OBG talks to Hamad Rashid Al Mohannadi, CEO, RasGas

Interview: Hamad Rashid Al Mohannadi

How have recent shifts in supply and demand on the international gas market impacted the Qatari market for liquefied natural gas (LNG)?

HAMAD RASHID AL MOHANNADI: RasGas’ strategic vision, since its inception in 1993, has enabled it to become a major LNG supplier to the world. We took a long-term decision to provide cleaner energy in the form of LNG worldwide at a time when there was still a lot of scepticism about whether LNG could be a commercially viable source of energy. RasGas shareholders made significant investments along the LNG value chain to ensure production was linked to customer demand around the world. We established some of the world’s largest LNG production trains and a chartered fleet of 27 efficient LNG vessels designed to serve LNG receiving terminals around the world.

We monitor closely regional gas supply-demand balances, so that we can quickly respond to any incremental change in market demand for LNG supplies. Such opportunities may be driven by short-term factors such as weather or longer-term factors such as economic growth. Despite our global scale, we have the skills and commercial flexibility to be nimble – a key advantage in an increasingly competitive world. Asia will continue to be a very important export market. A majority of RasGas’ LNG is delivered to Asia under both long- and short-term contracts. Since 2011 we have signed two new long-term contracts, one with South Korea and another with Taiwan. Today, a total of 28 countries import LNG, representing a significant uptake over the past decade. RasGas is building on this by pursuing contracts in a number of new markets, while also looking to expand sales with existing long-term customers.

How do you envisage the global market for LNG changing in the medium term, in light of the shale gas boom currently under way in the US?

AL MOHANNADI: Within the US, the most pressing question will be about keeping gas prices as low as possible. However, US gas is likely to end up being more expensive once it actually arrives in Asia. Having said that, cheaper domestic prices in the US are likely to promote more usage of gas. For as long as gas remains a relatively cheap source of energy, it will begin to make inroads into new market segments, including bulk transportation and petrochemicals, particularly in North America. This is likely to create more demand for LNG and gas, and though nobody knows just how high that demand will be, I believe it may be substantial.

Taking into account global supply and demand, there is sufficient room for Qatar to continue to supply LNG and natural gas to markets worldwide. Indeed, we have reason to believe that the increase in shale gas production in the US will only encourage natural gas to be even more competitive as a source of primary energy.

In these circumstances, it will highlight the importance of natural gas in the policy making process, so it should not be treated as a negative development.

The biggest challenge for North America will be choices around how best to use the gas resources it has and will develop. Given its current economic worries it may make more sense for the US to use locally produced gas in its domestic economy to make its manufacturing base more competitive. It is quite possible that we will see continued technological innovation along the gas value chain driven by US research and development aimed at increasing the efficiency of gas use and its transportation, and these developments may eventually spread globally, helping to push up demand.

Where does Europe factor into the gas market given its current economic situation?

AL MOHANNADI: Europe as a whole is going through a difficult period economically. Indigenous sources of gas supply are in steady decline, though remaining reserves are substantial. Gas arrives via a diverse array of pipelines and by ship. But at some point Europe will need to further diversify its sources of supply. RasGas has four long-term LNG contracts in Europe, and so remains a very important market for the state of Qatar.