Much has already been written over the last 24 hours by pundits and analysts alike about Qatar’s decision to leave the Organization of the Oil Exporting Countries (OPEC) by January next year. Some have chimed in, claiming that it’s an irrational move, while others have, perhaps correctly, attributed it to “toxic politics” in the always volatile Middle East. The latter view has much credibility given Qatar’s ongoing geopolitical rift with many of its Arab neighbors over allegations of financing terrorist groups, which led to a regional economic boycott of the country last year.
Despite the tensions, Qatar is claiming that its exit from OPEC has no political overtones. Saad al-Kaabi, the country’s energy minister, told a news conference on Monday that the decision was not linked to the political and economic boycott imposed in June 2017 by Saudi Arabia and three other Arab states – the United Arab Emirates, Bahrain and Egypt. The group also imposed a trade and travel embargo on Qatar over allegations of support for terrorism groups.
Ending 57 years of membership
Al-Kaabi added that the decision to withdraw had not been easy after 57 years of OPEC membership, but noted that the country’s impact on the cartel’s production decisions will be small. He stressed that Doha would continue to abide by its global commitments like any other non-OPEC oil producer. Related: Putin Looks To Capitalize On Waning U.S.-Saudi Relations
At the end of the day, Al-Kaabi is right. The exit of Qatar, an OPEC member since 1961, from the cartel will have scant impact on group since it represents just 2 percent of its total oil production. Qatar is the cartel’s 11th largest oil producer, producing only 600,000 barrels of oil per day. In context, Saudi Arabia just reached a historic record of pumping 11 million bpd. Moreover, it’s been gas that has made Qatar, per capita, one of the richest countries in the world, not its oil exports. Natural gas is the cornerstone of Qatar's economy and accounts for more than 70 percent of total government revenue, more than 60 percent of gross domestic product, and roughly 85 percent of export earnings.
OPEC cracks could deepen
The Qatari move could indicate, however, that cracks are growing within OPEC amid Saudi Arabia’s decision to forge both increased geopolitical and energy relations with Russia. Though Qatar is a tiny OPEC player, other cartel members, upset at Saudi Arabia’s willingness to bow to U.S. pressure to ramp up oil production as well as the Kingdom's willingness to go outside the cartel for oil market management could follow Doha’s lead.
Al-Kaabi also said that the move to leave OPEC was related to its liquefied natural gas (LNG) ambitions, which should be taken at face value. Related: Alberta Intervenes To Halt Canada’s Oil Crisis
“Achieving our ambitious strategy will undoubtedly require focused efforts, commitment and dedication to maintain and strengthen Qatar’s position as the leading LNG producer,” he said in a statement. “I would like to reaffirm Qatar’s pride in its international standing at the forefront of natural gas producers, and as the biggest exporter of LNG.”
Qatar is already the world’s largest LNG producer, with some 77 million tons per annum of liquefaction capacity, though that lead is not being challenged by Australia as it finally completes its massive LNG project expansion boom.
Yet, going forward, Qatar will far outpace any of its LNG exporting rivals, both Australia, Russia and even the U.S. as the country enters its so-called second phase of LNG project development. Last year, in a surprise statement, not dissimilar to Monday’s statement that it would leave OPEC, Qatar announced that it would boost LNG production to 100 mtpa within the next five or six years - a remarkable decision given LNG development in other parts of the world that will all be vying for the same market share. The new additional volumes will 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.
By Tim Daiss for Oilprice.com
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