The Gulf blog

On Qatar and its LNG competition 21, April 2014

Robert Tuttle – a solid reporter when it comes to financial-type things in Qatar and the Gulf – has written a good article on Qatar’s LNG future. Indeed, it’s one of the best I’ve seen recently offering a reasonably rounded snapshot of a crucial issue for Qatar going forward.

He rightly notes that Qatar will face stiff competition in coming decades, notably from Australia. As CNN reported back in 2012 in a snazzy slide-show, six out of the world’s ten most expensive energy projects revolve around Australian LNG. Tuttle’s suggestion that Qatar will be surpassed in 2018 as the world’s largest LNG supplier is entirely plausible. However, it is not quite that simple. The bureaucratic and particularly the environmental red tape in Australia are fearsome and while the investment and political will to push through Australia’s impending LNG domination is formidable and will doubtless win out eventually, the cost and the timescale are open to debate.

Tuttle does not touch on the LNG boom in East Africa, which, though utterly beset with institutional and governance issues, is still probably of a potential magnitude worth considering in such an article [though I should note that apparently the full length article is due out with Bloomberg soon].

The US shale revolution is certainly of relevance to Qatar going forward. Qatar’s decision to invest in a range of ‘competitors’ is a reasonable reaction to this, though its investment in the Golden Pass terminal in Texas is less a savvy assessment of trends and a subsequent engagement in a strategy of diversification as the result of investing in (i.e. building) an importing terminal, which subsequent to the Shale revolution became redundant.

In terms of grumbles about his article, there are a few. Very little started in 1971 with the discovery of the North Field (the world’s largest gas field that Qatar shared with Iran). Indeed, at the time the entire field was dismissed as irrelevant such was the myopic desire for oil. Quoting the Gas Exporting Countries Forum based in Doha makes some sense, but it is entirely unclear as to whether the organisation is of any meaningful, practical use whatsoever.

More importantly, the question of demand is not addressed at all. Certainly, articles have word limits and irascible editors and such, but this issue is not only about supply. Indeed, without considering the potential changes in demand, it is difficult to draw any meaningful conclusions as to the effects of greater supply on Qatar. If demand from East Asia keeps on rising then it is entirely possible that the new supply will meet the demand and the net result will be negligible as far as Qatar is concerned.