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DOHA: Amid the ongoing standoff between the gas producing countries and buyers over the pricing strategy, a top energy market analyst has totally justified Qatar’s pricing policy.
Talking to The Peninsula, Gopal Balasubramaniam (pictured), Partner, head of Oil & Gas-MESA Region, KPMG, strongly defended Qatar selling the liquefied natural gas (LNG) linked to oil prices and justified the country’s decision to ensure supplies to the buyers entered into long term agreements.
On the consuming countries’ pressure on gas suppliers to ditch the oil-linked prices, he said: “Oil- indexed gas price is a long prevailing system. If energy-hungry countries are willing to pay and Qatar is willing to supply what is the issue?. The producers are taking the commodity to the consumers who pay better prices. This is the rule of the game”.
On the international media reports of “Qatar sending only its left-over short-term deliveries to some of its European buyers while more and more of its LNG goes to higher paying Asian customers Gopal said Qatar has invested hugely in its LNG carriers. Hence long-term deals are key for the country. QatarGas’ last week deal with Chubu Electric Japan has also a long-term one, he said.
“Qatar has invested heavily on its LNG carriers. The market dynamics prevent the country from entering into short term deals. Qatar needs to honour its commitments to large Asian consumers like Korea, Japan and India. When Qatar has to meet their long-term commitments how can they come out and sell to other countries at lower prices?”, he asked.
The span of long term agreements is getting shorter these days. The long-term agreements, in contrast to the otherwise 20 to 25 year deals, have now come down to 10-15 years period.
Gopal, however, suggested Qatar may have to rework on its marketing strategy with the US Shale gas expecting to flood the global market by 2016. Australia’s announcement to heavily invest in the LNG sector is another factor that would change the market dynamics of Qatari gas market.
Australia’s LNG production is set to peak to 120m tonnes by 2018-2020. Its surely a concern for Qatar that the market is close to its major Asian consumers. “2020 is long way off. Qatar might change its market strategy. Qatar’s investment opportunities in Australia’s gas sector cannot be ruled out. There are reports Qatar is trying to take stake in Australian LNG”, Gopal added..
GCC region is also set to see a huge investment in the gas sector. As of now, the region’s gas deficit is 20bn cubic metres. It is expected to go up by 32bn cubic metres by 2015.