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On Qatar and its LNG competition 21, April 2014

Posted by thegulfblog.com in LNG, Qatar.
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LNG Tanker

 

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.

The Genesis of Qatar’s Foreign Policy 19, June 2013

Posted by thegulfblog.com in Al-Jazeera, Egypt, Foreign Policies, Qatar.
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The following article appeared in Sada, Carnegie Middle East’s super online journal under the title ‘Qatar’s Global Bargaining Chips’.

The fundamental thrust of Qatar’s foreign policy stems from two interrelated factors: the limitations of its location and the elite’s appreciation of how best to overcome these constraints. Historically, Qatar has always been a small power among larger ones and this mismatch has forced the ruling elites to seek a range of protective agreements, while maintaining as much autonomy as possible.

The latest incarnation of an external guarantor for Qatar is America, whose protection was sought in the aftermath of the invasion of Kuwait. While Qatar gratefully accepts the US security blanket, its leadership nevertheless assiduously seeks to diversify its dependency on America. Not only does this potentially offer Qatar more freedom of action, lowering its ability to be pressured by the United States, but given that history clearly dictates that each and every suzerain will eventually leave, it is prudent for Qatar to prepare for this eventual possibility.

Qatar’s Liquefied Natural Gas (LNG) export strategy is a good example of this; it’s a savvy economic policy, a good use of Qatar’s prodigious gas supplies, and it ties Qatar into the economic-energy nexus of a range of important states around the world. According to the International Energy Agency (IEA), in 2011 Qatar delivered over 2000 million cubic metres of LNG to Belgium, China, France, India, Italy, Japan, Korea, Spain, Taiwan, the US and the UK, while it delivered smaller quantities of LNG to Argentina, Brazil, Canada, Chile, Greece, Kuwait, and Mexico. This list includes four of the five permanent members of the UN Security Council and two temporary members. This is a useful set of countries with whom to have an energy relationship.

Countries like the UK, Japan, and China—who receive a significant percentage of their energy needs from Qatar—would be compelled to support the state if its energy security were threatened. In a volatile region where Iran frequently rattles the sabre, often threatening to close the Strait of Hormuz, tying such important countries into Qatar’s continued prosperity is important. Similarly, whether Qatar wants support in international forums or with international investments, relations based on deep energy-interdependence can be a stepping stone.

This rationale can also explain to some extent Qatari-Egyptian relations in the aftermath of the January 25 revolution. Before the overthrow of Mubarak, the bilateral relationship was poor with Egypt blocking Qatari initiatives in the Arab League and in peace talks in Darfur, regardless of their merits. Yet now Qatar has restarted its relations using its connections with the Muslim Brotherhood to forge a close relationship with key actors in Egypt’s new elite. Moreover, Qatar has matched its rhetorical support with billions of dollars of aid for Egypt’s economy. By so overtly backing the new government in a time of crisis, for a short time at least the Qatari leadership can expect some combination of support for their diplomatic initiatives and plumb economic investment opportunities. While Qatar will not be buying the Pyramids or the Suez Canal as some scurrilous reports have suggested, it may have the opportunity to invest in the Suez Industrial Zone. Similarly, there are rumors that Qatar may obtain favorable exemptions from investment laws in Egypt in much the same way that it avoided certain property taxes in France.

While it may seem unlikely for a state to operate in such a way and to expect some kind of reciprocity, the Qatari perspective assumes otherwise. Policy is perennially made at the very top of the elite structure and the personal convictions, discussions, and agreements of the Emir can have profound effects on Qatar’s policies.

Indeed, as unfashionable as it is to note the importance of an initial humanitarian impulse, given the personalized nature of Qatari politics, it may have been of key importance when Qatar so assiduously and quickly supported the opposition forces in the Libyan uprising. Yet it is not the only factor in the equation. Aside from potential understandings of reciprocity, Qatar also boosts its image and soft power immensely by being so closely associated with the revolutionary movements, which is a potential boon, both externally and internally. And if Qatar can establish normal or perhaps privileged relationships with the new governments across the region, replacing the previously fraught relationships (i.e. with Mubarak’s Egypt and Gaddafi’s Libya) then this too may bring economic benefits with greater trade and investment.

The highly personalized nature of Qatar’s politics and foreign policy is why the recent rumored changes in Qatar’s elite (allegedly involving the Emir and the Foreign Minister) are so important. While Qatar’s strategic direction has been set by the Emir, with Qatar resolutely focusing on this international arena, always seeking to involve itself where possible, there is still significant room for personal conviction to alter trajectories. For example, the Crown Prince of Qatar, the son of the Emir and his influential wife, Sheikha Moza, will sooner or later guide Qatar’s policies by himself and has been imbued with the Qatari vision. In the areas where he has had control of policy, notably in the sporting arena and Qatar’s food security project, he has pursued innovative and striking policies, striving to place Qatar in the midst of international discussions and events focusing these topics. Initial assumptions, therefore, can only conclude that while a future Emir Tamim may not have the zeal of his father or the current Foreign Minister to controversially propel Qatar into ever more international incidents, he is unlikely to retrench Qatar’s internationalist position.

Qatar: 16% growth in 2010, 1/3 LNG capacity growth and is to supply Dubai with LNG 26, January 2010

Posted by thegulfblog.com in Qatar, The Emirates.
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For a small country, Qatar continues to put out outstanding figures [though I realise that these things are not related…]. As the title of the article suggests, their economy is predicted to grow by 16% in 2010. Their LNG production is expected to grow from 54 millions tonnes per year to 77 million tonnes by the end of the year. Also it has been announced that Qatar will supply Dubai with up to 37 billion tonnes of LNG per year starting soon. Why Dubai isn’t getting its gas from its sister state, Abu Dhabi, is a mystery…or not.

Qatar doubles LNG output 3, November 2009

Posted by thegulfblog.com in Qatar.
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The Qatari Energy Minister Abdullah Al Attiyah officially opened Qatar’s latest and largest LNG plant at Ras Laffan. It is estimated that the plant will be able to produce around 7.8 millions tonnes of LNG per year. The sheer size of the plant helps it tremendously with economies of scale, producing each tonne of LNG at cheaply as possible. The site is also able to accommodate the latest and largest generation of LNG ships (roughly the size of an aircraft carrier) which, with a mobile cooling station on board, extends its span across the world and saves on the LNG dissipating into the ether.