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Doha will deliver

Qatar will have no trouble keeping its part of the deal

The supply cuts do not bother Qatar unduly. Doha has started cutting the 30,000 barrels a day it pledged, to meet the planned level of 0.618m b/d, and state-owned Qatar Petroleum's (QP) president and chief executive Saad Sherida al-Kaabi has advised export customers of the slight volume reductions. Qatar's dominant Asian buyers-Japan, Thailand and Singapore-will have no problem plugging the small gap from other sources. In short, Doha's clients are happy for now.

Qatar's small cuts will focus on wells in the country's biggest field, the 300,000-b/d al-Shaheen, due to its relatively high production costs and medium-heavy crude, says Dubai-based consultancy Qamar Energy. Production at the Dukhan field would only reluctantly be trimmed as Qatar values the field's light crude. Output at the country's smaller offshore fields will likely be safeguarded.

Qatar is reluctant to curb investors' appetite for new upstream investments that aim to beef up long-term production. This includes Total's new 30% stake in al-Shaheen and a pending $3bn tender to increase output from the 40,000-b/d Bul Hanine oilfield.

Longer term, momentum to expand upstream oil output, following decades of gas-centric ambition, means Doha may be less easy going if more cuts are called for, especially considering rising domestic demand. Qatar's average consumption of refined oil products in the first five months of last year doubled from the levels reported in 2011, reaching a record high of 228,000 b/d, according to the Joint Organisations Data Initiative. Doha's bid to widen Qatar's global oil footprint is also well underway, as illustrated by the sovereign wealth fund's December deal with Glencore to invest about $11bn, buying a 19.5% stake in Rosneft, Russia's largest oil producer.

Meanwhile, higher crude prices will also support the price of oil-indexed LNG contracts, shoring up Qatar's position as the world's premium liquefied natural gas exporter. Plus, the December deal between Opec and non-Opec producers means the collapse of the Doha talks last April may be remembered not as a farce but as a crucial diplomatic stepping stone on the way to collaboration.

PE Verdict: Although somewhat ambivalent about the need to cut, Qatar will deliver to the letter

This article is part of a report series on Opec. 

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