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RasGas Says U.S. to Limit Gas Exports to Keep Prices Low

June 06, 2012

Qatar’s RasGas Says U.S. to Limit Gas Exports to Keep Prices Low

Construction cranes stand on the West Bay district skyline beyond moored boats in Doha, Qatar. Photographer: Gabriela Maj/Bloomberg

Qatar, the world’s largest liquefied natural gas producer, joined Australian suppliers in playing down the threat of large-scale exports of the fuel from the U.S., where a shale-gas boom has upended global energy markets.

“The U.S. has need for energy themselves,” Hamad Rashid Al-Mohannadi, the managing director of RasGas Co., told reporters in Kuala Lumpur today. “I don’t see the U.S. exporting large volumes of LNG” as it would cause domestic gas prices to rise significantly, he said.

Exports will mainly be to countries the U.S. has free-trade agreements with, and supplies to other markets may be restricted to spot cargoes and short-term contracts, the executive from Qatar’s second-biggest LNG producer said in a separate speech at the World Gas Conference in the Malaysian capital. State-owned Qatar Petroleum owns 70 percent of RasGas and Exxon Mobil Corp. (XOM:US) the rest, according to its website.

Buyers from Japan, China and South Korea can’t count on significant U.S. supplies, where only one export project is under way and the government has said it wouldn’t rule on more licenses until at least the third quarter. Australia is set to overtake Qatar as the largest LNG exporter by the end of this decade as Asian demand underpins $180 billion of ventures led by Chevron Corp. (CVX:US) and Woodside Petroleum Ltd. (WPL)

“The U.S. appears to be moving toward exporting LNG,” George Kirkland, Chevron’s vice chairman and executive vice president for upstream and gas, said in a separate speech at the conference today. “The big questions are if, when and, importantly for us, how much?”

Chevron’s A$43 billion ($42 billion) Gorgon LNG venture in Australia will start at the end of 2014, Kirkland said.

Shale-Gas Boom

A boom in extracting gas trapped in shale rock in the U.S. has helped it surpass Russia as the world’s biggest producer of natural gas and brought the country close to energy independence.

The nation’s gas production increased 8.1 percent last year, about four times the average annual increase in the previous decade, the International Energy Agency said in report released yesterday. “While the U.S. has yet to export LNG, it is already physically exporting its gas surplus to neighboring countries,” including Canada and Mexico, according to the report.

Woodside, Australia’s second-biggest oil and gas producer, said the U.S. is unlikely to grant new natural-gas export permits until after the presidential election in November and volumes eventually shipped may be lower than some predictions.

Woodside Doubt

“Some people speculate about numbers up to 100 million tons per year” of LNG exports, Chief Executive Officer Peter Coleman said in an interview in Kuala Lumpur yesterday. “I don’t see that. It’s unlikely there will be a lot of movement on additional expansion until after the election cycle in the U.S.

The operator of the A$15 billion Pluto LNG project in Western Australia state expects the U.S. to export as much as 50 million metric tons of the fuel by 2025. That would meet about 10 percent of global demand. The company last month predicted 65 million to 80 million tons of unmet demand in 2018 to 2020.

‘‘In the U.S., you are always going to have constraints with the need for gas in power generation and the chemicals industry,” Coleman said. “That says a lot of gas will stay in the U.S.,” he said. “Australian LNG has its place.”

Benchmark gas prices in the U.S. have slumped to the lowest in a decade amid a supply glut. Gas futures slid to $1.90 per million Btu on the New York Mercantile Exchange April 19, the lowest since September 2001. The contract for July delivery rose 3.1 cents to settle at $2.446 per million Btu yesterday.

Tokyo Gas

“Long-term contracts are for 25 years or so, and betting gas prices will remain low for 25 years is a big gamble for consumers,” said Al-Mohannadi from RasGas. “If you’re looking for security of supply, you would rather look for supply from projects that are up and running.”

While it’s unlikely that all of the LNG export projects planned in North America will start, the region could supply as much as 10 percent of world LNG, according to Shigeru Muraki, the chief executive of Tokyo Gas Co.’s energy solution division.

Tokyo Gas, Japan’s biggest gas distributor, and Sumitomo Corp. agreed in April to buy 2.3 million tons of LNG annually for 20 years from Dominion Resources Inc.’s Cove Point project.

To contact the reporters on this story: Dinakar Sethuraman in Kuala Lumpur at dinakar@bloomberg.net; Rakteem Katakey in Kuala Lumpur at rkatakey@bloomberg.net; James Paton in Kuala Lumpur at jpaton4@bloomberg.net

To contact the editors responsible for this story: Amit Prakash at aprakash1@bloomberg.net; Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net


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