The start of liquefied natural gas production from Golden Pass LNG, a joint venture between QatarEnergy and ExxonMobil, will provide some support to the gas market, which has been hit hard by the war in Iran, analysts have said.
Production has begun at the first of three LNG trains, with output expected to reach 18 million tonnes a year.
Global LNG exports from the project are expected to begin in the second quarter of this year, QatarEnergy said in a statement.
“This is helpful after the loss of 78 million tonnes a year of Qatari capacity – 13 million tonnes of that seriously damaged – and six million tonnes a year of Adnoc LNG, but obviously only a small help,” said Robin Mills, chief executive of Qamar Energy.
Iranian missile strikes on Qatar's Ras Laffan industrial centre last month knocked out about 17 per cent of the country's LNG export capacity. The disruption could last three to five years, QatarEnergy chief executive Saad Al Kaabi said earlier this month.
The strike came in retaliation for an Israel attack on Iran’s South Pars gasfield, the world’s largest gas reserve, which Tehran shares with Qatar.
Qatar, which produces about a fifth of the world's LNG supply, has been central to energy markets, particularly in Asia where long-term contracts dominate trade. After the attack, QatarEnergy declared force majeure on its LNG contracts with Belgium, China, Italy and South Korea.
The effective closure of the Strait of Hormuz, through which 20 per cent of the world's LNG flows, has also cut off supply and sent prices in Asia soaring by up to 85 per cent.
LNG imports to Asia had their largest drop in more than three years in March, according to ship-tracking data compiled by Bloomberg. Deliveries to the continent fell 8.6 per cent year on year to about 20.6 million tonnes, the biggest decline since December 2022.
The start of operations at Golden Pass "comes at a much welcomed time, seeing LNG supply severely under pressure, with the recent addition of outages in Western Australia", Christoph Halser, gas and LNG analyst at Rystad Energy, told The National.
"There will be a longer ramp-up period, however, before the 6 million tonne annual capacity of the first train can sustainably operate at full rate, which may easily take six months. The startup therefore does not provide an immediate relief, but is definitely a positive sign."
Golden Pass LNG, which is 70 per cent owned by QatarEnergy and 30 per cent by ExxonMobil, has faced delays since the project was announced with an investment of more than $10 billion in February 2019.
“Golden Pass has been long in development, of course, and was delayed by various technical issues,” Mr Mills said.
The project represents a “significant part” of QatarEnergy's plans, announced in 2018, to invest $20 billion in the US energy sector, Mr Al Kaabi said at the time.
“The operational phase and market entry of Golden Pass LNG will come at an important time when global energy security ranks very high on energy agendas worldwide,” he added.
US role
With the disruption in the Gulf, focus is shifting to the US, which already plays a key role in the LNG market.
The US is the world's largest exporter of LNG, producing almost 110 million tonnes last year, according to energy consultancy Wood Mackenzie. Its output is forecast to pass 120 million tonnes this year.
“There is currently another 120 million tonnes per annum of capacity under construction across six sites in the US that will come on-stream through the early 2030s,” Kristy Kramer, head of LNG strategy and market development at Wood Mackenzie, told The National.
“Even further US LNG supply is possible, but still subject to final investment decision.”
The US LNG industry “will of course expand hugely over the next few years, even more so given the current crisis”, said Mr Mills, “but it will take about three years for the US to replace the Qatari LNG”.
Gulf states already have strong LNG ties with the US. In 2024, Adnoc participated in NextDecade’s Rio Grande LNG project through equity ownership and LNG offtake. Aramco has LNG offtake from Rio Grande LNG and Commonwealth LNG, Mr Kramer said.
“In addition to participation from the national oil companies, investment funds from the region have also participated in US LNG and energy in various forms, including Adia’s investments in Sempra Infrastructure and Cheniere Energy and Mubadala’s investment in Caturus,” he added.
In the future, the Gulf states will continue to seek more US LNG investment opportunities, “but those have just got a lot more competitive and expensive”, said Mr Mills.
Regional companies have a lot of interest in overcoming the current crisis and repositioning the Middle East as a secure and reliable location, Mr Halser said.
"I do not expect national oil companies to secure majority ownership in new projects, but limited offtake through equity ownership could be a possible route for mitigating short-term risks," he added.
