To Boost Export Of Its Environmentally Friendly LNG, Qatar Pulling Out Of Oil Cartel (OPEC)
Though OPEC only regulates oil production, spikes in the LNG industry impact the crude oil market and can undercut prices.
BE2C2 Report (Dec 3, 2018) — The world’s largest exporter of LNG, Qatar has announced it’s withdrawing from the Organization of the Petroleum Exporting Countries (OPEC) as of January 2019 to focus its efforts on boosting its production and export of the environmentally friendly fuel.
“A lot of people will politicize it,” said Qatar’s Minister of State for Energy Affairs Saad al-Kaabi, Reuters reports. “I assure you this purely was a decision on what’s right for Qatar long term. It’s a strategy decision.”
Al-Kaabi said Qatar will increase its production of both LNG and oil. It will boost LNG exports from 77 million tons of gas annually to 110 million tons and oil production capabilities from 4.8 million barrels to 6.5 million.
The additional millions of tons of new LNG production could cost about $27.6 billion, according to Sanford C. Bernstein Ltd. That’s a bargain compared with the $88 billion that Chevron spent to build the 24.5 million ton per year LNG export developments in Australia.
“We are not saying we are going to get out of the oil business, but it is controlled by an organization managed by a country,” al-Kaabi said, in an apparent shot at Saudi Arabia, though he mentioned no country by name, according to Reuters.
The decision came after Qatar, one of OPEC’s smallest producers but the world’s largest exporter of environmentally friendly fuel, reviewed ways to enhance its role internationally and plan long-term strategy, including focusing on its gas industry, said al-Kaabi on Monday.
“Qatar has decided to withdraw its membership form OPEC effective January 2019 and this decision was communicated to OPEC this morning,” he told a news conference, adding that Qatar would still attend an OPEC meeting in Vienna this week.
Qatar has been under a diplomatic and economic embargo by its Arab neighbors, including OPEC members Saudi Arabia and the United Arab Emirates, for the past 18 months. In response, Qatar has been increasing gas production, the mainstay of its economy.
OPEC has no role in the global market for natural gas. And Qatar made no reference to the dispute with other Gulf states in its announcement, emphasizing plans to cement its position as the world’s leading supplier of gas. Its exports currently account for about 30% of global demand.
The announcement comes ahead of the meeting by OPEC and its allies including Russia on December 6-7 to discuss cutting supply.
Qatar is a marginal player in OPEC when compared to some of the cartel’s biggest producers, such as Saudi Arabia and Iraq. It pumps about 600,000 barrels of oil a day out of more than 27 million from all OPEC members.
But the surprise move comes at a critical time for OPEC. Its members and other major producers are due to meet in Vienna this week to impose crude production cuts to address the excessive supply in the oil markets and boost oil prices.
In November, Saudi Energy Minister Khalid Al-Falih said the cartel and its allies would cut crude supplies by as much as 1 million barrels of oil a day.
Qatar minister said, “we are a very small player in OPEC and I don’t have a say in what happens.”
Though OPEC only regulates oil production, spikes in the LNG industry impact the crude oil market and can undercut prices–Qatar’s LNG production cost is said to be cheaper than oil in the region, according to independent estimates.
The minister said the decision was not easy as Qatar has been in OPEC for 57 years, but that the country’s impact on OPEC production decisions was small.
He stressed that Doha would continue to abide by all its commitments like any other non-OPEC oil producer.
The surprise declaration could make Qatar the first Middle East nation to leave the cartel since its founding in 1960.
Although contributing only a fraction of OPEC’s overall production, Qatar’s decision also throws into question the viability of the cartel. Once muscular enough to grind America to a halt with its 1970s oil embargo, OPEC needed non-members like Russia to push through a production cut in 2016 after prices crashed below $30 a barrel. That’s unlikely to change, especially as the United States regained the throne of the world’s top oil producer.
As for the world’s top energy importer, China will become the world’s top natural gas importer by 2019, and most imports by 2023 will be supplied by LNG, the International Energy Agency (IEA) said in its Gas 2018 report in June.
China Launches Two Satellites Developed By Saudi Arabia
RIYADH (Dec 7, 2018) — China on Friday successfully sent into space 2 remote sensingRead More
Dubai Female Police Officers Pull Plane to Guinness Record
DUBAI; Dec 6, 2018 — A group of 77 female police officers in Dubai setRead More