Qatar is leaving the Organization of Petroleum Exporting Countries or OPEC ending its 57-year membership in the cartel next January. The announcement was made three days ahead of a meeting of the Saudi-led body which aims to tighten global oil supplies amid persistent concerns over a supply challenge.
OPEC was formed in 1960 by five countries. Qatar joined the following year. Now, there are 15 members accounting for around 40% of world’s oil projection.
Many commentators interpreted it as a political act and the significance here is more political than economic. Qatar’s decision to withdraw was primarily a political move because it’s not a oil producer of such magnitude that can swing prices this way or that.
Doha’s justification that it wants to focus on liquefied natural gas (LNG) and it’s the key player in that arena, doesn’t really explain what’s happening here. There’s no reason why they can’t focus on natural gas and still be a member of OPEC.
They’re tired of having Saudi Arabia attack them, quarantine them, attack them politically and then when it comes to OPEC, exclude them from the decision-making process. They’re fed up. At the same time they’re making arms purchase. They’re pursuing an independent foreign policy. So, this is all part of a set of actions that the government is taking now. This move will cause other small states in OPEC to rethink their participation.
It’s the escalation of geopolitics. Qatar wanted to send a political signal to Saudi Arabia , using its biggest weapon and signalling to Saudis that ‘Look, we no longer want to be part of your equation and we’re not afraid of you at all, we are not going to be dictated to by you; we’re out of this whole thing.”
In the long term, this matter will escalate further. But, in the short term, if one looks at Qatari stock market, the immediate prospect is more skewed as risks increase on its assets.
Generally speaking, alternative energy has emerged as a big factor in this situation. Because, now we all are looking at all alternatives sources, including renewable energy and the energy landscape will change in next 10 years.
For instance, even in UK one could see that there’s a huge shift to renewable energy. When we’re looking at cars or the automobile industry; one can clearly see that is the wave which is going to be stronger in the next decade or two.
While some may view OPEC as a near-monopoly cartel, it lost its earlier domination long time ago. Qatar just took this as an issue and they left a blueprint for other countries to follow. The question is, whether we’re better off without OPEC and what the world would look like with its decline.
In all likelihood, it could lead to some chaos. Everyone would be fighting to retain their own share of the market. And, only the biggest producers with the large capacities will win.
A future dominated by LNG
Indeed, if we see the world energy landscape and look into the future, the trend is de-carbonization. It has accelerated in the last 15 years. In future, Natural gas will be the most favoured fuel.
The footprint that liquefied natural gas has in the energy market is increasing tremendously. Qatar, known for its rich gas reserves, naturally wants to focus more on LNG.
China is preparing its environmental agenda. With climate change and air pollution control, China now has a high demand on natural gas. It has not been very active in the past, but now we see a mainstreaming of natural gas into the energy landscape of China.
Natural gas is the cleanest fossil fuel and countries are increasing the capabilities of gas-fired power plants. There’s a big future for LNG and the US is also jumping on the bandwagon. It’s starting to export LNG.
When we look at long-term trends, they seem pretty clear. If one looks at international estimates up to 2035, it would appear that solar energy will get bigger, so will natural gas.
The outlook for nuclear energy outlook will be flat while coal is going to decline. And, oil will also be flat or in decline. That’s why, Saudi Arabia's Crown Prince Mohammed Bin Salman announced as a vision of 2030 that he was going to put his country on a different economic path with a more diverse set of assets because one can’t depend only on oil in the long term.
Qatar is the world’s biggest LNG supplier producing 77 million tonne a year which is almost 30% of the world’s total. It wants to increase that. Most of the LNG comes from oil and gas fields.
Some of the world’s largest gas reserves are found in Iran. It wants to expand its role as the world’s top LNG exporter and boost production by more than 50% to 110 million tonnes a year.
Md Sharif Hasan teaches international relations at the University of Rajshahi.