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Qatar aims to build on its gas potential, pulls out of OPEC

By Sheetal Sukhija, US News
04 Dec 2018, 04:04 GMT+10

DOHA, Qatar - Just ahead of a crucial meeting of the world's leading oil producers this week, one of the members of the Organization of the Petroleum Exporting Countries (OPEC) - Qatar, announced its decision to quit the organization.

Qatar, which is one of the smallest oil producers in the 15-member organization, has been an OPEC member for 57 years.

On Monday, Qatar's Minister of State for Energy Affairs, Saad Al-Kaabi called for a news conference, in which he announced that Doha had already communicated its decision to OPEC.

While explaining the move, the top Qatari minister said that the country was leaving the organization to focus on its gas ambitions.

Al-Kaabi said that his country's decision to withdraw from OPEC came after "Qatar reviewed ways to enhance its role internationally and plan its long-term strategy."

He added that Qatar would now make a big splash in the oil and gas business," but would still look to expand its oil investments abroad.

The minister, who is heading Qatars OPEC delegation, said that Qatar Petroleum was planning to raise its production capability from 4.8 million barrels oil equivalent per day to 6.5 million barrels in the next decade. Further, he pointed out that Doha is planning on building the largest ethane cracker in the Middle East.

Strategy Vs. Politics

Qatar's decisive move comes at a time when it is facing a political and economic boycott imposed on the country by other powerful OPEC members, including Saudi Arabia, the United Arab Emirates, and other Arab states Bahrain and Egypt.

The top Arab states imposed the boycott on Doha in June 2017, accusing the country of supporting terrorism.

Over the last 17 months, Qatar has vehemently denied the charges, alleging that the boycott was aimed at impinging on its sovereignty.

In announcing his country's decision on Monday, Al-Kaabi clarified that the decision was "not political."

He said, "A lot of people will politicize it. I assure you this purely was a decision on whats right for Qatar long term. Its a strategy decision."

He pointed out that Qatar's move was motivated by the countrys long-term strategy - which includes plans to develop its gas industry and increase LNG output to 110 million tonnes by 2024.

Al-Kaabi then stressed, "We don't have great potential (in oil), we are very realistic. Our potential is gas."

He argued that it was not practical for Qatar to put efforts and resources and time in an organization that we are a very small player in and I dont have a say in what happens.

Yet, despite claims that its decision was not driven by geopolitics, Al-Kaabi took an apparent swipe at OPEC's de facto leader, Saudi Arabia without mentioning the country by name.

He told reporters, "We are not saying we are going to get out of the oil business but it is controlled by an organization managed by a country."

What next for OPEC?

The decision by Doha comes just ahead of a key meeting of the oil producers' organization in Vienna, in which members will discuss plans to tackle an oil price slide.

Qatar, which joined the OPEC in 1961, has an oil output of 600,000 barrels per day (bpd).

In comparison, Saudi Arabia boasts 11 million bpd.

However, Qatar is the world's biggest exporter of liquefied natural gas, making the country an influential player in the global LNG market.

Backed by its huge fuel reserves in the Gulf, Doha boasts of an annual production of 77 million tonnes per year.

Yet, the decision was perceived as Qatar's protest against the growing dominance of the world's three top oil producers in policy decisions that impact the oil market.

The industry leaders, Saudi Arabia, Russia and the United States together account for almost a third of global output.

While Russia is not a member of the OPEC, it is one of the biggest oil producers outside the group and produces 11.37 million barrels of oil a day.

In recent years, Saudi Arabia and Russia have been making decisions on output policies together, as the OPEC deals with intense pressure from the prolonged oil price slide and from the U.S. President Donald Trump, who has been repeatedly calling on the organization to bring down oil prices.

With Qatar quitting the organization at a such a time, its withdrawal is set to complicate OPEC's decision during discussions in Vienna this week, even though the organization tried to downplay the impact on Monday.

Commenting on Qatars move, Algerias former energy minister and OPEC chairman, Chakib Khelil said, It could signal a historic turning point of the organization towards Russia, Saudi Arabia and the United States."

However, Al-Kaabi said that Dohas exit would have a psychological impact because of the row with Riyadh and could prove an example to be followed by other members in the wake of unilateral decisions of Saudi Arabia in the recent past.

A non-Gulf OPEC source meanwhile said that Qatars withdrawal was "regrettable and sad," but that it would not complicate OPECs decision this week.

During the group's meeting on Thursday and Friday, which is set to be attended by Doha, OPEC members are expected to cut oil supply to shore up crude prices.

The meeting is being closely watched by markets over the expected production cuts since oil prices recorded a sharp decline in November - losing almost 30 percent since an October peak.

On Monday, following Qatar's announcement, oil surged about 5 percent following a trade war truce announced by the U.S. and China, prices continue to remain well off Octobers peak.

Benchmark Brent was trading at around $62 a barrel, down from more than $86 in October.

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