Energy markets restructure beyond 2022 and its implications on Qatar LNG sales strategy: Business forecasting and
Noor Yusuf1, Rajesh Govindan1, Tareq Al-Ansari1
1College of Science and Engineering, Hamad Bin Khalifa University, Qatar Foundation, Doha, Qatar.
Abstract:
The emergence of new suppliers and energy resources has reshaped the energy market in terms of contractual structures and pricing systems. The market shifts were accelerated in response to the latest Russian-Ukraine crisis, impacting natural gas supply chains from financing projects to contracting volumes. The increased demand for liquified natural gas volumes intensified the need to switch from long-term oil-indexed contracts to short-term gas-indexed contracts. Those shifts were anticipated to influence the selling strategies for the expected added 49 MTPA of Qatari LNG, wherein increasing the share of spot selling would be reflected in higher economic performance. This study used forecasted prices to investigate potential Qatari LNG selling strategies. Initially, projections of the most dominant pricing systems used for pricing Qatari LNG (i.e., brent, Henry Hub, Title Transfer Facility, and Japan Korea Marker) were estimated between 2023 and 2040. While Qatar has been relying on long-term oil-indexed contracts, the second step estimated annual LNG revenues under different combinations of selling strategies (i.e., long-term and spot sales). Finally, the influence of varying brent slopes on the estimated revenues was measured. Due to data limitations and non-stationarity, the double exponential smoothing model was selected among the different tested models. Considering current market dynamics, forecasts of the double exponential smoothing model showed an upward price trend until 2040. An annual average increase of 1.24% for the studied pricing systems was reported. Reducing the share of long-term brent-indexed contracts to 70% and dedicating the remaining 30% of volumes to spot sales yielded the highest premiums for revenue estimates. An average annual revenue of $62 bn was reported for the 70/30 strategy, around 6% higher than the 100% brent-indexed contracts strategy. The findings revealed that diversifying the selling approach and introducing spot sales can enhance revenues. From the buyers' perspective, the outcomes support policymakers in understanding the implications of escalated prices driven by a lack of liquidity investments.
