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Qatar To Leave OPEC As Of January 1st, 2019

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Qatar To Leave OPEC As Of January 1st, 2019

Illustrative image

On December 3rd, Qatar announced its plan to quit the Organization of the Petroleum Exporting Countries (OPEC) as of January 1st after being a member for over 60 years to focus on natural gas production.

The country’s state oil company, Qatar Petroleum, made the announcement in a series of tweets.

“The withdrawal decision reflects Qatar’s desire to focus its efforts on plans to develop and increase its natural gas production,” Saad Sherida Al-Kaabi, the country’s newly-appointed minister of state for energy affairs was cited.

Qatar has been subject to a diplomatic and economic embargo by its neighbors, including OPEC members Saudi Arabia and the United Arab Emirates for the past 18 months. As a response, the country has been increasing gas production.

In 2011, reserves of natural gas in Qatar were measured at approximately 896 trillion cubic feet (25.4 trillion cubic metres), or 14% of all known natural-gas reserves in the world. They are the third largest, following Russia and Iran. In 2006, Qatar reportedly surpassed Indonesia to become the largest exporter of LNG in the world. Its exports currently account for about 30% of global demand.

OPEC has no role in the global natural gas market, and Qatar made no reference to the dispute with its neighbors in the announcement.

“Achieving our ambitious growth strategy will undoubtedly require focused efforts, commitment and dedication to maintain and strengthen Qatar’s position as the leading natural gas producer,” Al-Kaabi said.

Qatar is not a major producer in OPEC, especially compared to Iraq and Saudi Arabia. It pumps about 600,000 barrels of oil a day out of more than 27 million from all OPEC members.

Qatar To Leave OPEC As Of January 1st, 2019

Click to see the full-size image

Source: CNN

Despite Al-Kaabi’s claims that Doha did not make the decision due to the blockade, experts believe that it may be the underlying reason.

“More than anything, we suspect that Qatar’s withdrawal from OPEC has been spurred by its ongoing dispute with Saudi Arabia and its allies,” Jason Tuvey, Capital Economics’ senior emerging markets economist was cited by Al Jazeera.

“Qatar sought to reduce its exposure to Saudi oil policy and Saudi Arabia generally since the 1990s when the two countries first clashed over border disputes.Today, in light of the Saudi-led blockade against Doha, ensuring Qatar’s natural gas industry is independent of Saudi decision making on oil is all the more pressing,” Amy Myers Jaffe, a senior fellow at the Council on Foreign Relations told Al Jazeera.

Ellen Wald, senior fellow at the Atlantic Council’s Global Energy Center claimed that Qatar’s departure might be a bad sign, as oil policy becomes more concentrated in the hands of Saudi Arabia and non-OPEC member Russia. Naturally, Atlantic Council fellows miss no chance to attack Russia, even if a situation may not be related to the country.

“It could signal that smaller producers are growing disgruntled with the cartel’s dominance by Saudi Arabia and Russia,” said Wald. “If a group of small producers decide to exit the cartel it will decrease OPEC’s influence in the market.”

In an article published on OilPrice.com, Dr. Cyril Widdershoven criticized Qatar’s “illogical decision” to leave OPEC.

“Regardless of how significant one considers Qatar’s decision, it is hard to view it as a very rational one. As one of OPEC’s most vocal members, Qatar had a say far beyond its real economic or military capabilities. By shaping OPEC’s strategy, Doha played a pivotal role on the global stage. Leaving OPEC will immediately result in it losing this influence. Shifting focus from OPEC to maintaining its status as an LNG powerhouse is maybe economically rational, but it could end up costing Qatar geopolitical leverage. Except for Russia, ‘gas geopolitics’ is not a real power factor taken into account by global powers or military strategists. Being part of the ‘decision-making’ group within OPEC is most of the time the key to the White House, the Kremlin or Brussels. Having an insight and a say at the table of OPEC ministers grants nations a great deal of power.”

Qatar To Leave OPEC As Of January 1st, 2019

Source Al Jazeera

There is still a lot unclear regarding why Qatar made the decision. According to its energy minister it was to focus on its gas production. Other versions come down to speculation.

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