Being a small – by land mass – nation on the east coast of the Arabian Peninsula, news about Qatar may not be at the tip of the tongue of global citizens. The population has reached nearly 2.6 million, with only 200,000 being Qatari and much of the balance is composed of migrant workers. However, the emirate’s role in various geopolitical, economic and financial matters far outweighs its size. Its strategic importance is an offshoot of its rapid growth, vital role in energy markets (especially natural gas and LNG – the top exporter in the world), maintaining a top 10 status of global GDP per capita and policy (It is also hosting the World Cup in 2022).
Qatar has practiced an independent, often being described as hands-off, foreign policy – at loggerheads with other Gulf Cooperation Council (GCC) counties, which has harbored resentment. It has scored recognized successes recently with the release of Japanese journalist Jumpei Yasuda from armed groups in Syria – with Turkish assistance, American journalist Peter Theo, who was released by the al-Nusra front in 2014, mediation of border disputes between Eritrea and Djibouti and in Sudan it hosted and mediated the peace process in Darfur.
More loosely, world leaders have voiced concern over its independent action in regard to negatively viewed actions carried out by the emir, but Qatar’s role in energy markets, housing the 10,000 troop United States Al Udeid Air Base, where the forward operating base of United States Central Command sits, arms sales and embracing the U.S. has complicated emphasizing concerns and quelled sustained, widespread condemnation.
Regional Blockade
Regionally, since 2017, Qatar has had a blockade imposed against it by Saudi Arabia, the UAE, Bahrain and Egypt. The quartet’s stated reasoning has been that Qatar is a sponsor of terrorist organizations. Qatar has denied this claim.
The blockade includes land and air closures, and trade and travel restrictions. Qatar had been heavily reliant on land and sea for imports to meet the basic needs of its population. About 40% of its food was imported across the land border with Saudi Arabia – its only land border. Turkey, Oman and Iran have stepped in and have been facilitating supply routes.
Thirteen demands were presented by the quartet but have not been pursued by Qatar. Front and center is to end all connections to terrorist and ideological groups, limit relations with Iran, and financially compensate the four counties for loss of life, property and income as a result of its policies. Qatar has acknowledged that it has provided assistance to the Muslim Brotherhood but denies aiding militant groups linked to al-Qaeda or ISIS.
Loosening its relationship with Shia dominated Iran does not appear likely as the nations share the world’s largest natural gas field and, especially now, given the fact Iran is providing it with food, water and medical supplies. One could argue the blockade has in fact strengthened its relationship with Iran. The trade balance between the two countries dramatically increased as a result, reaching $2 billion over the past year.
Kuwait has offered to mediate in the dispute.
Blockade’s Importance on Energy
There has been some speculation that natural gas is the factor for the blockade rather than terrorism. Qatar’s proven natural gas reserves tally approximately 25 trillion cubic meters, third-largest in the world after Russia and Iran, or almost 14 percent of total world natural gas reserves. The vast portion of the resource is located offshore within the North Field, which reaches Iran’s waters – the South Pars Field. Qatar, also a member of OPEC, produces about 1 million barrels of oil per day.
Qatar has continued to be the top global LNG exporter, a position it has held for over a decade. Its efforts are led by Qatargas, whose parent company is state-owned Qatar Petroleum (QP) and operates 14 LNG trains. Production had remained mostly stable noting more time was necessary to study the impact of additional development in the North Field before potential expansion, but Qatar’s global market share has fallen to 28%, as new supply from other countries come on-line and expand (especially with U.S. and Australia trains adding to the mix).
The blockade appears to have awaken and expedited Qatar’s expansion ambitions in the energy markets and act as a counterbalance to future severe economic impacts as a result of the embargo and maintain its market share and customers.
QP, which controls all aspects of Qatar’s upstream and downstream oil and natural gas sectors, president and CEO Saad Sherida al-Kaabi stated “the nation’s oil and gas sector has not been impacted by the blockade.” In fact, he further stated, Qatar will restart investment and the LNG industry is expected to increase in the next 5-7 years by more than 30% or up to about 110 million tonnes – a planned increase that would be equivalent to 8 percent of the world’s current supply. National investment in natural gas development has been relatively consistent the past decade, so an open question is how the country will gather the billions of dollars to drive these new massive projects, or how much of its own coffers will it tap.
The blockade could challenge these ambitions with the need to partner with international oil companies (IOCs), which may not be anxious to become embroiled in regional tensions, especially with the importance of Saudi Arabia and the UAE in energy markets. If plans do become finalized, there are projections that Qatar could generate $40 billion in additional export revenue once it completes the expansion.
LNG continues to Flourish
Regardless of the blockade, the LNG export market continues to evolve as many industry prognosticators expect increased demand from Europe, as nuclear plants are shuttered and the continued transition to meet its carbon emission reduction goals, China and India, which attempt to move away from coal and meet increased overall national energy demand, and other Asian and Africa nations. Despite what is viewed as a potential market glut with vast new supply coming on-line, the long-term LNG market and demand demonstrates the foundation for long-term growth, thus continued opportunities for the tiny emirate.
One recent example of the global reach and sustained demand is reaching a new 22-year deal with PetroChina International Co. to supply 3.4 million tonnes per year. Qatargas believes the demand from China will increase and future deals will be possible.
Mr. Al Kaabi also stated, “Qatar believes in the increasing importance of gas as a clean source of energy and will continue to play a leading role to help ensure security of supplies.”
Despite the restriction, Qatari natural gas continues to flow to the UAE and Oman via Dolphin Energy’s pipeline. The pipeline was the first cross-border gas project in the Gulf Arab region.
Weathering the Storm Thus Far
The blockade’s negative impacts have been felt in tourism, real estate and Qatar Airways, which has been banned from flying to 18 cities in the quartet.
On a broader level, though, the IMF issued a report at the end of May stating “(Qatar’s) growth performance remains resilient. The direct economic and financial impact of the diplomatic rift between Qatar and some countries in the region has been manageable.” Qatar sets its budget based on an oil price of about $45 a barrel, and with Brent crude averaging about $80 barrel, the nation is that to have wiggle room to adjust for modest economic shocks.
Despite the intent of the blockade, current indications, overall, indicate Qatar has become more independent than before June 2017 and it can continue its successful growth with no sufficient additional obstacles to affect its course.
