By Pratap John/Chief Business Reporter

Qatar will continue to have a “cost advantage” in liquefied natural gas production as the development costs have more than doubled since 2003, the International Monetary Fund has said in a report.
In its latest country report, IMF said the capital costs per tonne of LNG of some of the recent Australian liquefied natural gas projects are between $2,778 and $4,048 compared to $1,000 to $2,000 for Qatargas.
Moreover, because Qatar produces and exports significant quantities of condensate and natural gas liquids alongside natural gas, the effective average cost of producing LNG is much lower.
Finally, Qatar has equity interests in some 54 vessels in which it exports its LNG, thereby reducing its transportation costs and risks.
IMF mission head (Qatar) Ananthakrishnan Prasad told Gulf Times the outlook for Qatar in the LNG market was “strong” in light of the projected increase in global demand for natural gas over the medium-term, its cost advantages in production and transportation, and the bulk of its LNG exports being tied in long-term contracts.
“However, Qatar should position itself to face competition from potential game-changers on the supply side in the longer-term, which the authorities are conscious of,” Prasad said.
Qatar holds the third largest reserves of natural gas in the world. Proven global gas reserves at the end of 2011 were estimated at 7,361tn cubic feet (tcf), the IMF said.
Qatar holds 12% of these reserves, concentrated in the North Field, the largest non-associated gas reservoir in the world, with a reserve to production ratio of more than 100 years.
Currently, the bulk of Qatar’s LNG exports are directed to Asia Pacific and to Europe, including the spot market. With a global demand increase of 17% between 2012 and 2017 projected by the International Energy Agency, Qatar’s “LNG export outlook remains positive” in the medium term, the IMF said.
Competition to Qatar’s exports could emerge toward the end of this decade from increases in unconventional gas production in the US, the emergence of Australia as a leading LNG producer and price shifts in the LNG market.
“Qatar’s innovations created a new LNG business model, and unconventional gas production and trade have transformed natural gas markets in the past few years,” said Prasad in the report.
Global LNG trade, constituting 32% of all traded gas, grew by nearly 10% in 2011, and about two-thirds of the increase came from Qatar.
A quarter of total LNG trade was in the spot and short-term market, representing an increase of 50% in 2011. Qatar has led the massive increase in LNG production worldwide, from less than 17mn tonnes per year (tpy) in 2000 to 77mn tpy by 2011. That year, Qatar represented 30% of global LNG trade and 28% of global LNG export capacity.
Qatar’s ability to benefit from higher Asian and European gas prices, however, may face competition from a number of LNG projects that are coming onstream in the next several years, the report pointed out.
Australia is expected to become the largest LNG producer by the end of the decade. If these projects proceed as planned, Australia’s LNG exports are likely to increase more than three-fold over the next five years with the added advantage that some of these projects are close to the Asian market.
While Qatar has been able to balance the decline in gas prices with increased production so far, the current moratorium limits the prospects of large-scale increase in production in the immediate future.
Nevertheless, Qatar has the technology to increase its production by another 10% at short notice through debottlenecking process, the IMF said.
“There are, however, many uncertainties that might delay new production by competitors, which augurs well for Qatar,” IMF said.
These uncertainties relate mainly to Australia’s capacity to complete its projects in time, as there is farmers’ opposition. China has yet to start shale gas production, although it is believed to hold 25 tcm of recoverable shale gas reserves.
The outlook for unconventional gas production in Europe is doubtful. There has been opposition to hydro fracking in France and moratoriums have been imposed in France, Switzerland, Germany, Northern Ireland and Bulgaria.
The US is the only country producing unconventional gas, despite the current adverse factors, which include increases in material and labour costs.