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Qatar signals LNG price war

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LNG Industry,

Reuters are reporting that Qatar's plan to boost LNG output by 30% is the opening shot in a price war for customers in Asia pitting the Gulf state against competitors from the US, Russia and Australia.

Qatar took energy markets by surprise on 4 July when it said it would raise its LNG production to 100 million tpy – equivalent to a third of current global supplies – within the next five to seven years.

It suggests that Qatar is preparing for a lengthy battle with Saudi Arabia, Egypt, the United Arab Emirates and Bahrain.

Qatar's move will add gas to an already oversupplied market in a thinly disguised challenge to other exporters who are also raising their output.

With low production costs and infrastructure already in place, Qatar is well placed to come out on top. Flooding the market with more LNG will help defend its place as the world's top exporter, a position challenged by Australia.

The main battleground for LNG market share is Asia, which consumes 70% of the fuel and where it is seen as a key fuel to meet soaring energy demand without the rampant pollution that comes with coal.

The main producers challenged by Qatar's move are those who have yet to attract a final investment decision, especially in the United States.

Flooding the market with more LNG at a time of oversupply and when buyers are reluctant to sign on new long-term contracts – which have so far dominated supplies – is expected to boost trading in Asia's spot LNG market, which currently makes up just 15% of overall supplies, as more uncontracted supply gets exchanged according to short-term demand.

The winners in this aggressive fight for market share are consumers.

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