when many observers expect the market to be tightening again.
A few lessons for India
1. All this coupled with the construction of terminals on US Gulf Coast means that fragmentation and index pricing in global gas market is soon likely to be a thing of the past. India's gas companies should therefore be cautious about long-term external contracts with index pricing
2. In an environment of low gas prices, the Government of India would do well to forget chasing foreign companies for gas exploration in/off India.
3. Instead, this is an opportunity to lock-in long-term purchase contracts, especially leveraging the LNG infrastructure of Qatar that is likely to come on line.
4. More of the existing model for producing fertilisers - cheaper to produce fertiliser in Qatar and bring them here rather than bring gas here and then produce fertilisers here.
5. I am not sure about this, but the economics of some of our RLNG terminals/FSRUs under construction will come under strain if gas stays low for too long.