Qatar has announced plans to increase natural gas production by 30 percent thus effectively challenging US President Donald Trump’s goal of “energy dominance.”
State-run Qatar Petroleum CEO Saad Sherida al-Kaabi, told reporters on Tuesday that Qatar Petroleum intends to raise production from 77 million tonnes of natural gas to 100 million tonnes a year by 2024. Qatar is making the bold move amid an ongoing crisis after Saudi Arabia led three other countries last month in severing ties with Doha and imposing an air, land and sea blockade on the Persian Gulf state. That was followed by the imposition of 13 conditions before ties are restored.
Saudi Arabia, the United Arab Emirates, Egypt and Bahrain were due to meet on Wednesday to decide whether to continue sanctions they imposed on Qatar on accusations it was aiding extremism and courting neighboring Iran. Doha denies the charges and has submitted to mediator Kuwait replies to 13 demands that the gathering will consider.
“What Qatar has given in goodwill and good initiative for a constructive solution, based on dialogue, we believe should be sufficient (to show) we have carried out our duties from our side,” Qatari Foreign Minister Sheikh Mohammed bin Abdulrahman al-Thani told a news conference in Doha.
Qatar, dominant global LPG exporter
The LPG announcement by Qatar comes after the company said In April announced it was boosting output in the world’s largest gas field – the ‘North Dome’ – off the Gulf state’s northern coast, which it shares with Iran. ‘South Pars’ is the name for Iran’s share of the gas field.
“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 last April,” a statement by the company said.
The April announcement meant an end to the self-imposed ban on development of the field that it declared in 2005 to give Doha time to study the effect on the reservoir from a rapid rise in output.
Qatar is already the world’s dominant LNG exporter, and the planned 30 percent hike over the next five to seven years could help it consolidate its grasp on the market.
The LNG market is undergoing huge changes, however, as the biggest ever flood of new supply hits the market.
Qatar, one of the richest countries globally
Gas has helped transform Qatar into one of the richest countries in the world, propelling its rise into a major regional player and helping fund huge infrastructure projects such as the 2022 football World Cup, which will be hosted by Qatar.
According to CNBC, Qatar’s move creates an obstacle to President Donald Trump’s goal of “energy dominance.”
The move threatens to add to a projected glut of liquefied natural gas, or LNG, as a wave of new projects come online in the coming years, including from the US.
With such low production costs and LNG facilities closer to buyers in Europe and Asia, the Qatari move means US producers could struggle to sell their LNG competitively and projects still needing finance could struggle to find investors.
Trump competing with Qatar
Analysts said the move to boost production was partly to do with added competition in the LNG market, mainly from Australia, the United States and Russia.
The Trump administration has recently created a headache for Qatar in the LNG market.
In May, the Commerce Department reached an agreement with Beijing that will see China give state-owned companies the green light to negotiate long-term contracts with U.S. LNG exporters. While there is no guarantee the Chinese companies will import more American LNG, but they are likely to use the agreement to secure lower prices from Qatar and other exporters.
Iran Factor
“It is also to do with Iran now set to increase production on the South Pars field, which means they can up production from their side of the field (North Field) without destabilizing the geology of the field,” said Oliver Sanderson, gas analyst at Thomson Reuters.
Some experts say that, while the Persian Gulf States accuse Qatar of cooperating too closely with Iran, their sanctions could push it to closer cooperation with Tehran on gas production and exports from the shared field. Analysts say Qatar needs the support of Iran now more than any time before to increase production.
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