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Tim Daiss

Tim Daiss

I'm an oil markets analyst, journalist and author that has been working out of the Asia-Pacific region for 12 years. I’ve covered oil, energy markets…

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Tiny Qatar Flexes Its Muscles With Oil And Gas Investment Push

Qatar is continuing to make energy headline news. The tiny kingdom is forging its own path even at the expense of recently pulling out of OPEC to focus on its liquefied natural gas (LNG) ambitions. However, its decision to pull the plug on its involvement with OPEC was also likely a geopolitical move against Saudi Arabia and other Arab neighbors that put in place a blockade and economic measures against Doha over what they allege is state sponsorship of terror groups, an allegation that the country vehemently denies.

Over the weekend, news broke that Qatar is now aiming to invest billions in the North American energy patch, including a new deal with Italian energy company Eni for three oil fields in Mexico, as well as making an investment decision by the end of the year or January on the Goldan Pass LNG project proposal in Texas. State-run Qatar Petroleum is the majority owner of the Golden Pass LNG terminal, while U.S. oil major Exxon Mobil and U.S.-based independent oil company ConocoPhillips hold smaller stakes.

Investing $20 billion in the U.S.

Saad Sherida al-Kaabi, the current Minister of Energy in Qatar and head of state-run Qatar Petroleum, said on Sunday that the company will also announce foreign partners for new LNG trains needed for an ambitious domestic scale-up by the middle of next year. He added that as part of its more than $20 billion investment push in the U.S., the company is looking “at gas and oil, conventional and non-conventional.”

Self-financing options

Currently, Qatar Petroleum is still in talks with international oil firms about the LNG expansion push at home, including Eni, Kaabi said. Other partners already operating in Qatar include Exxon Mobil, French oil major Total, Royal Dutch Shell and Eni. He also said the company could self-finance the LNG expansion rather than borrow, marking a major shift from previous deals where it used lenders to fund up to 70 percent or more of project costs. Kaabi said it could carry out the expansion alone if no good offers from foreign firms were made.

Operations in Mexico

In Mexico, Qatar Petroleum and Eni will produce about 90,000 barrels of oil a day from the Amoca, Mizton and Tecoalli fields in the Gulf of Mexico by the end of 2021, Kaabi said at a press conference with Eni Chief Executive Officer Claudio Descalzi in Doha over the weekend. The fields hold 2 billion barrels of oil equivalent, according to Kaabi. Related: Saudi Oil Minister: Crude Stocks Should Drop Very Soon

The companies are already working together on a separate offshore block in Mexico, according to press releases from both companies. Eni gained approval for the developments earlier this year and needs the Mexican authorities to sign off on Sunday’s deal. For its part, Qatar Petroleum now has operations in Mexico, Brazil, Argentina, Oman, Congo, South Africa, Cyprus and Mozambique.

Flexing its muscles

The timing of Qatar’s proactive moves comes just a few weeks after it shocked energy markets by announcing it would withdraw its decades-long membership from OPEC starting in January. Perhaps more importantly, Qatar’s energy push in both the U.S., Mexico as well as other countries shows that it can flex its muscles and its wealth despite being ostracized by most of its middle eastern neighbors. Mexico, for its part, is keen to attract foreign direct investment to jump-start its struggling oil sector. Last week, the country’s new government gave plans to build an $8 billion oil refinery in the home state of new President Andres Manuel Lopez Obrador, in addition to renovating six other plants as the nation attempts to lower its dependence on imported fuel.

Qatar’s interest in the U.S. LNG sector is also a stroke of both geopolitical and energy markets savvy since the U.S. could by the mid part of the next decade compete with Qatar as the top LNG producer in terms of liquefaction capacity as the so-called second wave of U.S. LNG project development becomes operational.

