Qatar announces plan to raise gas capacity

Unexpected move comes as it prepares for economic independence

DOHA: Qatar announced Tuesday that it planned to raise liquefied natural gas (LNG) capacity by 30% in an apparent show of strength in its dispute with Gulf neighbours who have imposed political and economic sanctions on Doha.

The unexpected move came as Qatar appears to be preparing itself for greater economic independence should the dispute with Saudi Arabia, the United Arab Emirates, Egypt and Bahrain become protracted.

Its immediate effect will be to worsen a glut on the LNG market where Australia, the United States and Russia vie. The Gulf States and Egypt have severed diplomatic and transport ties with Doha, accusing it of supporting terrorism and courting regional rival Iran. Qatar denies the accusation.

The Arab states, who have presented Doha with a list of demands, meet on Wednesday to discuss how to end the crisis; or they could impose more sanctions, which may include asking trade partners to pick a side in the rift.

Qatar Petroleum’s chief executive said the firm would increase gas production from its giant North Field, which it shares with Iran, by 20% after new gas development.

In April, Qatar lifted a self-imposed ban on development of the North Field, the world’s biggest natural gas field, and announced a new project to develop its southern section, increasing output in five to seven years. That new project will raise Qatar’s total LNG production capacity by 30% to 100 million tonnes from 77 million tonnes per year, CEO Saad al-Kaabi told a news conference.

“Once completed...this project will raise the production of the State of Qatar to about 6 million barrels of oil equivalent per day,” Kaabi said. 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.

So far only Cheniere exports US LNG, but there are project proposals with a total capacity of some 150 million tonnes/year. Energy sales have driven Qatar’s rapid rise as a regional player, with vast infrastructure projects and widening diplomatic influence as well as a role in the Syrian conflict that is viewed with suspicion by Gulf neighbours.

Published in The Express Tribune, July 5^th, 2017.

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