When it comes to the price of oil, there is no sure thing. Prices rise and fall according to weather, geopolitics, and supply.
This has been on display at the ongoing, online meeting of the Organization of Petroleum Exporting Countries and its oil-producing allies, a group known as OPEC+, to decide production policy. So far, they have agreed to raise production by 400,000 barrels per day, starting in January 2022, if the price holds and there isn’t a global economic slowdown caused by the Omicron variant.
Normally, the price of liquefied natural gas (LNG) moves empathetically with the price of oil. But that is unlikely now.
Global energy markets are stressed at the onset of winter in the northern hemisphere as they haven’t been in decades. The result is that Qatar, the independent emirate on the west coast of the Persian Gulf, is in a particularly good place.
Qatar is the world’s largest exporter of LNG for which world demand is surging. And it sees LNG as a greener fossil fuel in these climate-conscious times.
Even as world leaders talked of reducing dependence on natural gas at the COP26 climate change conference in Glasgow, Scotland, nations everywhere were desperately seeking more of it.
Qatar has consistently bet long on LNG and got it right.
While it has limited oil reserves and is a minor oil producer, as a natural gas exporter, it is a major. It sits on the world’s largest proven reserves of natural gas, followed by Russia.
Qatar is upping its LNG bet by developing a vast new northern field with the aid of foreign investors. They are keen to get in on the gas play, which is getting harder and harder to do in the United States and elsewhere. When this field is at full production, it will increase the country’s LNG exports by 64 percent.
Qatar’s nearest LNG rival is Australia, which has been developing this gas resource rapidly. But nothing will dislodge Qatar from its global status as the world’s top producer of LNG.
Lowest Lifting Cost
Fortuitously, Qatar’s LNG lifting cost is the world’s lowest, and that is unlikely ever to change. This has added a second revenue stream: liquids derived from natural gas. These include ethane, propane, and butane.
While the world frets about its use of fossil fuels, it nonetheless is desperate for more natural gas. Qatar reckons gas is useful in the fight against global warming as the versatile, somewhat clean alternative to coal and oil combustion to make electricity.
Qatar has just ordered 10 natural gas tankers (those huge ships with the distinctive spheres rising above the decks), six from South Korea and four from China.
The Gulf state sees itself as a green knight in the climate-change battle. In October, Qatar’s prime minister and minister of interior, Sheikh Khalid bin Khalifa bin Abdul Aziz al-Thani, unveiled an ambitious environmental program: the Qatar National Environment and Climate Change Strategy.
QatarEnergy, the state-owned hydrocarbon company, also is pursuing sustainability and is working to reduce greenhouse gas (GHG) emissions. In conjunction with oil giant Chevron and Pavilion Energy of Singapore, it has announced a plan to map GHG emissions from Qatar’s LNG production and transportation. Methane is a deadly greenhouse gas, and Qatar is determined to stop leaks which can occur all along the LNG chain, from well to delivery.
The environment, says Qatar, is to be front and center. It sees natural gas as the transition fuel — an ally in fighting GHG emissions as it enables countries, particularly those in Asia, to stop burning coal, the primary contributor to atmospheric carbon.
While U.S. environmentalists seek to shut in natural gas, the world gasps for it. Only by burning gas can China, India and other coal based-electric systems switch to a cleaner fuel while they build nuclear and install wind and solar generation, argues Qatar and others looking globally.
New Way of Thinking
Saad Sherida al-Kaabi, Qatar’s energy minister, said at a seven-nation virtual ministerial last December that the post-Covid-19 world will be different and will require a new way of thinking about economics and the environment. “This is where, I believe, natural gas plays a pivotal role and displays its most important economic and environmental qualities,” he said.
Qatar protrudes like a thumb into the Persian Gulf. It is a little smaller than Connecticut, but its population is 2.9 million – some 313,000 are citizens and the rest are expatriate workers.
For three years, four Arab states imposed a blockade against Qatar. The cause of their unhappiness was the country’s independent streak. Qatar funds in part the Al Jazeera television network, whose broadcasts were deemed by Saudi Arabia, the United Arab Emirates, Bahrain, and Egypt as being supportive of terrorism. Egypt said they were giving voice to the Muslim Brotherhood during a period of stress. Also, Qatar refused to curb its relations with Iran. Following Kuwaiti and U.S. mediation efforts, the five Arab brothers kissed and made up last January.
On a visit to Doha, Qatar’s ultramodern capital city, I saw signs of its difference with neighbor Saudi Arabia everywhere. You can buy a drink in its hotels; most women don’t wear niqabs and burqas, and they come and go in public. Qatar is a devoutly Muslim country, but accommodatingly so.
Qatar will host global throngs during the FIFA World Cup, which opens on Nov. 21, 2022. That will put the country on the world stage in a very different way.
Qatar has two aces: Its natural gas and its extraordinary friendship with the United States. It hosts the Al Udeid Air Base, America’s largest in the region, which has been invaluable in our military operations in the Middle East. Qatar was the go-between for Washington and Afghanistan’s Taliban and today hosts a Taliban embassy, giving the United States the ability to talk to the Taliban without opening formal relations with Kabul.
Energy policy, climate change and politics are inextricably entwined. Qatar’s management of these issues shows that international stakeholders can navigate them to produce winning results.
