Study: Qatar uses LNG to build ‘extraordinary’ global clout

Success in the export of liquefied natural gas (LNG) has allowed Qatar to build an extraordinary level of global influence, improve its national security and “rise above” its neighbors on the Arabian Peninsula, according to a new paper from Rice University’s Baker Institute for Public Policy.

Success in the export of liquefied natural gas (LNG) has allowed Qatar to build an extraordinary level of global influence, according to a new paper from Rice's Baker Institute.

Titled “Qatar ‘Rises Above’ its Region: Geopolitics and the Rejection of the GCC Gas Market,” the paper was published this month by the London School of Economics Kuwait Programme on Development, Governance and Globalisation in the Gulf States. It was co-authored by Jim Krane, the Wallace S. Wilson Fellow for Energy Studies at the Baker Institute and an expert on Persian Gulf economics and politics, and Steven Wright, associate professor of international relations and Gulf studies at Qatar University.

Qatar, like its neighbors on the Arabian Peninsula, is a member of the Gulf Cooperation Council (GCC), a monarchical bloc that links these six Sunni Muslim-led regimes through trade, customs and immigration treaties. A currency union among the six is also planned.

However, Krane said a “curious imbalance” afflicts energy markets in the Persian Gulf region. Five of the six Gulf monarchies exhibit shortages in domestic supply of natural gas, with two of them turning to market-priced imports of LNG, mostly from outside the region. Meanwhile, Qatar holds an ideal source of supply: It is the world’s third-largest holder of conventional reserves and the No. 2 gas exporter. The researchers question why Qatar has declined to sell to its neighbors.

The authors attribute the imbalance to pricing and politics. “Gas-short GCC states have historically been unwilling to pay what Qatar considered a reasonable price for its gas,” Krane said. “Because of this, Qatar has ‘risen above’ the GCC market. Instead it exports its gas as LNG to far-flung customers where it gets much higher prices on long-term bilateral contracts.”

Krane said success in LNG has allowed Qatar to develop an extraordinary level of global influence and improve its national security by building links to powerful importing states such as Japan and China, which have become stakeholders in the security of continued Qatari supply. “Qatar’s gains in revenue, political influence and security have reduced its dependence on regional markets,” he said. “Without serious changes in its neighbors’ attitudes toward pricing, Qatar is likely to leave demand unmet in neighboring monarchies.”

In the longer term, Qatar may revisit gas sales to its neighbors, the authors said. “The entry of new suppliers and disruptive technology into global gas markets bodes well for gas importers in the GCC and globally,” Krane said.

However, whether Qatar will accept an increased role for itself in the regional gas trade remains to be seen, he added. “If regional and international gas prices begin to converge, Qatar will have to balance its geopolitical preferences for creating international stakeholders with the potential benefits of cementing relations with regional partners and embracing a more meaningful GCC collective. Until then, Qatar’s horizons remain global.”