Jockeying for top global LNG slot

However, Qatar is also developing a fourth LNG production train to increase its liquefaction capacity from a current 77 million tons per annum (mtpa) to 110 mtpa by around 2023. The new additional volumes be secured by doubling the size of the new gas project in the southern sector of the North Field, which Qatar Petroleum had announced earlier. Yet, going forward, Australia, which has briefly overtaken Qatar as the top LNG exporter, and even Russia, will all vie for top global LNG exporter status even after Qatar ramps up its production. Related: Iran Claims It Holds The Most Oil, Gas Reserves In The World

All of this LNG project development will come just a few years before LNG buyers in North Asia, which accounts for nearly three-quarters of global LNG demand, will see uncontracted demand in the region increase even more amid increase Chinese procurement of the super-cooled fuel, rising four-fold by 2030, according to a new report by energy consultancy Wood Mackenzie. The major LNG buyers - CNOOC, CPC, JERA, KOGAS, PetroChina, Sinopec and Tokyo Gas - together account for more than 5 percent of the global LNG market, Wood Mackenzie added.

Revamped relations with Riyadh

Finally, Qatar said on Friday that negotiations to end the feud with its Arab neighbors can only begin after the Saudi-led group ends the embargo on the gas-rich country. “Our position on the solution hasn’t changed,” Emir Sheikh Tamim bin Hamad Al Thani said at a conference in Doha on Saturday. “The blockade should be lifted, and the dispute resolved with dialogue based on mutual respect and non-intervention in the internal affairs of states.”

Last week, according to a Bloomberg report, Sheikh Tamim turned down an invitation from Saudi Arabia’s King Salman to attend a gathering of Gulf monarchies. This initial gesture was seen as a sign of thawing relations after 18 months of Qatar’s boycott by the kingdom, the United Arab Emirates, Bahrain and Egypt.

By Tim Daiss for Oilprice.com

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  • Mamdouh G Salameh on December 19 2018 said:
    Qatar’s decision to leave OPEC is overwhelmingly motivated by concentrating on LNG being the major source of its wealth and also taking measures to defend its position as the world’s largest LNG producer and exporter against Australia, the US and Russia.

    Qatar is not a major player in OPEC. Its production in 2017 averaged 600,000 barrels a day (b/d) of which some 466,000 b/d were exported on average according to the 2018 OPEC Annual Statistical Bulletin.

    And while by leaving OPEC Qatar may lose some influence in the global oil market, its strategy to expand its LNG production capacity will not only consolidate its position as the world’s largest producer and exporter of LNG but will more than offset its loss of influence from OPEC and will also enhance its stature as the world leader in the fast-growing global LNG and natural gas market.

    And in order to continue occupying the top spot in LNG, Qatar is expanding its LNG production from the current 77 million tons to 110 million tons by 2023/24. Qatar is also enhancing its lead by buying the competition or investing in more LNG productive assets around the world. The proposed investment of $20 bn in LNG projects in the United States over the next few years falls within that investment strategy. Qatar already has a significant presence in the emerging LNG market of the United States. It is the majority stakeholder in the Golden Pass terminal in Texas, where it has partnered with ExxonMobil and ConocoPhillips.

    Qatar is also reported to have reached a new deal with Italian energy giant Eni for three oil fields in Mexico where Qatar Petroleum and Eni will produce about 90,000 barrels of oil a day (b/d) from the Amoca, Mizton and Tecoalli fields in the Gulf of Mexico by the end of 2021. The fields are estimated to hold 2 billion barrels of oil equivalent.

    Sooner or later Saudi Arabia, UAE, Egypt and Bahrain will realize that there is no benefit to be gained by a continuation of the blockade against Qatar and that the dispute should be resolved with dialogue based on mutual respect and non-intervention in the internal affairs of states.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • Johan Steyn on December 24 2018 said:
    Very informative piece Mr. Daiss, I would however like to add to the information related to the additional LNG Trains which you stated, are planned for Qatargas; As it stands, OG North currently have 7 LNG Trains, while QG South has another seven LNG Trains. QG has also announced the construction of another 4 Mega Trains at it's Ras Laffan facility, bringing the total number of LNG trains in QG alone, to 18 by 2023. There are various other installations at the same site having their own LNG trains, but these are not related to the article.

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