Argentine deal expands Qatar's LNG business

Qatar is lining up long-term international customers for its natural gas, starting with a 5 million tonne LNG deal with Argentina.

Long-term plans

World's top producer already counts UK and Japan as clients

April Yee and Asa Fitch

Qatar, the holder of the world's third-biggest gas reserves, is steadily lining up long-term international buyers for its lucrative export.

Its latest coup is a two-decade agreement signed with Argentina last week to supply 5 million tonnes of liquefied natural gas (LNG) a year, equal to more than 15 per cent of that country's natural gas demand. It follows deals with the UK, Japan and other major consumers.

Finding long-term customers is at the top of the emirate's priorities as it increases its LNG production to 77 million tonnes a year by the end of this year. "If I get a long-term customer, I can plan my production," said Bhaskar Majumdar, a regional energy analyst at the consultancy Frost & Sullivan in Bangalore.

"The industry is not into shock."

As major new fields come online, Qatar has become a major force in the global natural gas industry. Turning its natural gas into LNG allows Qatar to send its product to faraway countries by ship rather than pipeline.

Last year it became the world's biggest LNG producer and is bringing two more production lines into operation. The US energy information administration estimates Qatar's LNG exports will grow by 13.5 per cent every year until 2015.

New gas production has made Qatar's economy the world's fastest-expanding, with GDP growth projected at 20 per cent this year by the IMF.

Major consumers have responded by building up their LNG-receiving infrastructure, such as the ship terminal the UK constructed to accommodate supplies under an estimated £2 billion (Dh11.76bn) supply agreement providing for the emirate to meet half of the UK's gas demand by 2025.

Industrialised nations are turning increasingly to natural gas as fuel for power generation as the accident at Japan's Fukushima Daiichi power plant makes nuclear energy a less attractive option, and developing countries use natural gas as a cleaner alternative to coal and diesel.

Demand is projected to rise at least 2.4 per cent a year through 2016, according to the International Energy Agency.

"The best places to go would be where the market for power and energy is going, and the best places for that are India and China," Mr Majumdar said.

"The other market is where the power generation is either supplemented by coal or nuclear."

The deal with Argentina is the first long-term supply contract in South America for the state-owned LNG producer Qatargas, according to Sheikh Khalid bin Khalifa Al Thani, its chief executive. "This milestone further demonstrates Qatargas's commitment as a reliable LNG supplier to the world," he said.

Under the 20-year agreement, the fuel is to be sent starting in 2014 to a natural gas hub run by Energia Argentina Sociedad Anonima, a state-owned energy company.

"Argentina is one of the world's fastest-growing LNG markets, which needs long-term supplies to meet its increasing demand for natural gas, and we here in Qatar are very proud to partner with Argentina and to be able to support their energy needs for many years to come," said Mohamed bin Saleh Al Sada, the Qatari energy minister.