Qatar, asserting independence, to leave OPEC in 2019
The gas-rich Gulf state, seeking better US ties and greater autonomy from its rivals, sends out a 'trial balloon'
The Gulf state of Qatar’s half-century membership of one of the world’s most powerful cartels fell victim to clashing political and commercial interests this month.
It happened when the country’s new energy minister, Saad al-Kaabi, announced his nation would be leaving the Organization of Petroleum Exporting Countries (OPEC) on January 1, 2019.
While saying that the move was a “strategic decision” made to allow the country to focus on developing its far larger natural gas business, few have taken Kaabi’s explanation at face value.
Indeed, the Qatari move was likely the result of a variety of factors, ranging from looming US legislation to perceived Saudi and Emirati dominance over the 15-nation cartel.
At the same time, new Qatari oil field developments and the troubles of another multi-nation body, the Gulf Cooperation Council (GCC), have also been thrown into the mix.
“What happened, happened for a combination of reasons,” Rory Fyfe, an economist with regional think-tank MENA Associates, told Asia Times.
“It’s about the public story, the gas story, but it’s also about Qatar saying to those neighbors who haven’t been treating it particularly well recently, ‘Ok, we’ll be fine without you’.”
Oil versus gas
Qatar, a tiny Gulf peninsula the size of Jamaica, holds about 14% of the globe’s total known reserves of natural gas. Mostly located in the giant offshore North Field, these reserves are fed by pipeline to massive plants at the port of Ras Laffan, north of the capital Doha.
There, it is either passed on for local consumption, sent by pipeline to the UAE and Oman, or converted into Liquefied Natural Gas (LNG) and loaded onto ships for export.
This year, about 71% of those vessels headed for Asia, with Qatar responsible for nearly one third (27.6%) of the world’s total LNG deliveries.
The country is also ramping up its production of LNG, with this set to expand by about 40% in 2020 when new plants come on-stream.
Yet at the same time, “Qatar is not a huge oil producer,” Courtney Freer, research fellow at the LSE Middle East Centre in London, told Asia Times, “while OPEC also isn’t a place where you can talk much about gas.”
According to OPEC data, Qatar held only about 2% of the organization’s total oil reserves in 2017, yet has around 25% of OPEC’s total gas reserves.
Qatar’s oil output has also been dwindling as reservoirs are depleted. The country has been trying to address this, recently signing a major deal with France’s Total to increase production at the offshore Al Shaheen oil field.
Yet OPEC has recently been working to cut petroleum output in order to bolster prices.
“For Qatar and Total, that makes no sense right now,” adds Fyfe, “and would make things quite difficult for both.”
At the same time as announcing Qatar’s exit from OPEC, Kaabi said his country wanted to raise oil output from 4.8 million barrels a day to 6.5 million.
Kaabi is new to the job, having been appointed energy minister in a cabinet reshuffle in November. His background is heavily within the natural gas and LNG business at Qatar Petroleum (QP), which he still heads and which majority-owns the country’s gas and LNG business.
“While the previous energy minister was quite active in OPEC,” recalls Fyfe, “Kaabi is seen as perhaps less likely to see it as relevant, right now.”
In the United States, where Qatar owns one of the world’s largest LNG terminals, OPEC is highly unpopular with the Trump administration and is often the subject of disparaging tweets by the president.
Legislation known as NOPEC – No Oil Producing and Exporting Cartels Act – is progressing through Congress and could expose OPEC members to anti-trust suits.
Qatar’s decision to leave the organization may thus also be aimed at protecting its US investments and improving relations with Washington. The Trump administration, which initially took Saudi Arabia’s side against Qatar, has since pressed for a focus on Iran and left its traditional ally hanging.
“Qatar has always been very careful about timing,” Noha Aboueldehab, a visiting fellow at the Brookings Doha Centre, told Asia Times. “They’ve always been very good at that.”
A ‘trial balloon’?
The move came just before Qatar was due to attend an OPEC meeting in Vienna on December 5 and a GCC summit in Riyadh earlier this week.
“Saudi Arabia’s wishes have carried the day at OPEC in recent years,” Professor Mehran Kamrava, director of the Centre for International and Regional Studies at Georgetown University Qatar, told Asia Times.
“Powerful members such as Iran have not been able to assert their influence and there has been close collaboration between Saudi Arabia and non-OPEC member Russia on oil output, so OPEC isn’t what it used to be. Qatar has asserted its independence from all that by leaving.”
That it might wish to do so now is also likely a consequence of the Saudi and Emirati-led blockade imposed against Qatar back in May 2017.
“It’s another indicator of how the 2017 crisis has pushed Qatar to become more self-reliant and assert its autonomy wherever possible – particularly in relation to Saudi Arabia,” adds Kamrava.
The blockade also made the recent GCC summit in Riyadh an awkward affair, as Qatar, Saudi Arabia and the UAE are all members, along with blockade-supporting Bahrain and neutral Kuwait and Oman. The Qatari emir was invited but did not attend, and no reference was made to the dispute in the final statement.
“It’s another indicator of how the 2017 crisis has pushed Qatar to become more self-reliant and assert its autonomy wherever possible – particularly in relation to Saudi Arabia.”
“While I don’t believe Qatar will ever leave the GCC,” said Kamrava, “leaving OPEC could be a trial balloon. If these international forums are becoming increasingly irrelevant, what are the benefits of staying versus the costs of leaving? This could well be what Qatar is trying to work out.”
With no solution to the GCC crisis in sight, the fragmentation of organizations that for years brought the region’s nations together are likely to continue.
“Regional leaders may call for unity, but this has had no real impact,” said Aboueldehab. “Without pressure from the West – and the US in particular – it doesn’t look like anything much is going to change. Now, we can safely say, this division is the new normal.”