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SOME of the latest punditry has it that Qatar’s economy is teetering on the brink of disaster because of the COVID-19 crisis, which has been steadily eroding demand for the country’s most important export, natural gas. Obviously the situation is less than ideal, but much of the doom and gloom stems from a failure to appreciate just how well prepared the country is for all manner of obstacles.
Journalists and other observers have watched the market for crude oil collapse to the point where prices for some futures contracts recently went into negative territory – i.e. producers in some parts of North America actually had to pay customers to take oil off their hands. This, in turn, is causing a slew of US and Canadian oil companies, especially smaller ones, to stop extracting crude, and many are going bankrupt. Similar pressures are expected to arise for gas producers, these folks argue, and since Qatar is the world’s leading producer and exporter of liquefied natural gas (LNG), it will face the biggest problems.
Thus far the consequences for LNG have been less dramatic than those for crude oil, but nor can they be ignored, especially for developing countries whose economies are heavily dependent on constant flows of gas revenues from exports.
However, Qatar has to be considered far more resilient than other major LNG producers. For one thing, it has much deeper pockets that give it considerable wherewithal to withstand even a prolonged period of lower gas revenues. For another, Qatar’s energy interests go far beyond the extraction of its gas resources for export, allowing diversification of revenues and therefore dilution of negative impacts.
One of the drivers of its success has been government-owned Qatar Petroleum (QP), one of the strongest and most influential companies on the planet. QP reached its current lofty status by, first, making its bet on LNG at precisely the right time in history, just as the environmental concerns associated with oil made natural gas a more palatable choice and the world’s energy mix started transitioning to a higher proportion of renewables and other alternative technologies. Second, Qatar then used its role as the world’s most important LNG exporter to become a force for stability in a burgeoning global gas market, maintaining safe and reliable supplies that have allowed customers around the world to grow their economies.
Furthermore, QP has not remained a one-trick pony. Instead, it and its subsidiaries have diversified with gusto – and not just in the usual sense of producing petrochemicals, aluminum, and fertilisers on their home turf. Rather, the company has reached far beyond Qatar, the GCC countries, and even the broader Middle East and North Africa region to make acquisitions around the globe. Acting alone or in concert with major partners like Britain’s Shell, France’s Total, Italy’s ENI, and the USA’s Chevron and ExxonMobil, the past couple of years have seen QP take up or renew stakes in exploration, production, and/or processing assets in at least a dozen countries, including Argentina, Brazil, Cyprus, Congo Brazzaville, Guyana, Ivory Coast. Kenya, Mexico, Morocco, Mozambique, Namibia, Oman, South Africa, and even the United Arab Emirates.
Perhaps the biggest triumph has been in the United States, where QP’s activities have included partnering with ExxonMobil (Qatar’s single largest foreign investor) for a $10 billion project to build a two-train LNG export facility. QP has also teamed with Chevron Phillips Chemical, a joint venture between Chevron and Phillips 66, to develop what could be the world’s largest ethane cracker and derivatives units on the US Gulf Coast. QP will have a 49% stake in the $8 billion complex, and Chevron Phillips Chemical has agreed to build virtual twin of it at Ras Laffan – hub of Qatar’s gas industry.
The company also continues to consolidate its access to existing markets in Europe and Asia, and to increase its capacity to supply those markets. It has recently signed long-term contracts at terminal facilities serving key LNG markets, including Montoir-de-Bretagne, France (3 million tons per annum [MTA] until 2035), and Zeebrugge, Belgium (100% of regasification capacity until 2044). In addition, QP subsidiaries hold stakes in major terminals like the United Kingdom’s South Hook (67.5%) and Italy’s offshore Adriatic facility (23%). In April, it signed a $3 billion contract to book a Chinese shipbuilder for the construction of new LNG carriers, some 100 of which it expects to need in the coming few years.
All the while, QP has continued to rack up agreements with both new and existing customers, including LNG sales to Kuwait and Vietnam; naphta deals with Japan’s Marubeni Corporation, Shell, Thailand Chemicals, and Vietnam; condensate feedstock sales to ExxonMobil in Singapore; and liquefied petroleum gas contracts with China’s Oriental Energy and Wanhua Chemicals.
And all this is not to mention QP’s massive undertaking to expand LNG output from 77 MTA to more than 110 MTA. In fact, when the COVID crisis hit, the company’s response was to take advantage of lower prices for construction materials by increasing capacity to a whopping 126 MTA by 2027.
It should be noted that QP has managed all of these feats while its home country has been fending off a Saudi-led blockade. Qatar’s public and private sectors alike have demonstrated world-class resilience since the blockade was imposed in 2017, so there is no reason to believe they will shrink before this new challenge. On the contrary, Qatar is – and will remain – a trusted source of stabilisation in global markets.
The current crisis could well require Qatar to make uncomfortable decisions, but its long-term trajectory – to keep expanding its role as a force for good in energy circles by providing win-win scenarios – is unlikely to be affected.
