Qatar LNG expansion looks to East Asia for continued growth

While the global natural gas market faces some difficulties due to the political risk associated with the LNG trade, Qatar’s LNG production expansion and subsequent diversification of its economy will likely produce long-term benefits for the country. Although not all European markets will be receptive, Qatar has already signed offtake agreements with firms based in Germany, France, and Italy, several of which run to mid-century. At the same time, Qatar continues to forge new trade relations in countries it views as growth markets of the future, particularly among developing countries in East Asia.

Qatar’s decision to increase its LNG production capacity by 85%, to 142 million tonnes/year (tpy) by 2030, was a long-term strategic decision. While the Biden Administration’s pause on reviewing applications to export LNG—announced Jan. 26, 2024—will benefit Qatar’s LNG expansion in the short term, it was not a factor driving Qatar’s plans. Rather, Qatar is focused on the long-term benefits of price stability, security of supply, steady growth, and diversification of supply and demand.

The European market will not be a major target for Qatar gas exports due to expectations for flat-to-declining gas demand there. 

The US pause on LNG export approvals could damage its sector. Liquefaction projects unable to achieve final investment decision and break ground before the expiration of their permits 2025–27 may be denied future extensions. If that happens, some planned LNG liquefaction projects could be delayed or even cancelled. 

In terms of the overlap of foreign relations and energy exports, Qatar sees opportunities for growth in countries with less developed economies, including Thailand, Bangladesh, and India. In East Asia, China has surpassed other Qatari import partners to become a key importer.

Political risks are increasing, driven by major disruptions caused by shipping attacks in the Red Sea and the ongoing war between Russia and Ukraine. Exporting states also are concerned about uncertainties surrounding the pace and comprehensiveness of transitions to clean energy. These risks have caused long-term energy contracts to fall out of favor, with shorter-term contracts and spot purchases rising in popularity.

Despite these issues, Qatari energy policymakers are convinced that the country’s multi-phased LNG expansion will bring large, long-term economic benefits. The temporary halt in US LNG export approvals presents a timely opportunity for Qatar to intensify its gas marketing efforts.

Global context

Current global LNG trade volume stands at roughly 400-million tpy, with three major players: the US, Australia, and Qatar. Each of these countries accounts for roughly 20% of the market share, with the US slightly ahead.

We are seeing the largest growth in global LNG trade ever recorded. The LNG industry tends to increase in waves:

• 2009-11, 73 million tpy, largely driven by Qatar.
• 2015-19, 145 million tpy, driven by the US and Australia.
• 2024-30, could surpass 200 million tpy.

Qatar’s diversification plan

Qatari leadership has increasingly sought to diversify the country’s economy—venturing into sports, telecommunications, and logistics—even as it continues to increase exports of energy commodities. The country’s leaders have also demonstrated a commitment to achieving diversification through large-scale infrastructure projects. Their decision to grow Qatar’s LNG capacity—and increase annual production to 142 million tpy from 77 million tpy by 2030—must be understood in the broader context of the push for economic diversification, which requires the investment capital that LNG exports can provide.

The Qatari plan intersects with several key developments in the broader energy market that bolster Qatar’s potential to dominate the LNG market in the coming years:

• The Biden administration’s decision to pause review of export authorizations to non-free trade agreement (FTA) countries (including China) could reduce the growth rate of US LNG production and exports, allowing Qatar to take advantage of a potential gap in the market. The pause could undercut growth of a few American LNG firms, but it will not directly affect LNG projects in operation or under construction in the US. 
• Japan—historically the largest consumer of LNG and a pivotal player in the development of Qatar’s LNG sector in the 1990s—is expected to have reduced growth in demand for LNG in future years due to its move towards renewable energy and blue ammonia. As a result, Qatar is now focusing on the broader East Asian energy market. Chinese off takers, for example, have signed a 27-year deal for Qatari LNG, whereas Japanese firms feature much less in the Qatari plans. 
• Declining LNG prices are helping establish new markets in developing countries in Asia that might otherwise turn to coal.

Geopolitical considerations

In Europe, opportunities for Qatari LNG are not as promising, though many predict that the Russian invasion of Ukraine—and Europe’s subsequent shift away from Russian gas—could lead to Qatar emerging as a significant supplier to its markets. Although experts believe that there will be a noticeable increase in the amount of Qatari LNG supplied to Europe to replace lost Russian product, the trend is not expected to be permanent. Factors such as the European Union’s carbon emissions goals continue to reduce the attractiveness of fossil fuels, even LNG, to EU countries.

Geopolitical considerations in the Middle East have shaped Qatar’s aggressive LNG expansion. Qatar’s giant North field (Fig. 1) is part of the world’s largest non-associated gas field which extends across the maritime boundary with Iran. While maintaining a calm and collaborative relationship with Iran is vital to securing Qatar’s future as a major LNG exporter, this association has at times sparked discontent among its neighbors.

In 2017 an air, land, and sea blockade, led by Saudi Arabia and the UAE, targeted Qatar. Its ties with Iran were cited as one justification for the action. As the blockade continued, in 2018 Qatar announced its withdrawal from the Organization of Petroleum Exporting Countries, signaling its intent to pursue a path of greater autonomy and flexibility by focusing on LNG. On this topic, panelists made several points:

• The move has only served to deepen the commitment of Qatar’s leadership to expanding LNG exports.  
• Despite—and throughout—the blockade, Qatari gas continued to flow into the UAE via pipelines, signaling the state’s desire to separate political disagreements from energy and financial partnerships. 
• Beyond the Gulf, Qatar is making efforts to form global links and partnerships across the geopolitical spectrum, by leveraging its LNG capacity. However, reticence—particularly among European importers —to sign the long-term contracts favored by the Qatari government has complicated these efforts.