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Iran to supply gas to Qatar? 4, January 2011

Posted by thegulfblog.com in Iran, Qatar.
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A few reports have emerged suggesting that Qatar may begin to import Gas from Iran. This may sound rather curious. Qatar, after all, has the third largest gas supplies in the world and is the world’s largest exporter of LNG. Why, you may well ask, would they therefore possibly need to import gas?

Simply put, it makes far more economic sense for Qatar to suck the gas out of the ground and export it than to use it internally. Qatar, like most GCC States, heavily subsidises internal energy to the tune that I’d be surprised if they would cover their costs were they to use their own gas and charge their domestic market rates.

They can make a bigger profit on the gas that they sell abroad to easily offset the cost of buying the gas from Iran, if it comes to that. This kind of logic also helps to explain why Qatar did not supply Kuwait and Bahrain recently when they asked for Gas supplies. Seemingly, these GCC countries wanted some kind of wasta-based discount. Qatar refused as they can simply make more money selling their gas further afield.

Iran does not have the technology to engage meaningfully in the LNG business and so their good old fashioned gas can be piped along relatively cheaply; certainly there will not be many transportation costs. Moreover, Qatar and Iran have a good outwardly friendly relationship. This kind of agreement – which is to say one that is not integral to security, but more than the usual litany of MOUs – fits nicely into their current positive relationship.

The other cause could simply be that currently Qatar does not have any spare capacity to spare for their domestic market. Yet, while Qatar certainly does have a large number of long-term overseas contracts, given the scale of their production, I’d be surprised if this were the case.

The Qatar Tribune also notes that the Barzan Gas Project is expected to be completed by 2014 which plans to supply gas for local power generation. I can only assume that this project is heavily subsidised by the rest.

 

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