(Roudi Baroudi is a
four-decade veteran of the energy industry who currently serves as CEO of Energy and Environment Holding, an independent consultancy
based in Doha)
Journalists and other observers have watched the market for crude oil collapse to the point where prices for some futures contracts recently went into negative territory – i.e. producers in some parts of North America actually had to pay customers to take oil off their hands. This, in turn, is causing a slew of US and Canadian oil companies, especially smaller ones, to stop extracting crude, and many are going bankrupt. Similar pressures are expected to arise for gas producers, these folks argue, and since Qatar is the world’s leading producer and exporter of liquefied natural gas (LNG), it will face the biggest problems.
Thus far the consequences for LNG have been less dramatic than those for crude oil, but nor can they be ignored, especially for developing countries whose economies are heavily dependent on constant flows of gas revenues from exports.
However, Qatar has to be considered far more resilient than other major LNG producers. For one thing, it has much deeper pockets that give it considerable wherewithal to withstand even a prolonged period of lower gas revenues. For another, Qatar’s energy interests go far beyond the extraction of its gas resources for export, allowing diversification of revenues and therefore dilution of negative impacts.
One of the drivers of its success has been government-owned Qatar Petroleum (QP), one of the strongest and most influential companies on the planet. QP reached its current lofty status by, first, making its bet on LNG at precisely the right time in history, just as the environmental concerns associated with oil made natural gas a more palatable choice and the world’s energy mix started transitioning to a higher proportion of renewables and other alternative technologies. Second, Qatar then used its role as the world’s most important LNG exporter to become a force for stability in a burgeoning global gas market, maintaining safe and reliable supplies that have allowed customers around the world to grow their economies.
Furthermore, QP has not remained a one-trick pony. Instead, it and its subsidiaries have diversified with gusto – and not just in the usual sense of producing petrochemicals, aluminum, and fertilisers on their home turf. Rather, the company has reached far beyond Qatar, the GCC countries, and even the broader Middle East and North Africa region to make acquisitions around the globe. Acting alone or in concert with major partners like Britain’s Shell, France’s Total, Italy’s ENI, and the USA’s Chevron and ExxonMobil, the past couple of years have seen QP take up or renew stakes in exploration, production, and/or processing assets in at least a dozen countries, including Argentina, Brazil, Cyprus, Congo Brazzaville, Guyana, Ivory Coast. Kenya, Mexico, Morocco, Mozambique, Namibia, Oman, South Africa, and even the United Arab Emirates.
Perhaps the biggest triumph has been in the United States, where QP’s activities have included partnering with ExxonMobil (Qatar’s single largest foreign investor) for a $10 billion project to build a two-train LNG export facility. QP has also teamed with Chevron Phillips Chemical, a joint venture between Chevron and Phillips 66, to develop what could be the world’s largest ethane cracker and derivatives units on the US Gulf Coast. QP will have a 49% stake in the $8 billion complex, and Chevron Phillips Chemical has agreed to build virtual twin of it at Ras Laffan – hub of Qatar’s gas industry.
The company also continues to consolidate its access to existing markets in Europe and Asia, and to increase its capacity to supply those markets. It has recently signed long-term contracts at terminal facilities serving key LNG markets, including Montoir-de-Bretagne, France (3 million tons per annum [MTA] until 2035), and Zeebrugge, Belgium (100% of regasification capacity until 2044). In addition, QP subsidiaries hold stakes in major terminals like the United Kingdom’s South Hook (67.5%) and Italy’s offshore Adriatic facility (23%). In April, it signed a $3 billion contract to book a Chinese shipbuilder for the construction of new LNG carriers, some 100 of which it expects to need in the coming few years.
All the while, QP has continued to rack up agreements with both new and existing customers, including LNG sales to Kuwait and Vietnam; naphta deals with Japan’s Marubeni Corporation, Shell, Thailand Chemicals, and Vietnam; condensate feedstock sales to ExxonMobil in Singapore; and liquefied petroleum gas contracts with China’s Oriental Energy and Wanhua Chemicals.
And all this is not to mention QP’s massive undertaking to expand LNG output from 77 MTA to more than 110 MTA. In fact, when the COVID crisis hit, the company’s response was to take advantage of lower prices for construction materials by increasing capacity to a whopping 126 MTA by 2027.
It should be noted that QP has managed all of these feats while its home country has been fending off a Saudi-led blockade. Qatar’s public and private sectors alike have demonstrated world-class resilience since the blockade was imposed in 2017, so there is no reason to believe they will shrink before this new challenge. On the contrary, Qatar is – and will remain – a trusted source of stabilisation in global markets.
The current crisis could well require Qatar to make uncomfortable decisions, but its long-term trajectory – to keep expanding its role as a force for good in energy circles by providing win-win scenarios – is unlikely to be affected.
(Roudi Baroudi is a
four-decade veteran of the energy industry who currently serves as CEO of Energy and Environment Holding, an independent consultancy
based in Doha)
