Qatar and the Global Energy Market: The Politics of Natural Gas

Pakistan’s position in this dilemma is unique; it enjoys ties with Qatar, as well as with Saudi Arabia and the United Arab Emirates.

On 22 June 2019, Emir of Qatar Sheikh Tamim bin Hamad Al-Thani arrived in Pakistan on the invitation of Prime Minister Imran Khan for a two-day state visit. The state visit was specifically aimed at strengthening bilateral ties and improving cooperation in diverse fields between Qatar and Pakistan. In addition to the one-on-one talks between the Emir, Prime Minister Imran Khan and President Arif Alvi respectively, delegation-level meetings were also conducted between representatives of both countries. Notably, one of the most important results of this visit was the subsequent pledge for mutual cooperation with regard to gas exploration and the energy sector. The sheer competitiveness of the energy market is a stark reality. In a bid to secure a pivotal multi-billion-dollar supply contract, the Qataris reduced prices of liquefied natural gas (LNG) for Pakistan in May 2019.

With Saudi Arabia and the United Arab Emirates both offering enticing offers concerning deferred oil and LNG payments for Pakistan, Qatar sought to modify LNG prices in order to successfully secure the deal. It is reported that presently, Qatar exports ‘500 mmcfd [million cubic feet per day] to Pakistan under a 15-year agreement struck at 13.37% of Brent crude price.’[i] Pakistan has been negotiating with a number of countries including Russia, Turkey, Malaysia, Azerbaijan and Italy with regard to attaining long-term gas deals. Saudi Arabia (and state-owned petroleum and natural gas company Aramco) has also shown interest in securing a gas deal with Pakistan.

One may link the interest expressed by the Saudis as one of the more pressing reasons behind Qatar being more keen to ratify the deal and emerge as the frontrunner for the Pakistani market – the ongoing Qatar Diplomatic Crisis (beginning in 2017) which saw Bahrain, Egypt, the United Arab Emirates and Saudi Arabia (among others) sever ties with Qatar and formally issue sea, air and land blockades with the state can be seen as one of the more pertinent reasons behind Qatar taking advantage of the energy market’s competitive nature in a bid to secure its interests with Pakistan.

Another important reason behind Qatar’s interest in securing this crucial LNG deal with Pakistan can be attributed to eyeing Russia and Pakistan sign an inter-corporate agreement concerning the ten-billion-dollar offshore gas pipeline deal in September 2018.

This agreement entails that natural gas would be transported from Russian Gas Company Gazprom’s sources in the Middle East to Pakistan. The alliance between Qatar and Russia would be of immense strategic importance for both countries as ‘Russia is looking for new allies so that it may remain competitive for years to come.

An alliance with Russia could also be of interest to Qatar, which is likely to lose some large-scale export contracts held by Asia-Pacific buyers after 2020.’[ii] This alliance also goes in line with one of the prime objectives of the Gas Exporting Countries Forum (GECF) of which both Qatar and Russia are members: ‘to promote joint investment in natural gas projects among members.’[iii] The competitiveness of the global energy market, coupled with Pakistan’s growing demand to meet its required energy needs makes it an important market to invest in for both Russia and Qatar.

Qatar’s national energy use consists of 99.2 per cent reliance on natural gas and 0.8 per cent reliance on oil.[iv] Taking advantage of its geo-strategic location and natural gas reserves, Qatar is looking towards re-defining the energy market (as Forbes states that ‘At nearly 2% per year, the growth in global gas demand is expected to be almost triple that of oil in the coming decades.’[v]) by capitalising on the growing, global demand for natural gas as an alternative to oil.

In their research Increasing the Use of Natural Gas in the Asia-Pacific Region, Ian Cronshaw, Quentin Grafton and Llewelyn Hughes point towards the environmental advantages of using natural gas by arguing that it ‘emits far fewer pollutants that cause local air pollution and half as much carbon dioxide as coal. Additionally, natural gas can make it easier to integrate renewable sources into the grid, because gas-fired turbines used to produce power can vary their output easily to compensate for unpredictable wind and solar power.

