Krane, Jim and Wright, Steven
(2014)
Qatar ‘rises above’ its region: Geopolitics and the rejection of the GCC gas market.
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London School of Economics and Political Science.
Abstract
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 liquefied natural gas, mostly from outside the region. Meanwhile, the sixth Gulf monarchy, Qatar, holds the world’s third-largest conventional reserves and is the planet’s number two gas exporter. Why is Qatar, given its enormous resources and relatively small domestic needs, unwilling to supply gas sufficient to meet its neighbours’ demand? After all, Qatar, like its neighbours on the Arabian Peninsula, is a member of the Gulf Cooperation Council, a monarchical bloc that links these six Sunni Muslim-led regimes through trade, customs and immigration treaties, even marriage ties. A currency union among the six is also planned. Surely it makes more economic sense for the five gas-short monarchies to import via pipeline from such a well-endowed regional ally, rather than enter the competitive global liquefied natural gas (LNG) market with its implications for higher prices on fuel and higher costs of transport? The answers to these questions – the theme that drives our research – flow from two broad categories: pricing and politics. Briefly, gas-short GCC states have historically been unwilling to pay what Qatar considered a reasonable price for its gas. In part because of this recalcitrance, Qatar has “risen above” the GCC market. It sought instead to export its gas as LNG to far-flung customers where it secured much higher prices on long-term bilateral contracts. Success in LNG has allowed Qatar to build an extraordinary level of global influence and improve its national security. It has done this by compiling links to powerful importing states that 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. In the short to medium-term, Qatari supply appears unlikely to assuage unmet demand in neighbouring monarchies.
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