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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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Qatar Doubles Down On LNG Expansion Despite Saudi Blockade

Tiny gas-rich Qatar is pushing through with its plans to solidify its top spot as the world’s largest liquefied natural gas (LNG) player both in terms of liquefaction capacity and exports. The kingdom currently has an LNG production capacity of 77 million tons per annum (mtpa), but mid last year it shocked energy markets when it announced that it would ramp up production to a staggering 110 mtpa by further developing its prolific North Field within six years.

Doha is also likely ramping up production to not only keep its top production slot out of reach of its two toughest LNG production competitors, Australia, and the U.S. Though Doha denies it, the kingdom is also likely ramping up production in the wake of a Saudi-led Arab boycott against Qatar for alleged support and funding for terrorist groups and for its closer pivot to Saudi arch-rival Iran which is battling Riyadh for geopolitical hegemony in the region. Egypt, the United Arab Emirates, and Bahrain have also taken part in the boycott, which has for all practical purposes failed to achieve its goals.

Qatar, after initially struggling amid the boycott, pulled out of OPEC in January to focus on its gas sector. Moreover, in 2018 it reached a trade surplus of $52 billion in spite of the geopolitically charged boycott. Media in the region said Qatar was still attracting strong demand despite the economic and diplomatic boycott by its former Gulf allies. In 2018, Qatar raised $12 billion in its first dollar bond sale in two years, bypassing Saudi Arabia’s $11 billion bond issue the same year.

Frustration in Riyadh over its inability to effectively punish its neighbor in the region hasn’t been reported in Saudi media, but it must be disconcerting nonetheless, especially for upstart Saudi Crown Prince Mohammed bin Salman who has been accused by several U.S. lawmakers of being reckless and dangerous in his international dealings, including his purported involvement in the murder of U.S. Saudi dissident journalist Jamal Khashoggi in the Saudi consulate in Istanbul in October. Related: STEO: Brent To Average $70 This Year

Qatar is also defying the Saudi led boycott in other ways. In March, the kingdom said it was aiming to start an energy-focused lender, Energy Bank, that will eventually be worth $10 billion. Speaking at an Islamic Finance conference in Doha at the time, Qatari executives said it would be the largest Islamic energy-focused lender in the world and would target private sector and government energy projects, both at home and abroad. Mohammed al-Marri, chairman of Energy Bank’s media committee, said operations would begin in the fourth quarter of 2019.

Pushing through on LNG expansion plans

In lockstep with its ambitions, state-run gas giant Qatar Petroleum (QP) said on Tuesday that it had invited bids for engineering, procurement, and construction (EPC) work to expand its LNG storage, and the loading and export facilities for its North Field Expansion project. QP added that the tender package is for EPC work for three LNG storage tanks, compressors to recover tank boil-off gas during storage and jetty boil-off gas during LNG vessel loading. The tender would also include LNG rundown lines from the LNG trains to the LNG storage area as well as two additional LNG berths, with an option for a third LNG berth.

Going forward, Qatar will not only continue to build more LNG infrastructure, but invest in other LNG projects in a myriad of countries, including the U.S. and even Russia - a true stroke of energy geopolitical genius and diversification, likely putting Qatar out of harm's way from the current and any future Saudi maneuverings to try to bring it to its knees. Gas has made Qatar, per capita, one of the richest countries in the world, while the fuel 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.

By Tim Daiss for Oilprice.com

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