As a result, natural gas can facilitate a transition to zero-carbon energy infrastructure.’[vi] If one is to contemplate speculative futures with regard to the energy market, natural gas harbours an incredibly important position as its demand has only surged in the last decade. The geo-politics of natural gas are another interesting point, given the concentration of natural gas’ location in Russia, Qatar, Iran and North America. Ernest Moniz, in the Massachusetts Institute of Technology (MIT) published study, The Future of Natural Gas, highlights the political considerations that have to be acknowledged just as much in ‘global gas resource development as geology and economics.’[vii]

Given the politics that follow the energy market and the Middle East region, one often comes across ample literature pertaining to oil-politics, but the politics of natural gas remains a comparatively side-lined geo-political phenomenon. The diplomatic crisis between Qatar and a number of its Gulf neighbours has only emboldened its endeavour to channel more of its efforts in natural gas exploration in order to assert itself on the global energy market.

Pakistan’s position in this dilemma is unique; it enjoys ties with Qatar, as well as with Saudi Arabia and the United Arab Emirates. It must also be noted that Pakistan’s reliance on LNG has only been increasing over the years. As it strives to cater to growing energy demands, Pakistan must play its cards smartly so as to avoid becoming entangled in this regional conflict in the Gulf – rather, it must push towards being an intermediary between Qatar and its neighbours so as to facilitate an effective reconciliation process.

The state-visit of the Emir of Qatar allows one to speculate over Pakistan’s position with regard to the competitiveness of the energy market, with the subject of increased cooperation in gas exploration and the energy-sector carrying explicit implications for Pakistan’s (and Qatar’s) political economy and implicit connotations for Pakistan’s diplomatic position.

Ana Tawfiq Husain is a researcher at the PIIA and a student of Habib University

Sources:

https://www.dawn.com/news/1489767

https://tribune.com.pk/story/1963643/2-qatar-lowers-lng-price-win-pakistans-contract/

https://www.aljazeera.com/ajimpact/qatar-reveals-3bn-investment-pakistan-190624114635608.html

https://www.globalvillagespace.com/qatari-emir-welcomes-pm-khans-invitation-to-visit-pakistan/

http://mecometer.com/whats/qatar/electricity-production-by-source/

https://www.cfr.org/sites/default/files/report_pdf/Discussion_Paper_Cronshaw_Grafton_Hughes_Gas_in_Asia-Pacific_OR_1.pdf

https://www.aljazeera.com/news/2019/06/qatar-blockade-gulf-crisis-190604220901644.html

https://www.reuters.com/article/pakistan-gas-lng/qatar-emerges-as-front-runner-for-long-term-lng-deal-for-pakistan-idUSL5N2264ZN

http://energy.mit.edu/news/the-key-results-of-the-recently-published-mit-multi-disciplinary-study-the-future-of-natural-gas/

https://www.bloomberg.com/news/articles/2018-09-26/qatar-wants-to-get-even-bigger-in-gas-as-race-with-u-s-heats-up

https://www.forbes.com/sites/judeclemente/2018/12/05/qatar-wisely-shifts-even-more-to-natural-gas/#3050c1bc2d9a

https://www.theguardian.com/world/2018/may/06/qatar-blockade-unexpected-new-vision-isolation

http://www.gasprocessingnews.com/columns/201808/industry-perspectives.aspx

https://russiabusinesstoday.com/energy/russia-qatar-to-expand-energy-cooperation/

https://www.thenews.com.pk/print/428722-pakistan-signs-10-bn-gas-pipeline-agreement-with-russia

https://fas.org/sgp/crs/row/IF10939.pdf

Footnotes

[i] https://tribune.com.pk/story/1963643/2-qatar-lowers-lng-price-win-pakistans-contract/

[ii] http://www.gasprocessingnews.com/columns/201808/industry-perspectives.aspx

[iii] https://fas.org/sgp/crs/row/IF10939.pdf

[iv] http://mecometer.com/whats/qatar/electricity-production-by-source/

[v] https://www.forbes.com/sites/judeclemente/2018/12/05/qatar-wisely-shifts-even-more-to-natural-gas/#57f9d1512d9a

[vi]https://www.cfr.org/sites/default/files/report_pdf/Discussion_Paper_Cronshaw_Grafton_Hughes_Gas_in_Asia-Pacific_OR_1.pdf

[vii] http://energy.mit.edu/news/the-key-results-of-the-recently-published-mit-multi-disciplinary-study-the-future-of-natural-gas/

 

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Filed under Discussion, Economy, Energy, Pakistan, Pakistan Horizon, Politics, Russia, The Middle East

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