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Qatar sees changing energy policy and leadership

A new emir and shifting global gas fundamentals mean things are likely to be different at the mighty QP

The Middle East’s most dynamic national oil company (NOC) of the past two decades is facing seismic changes to its operations, reflecting both a shift in Qatar’s broader energy strategy and the emirate’s change of ruler.

Sheikh Tamim bin Hamad al-Thani, 33, succeeded his father, Sheikh Hamad, as emir, with the handover effective from the end of June. Following Tamim’s removal of the powerful prime minister Hamad Bin Jassim al-Thani (HBJ), the two dominant figures responsible for Qatar’s remarkable transformation into a regional superpower have retired form public life.

In the immediate term, there is unlikely to be any substantial change to the Gulf state’s energy infrastructure. Tamim is committed to ensuring stability and not inclined towards unnecessary tinkering. The energy minister, Mohammed Bin Saleh Al-Sada, remains in place. A respected Qatar Petroleum (QP) veteran, Al-Sada is both chairman and managing director of QP – a joint role that is not replicated in other major Gulf oil producers. Though respected by international oil companies (IOCs), he lacks the personal charisma of his predecessor Abdullah al-Attiyah, the architect of QP’s joint-venture deals with foreign majors.

The future of QP

Saad Sharida Al-Kaabi, director of QP’s QatarGas and RasGas units, has been mentioned as a possible future chief executive of QP, if Al-Sada is forced to cede the QP role. In this putative division of powers, Al-Sada would retain his ministerial functions.

Change will come in time, and this will inevitably seep into the energy bureaucracy of Qatar plc. One aspect that Tamim will address is the lack of institutional heft of the major government and para-state entities – one of the negative legacies of the highly personalised governing style of the Sheikh Hamad/HBJ duopoly.

“While the former emirship was all about growth and expansion, under Tamim the theme will be one of consolidation, and the building of ministries and departments that can do the actual work. Qatar has been run by a couple of men at the top. Now is the time to institutionalise these relationships,” says David Roberts, director of the Rusi Qatar think tank. There have been suggestions that the new leadership will try to shake up the energy landscape, with reports coming out of Doha that the leadership plans to spin off QP. This, the thinking goes, would enable it to compete more effectively with a new breed of liquefied natural gas (LNG) suppliers emerging out of Australia and Mozambique.

It would also fit under Tamim’s rubric of giving institutions more independence, rather than being prize assets to be held as pawns by powerful figures within the ruling family.

There is no detail on how exactly QP would operate more independently. QP International (QPI), the foreign investment arm of the company, appears the most likely candidate for being spun out. Says Valerie Marcel, an NOC specialist at Chatham House: “QPI is much more ambitious now and that strategy is a manifestation of the parent NOC’s desire to have some operations be beyond the direct control of the state. It’s a sign of the emancipation of the company and not an unwelcome development.”

QP by the numbers

In May this year, QPI announced its first acquisition in an overseas offshore oilfield, buying a stake in Total’s Congo operations – a potential signifier of a more expanded role for the unit.

Al-Sada would be expected to lose his managing director/chief executive function at QP, but would be likely to retain a chairmanship role. There is also the prospect of a merging of the twin LNG businesses RasGas and QatarGas. Some senior Qataris believe that merging the two would yield a more effective, competitive unit. At the very least, it could endow the state oil company with a more streamlined decision-making process. 

The way that QP markets its gas will have to change. Its preference for locking in buyers at high prices proved an effective sales strategy throughout the 2000s, as Asian consumers struggled to find attractive alternatives to Qatari supply. But whether the predilection for high export prices can survive in a market with more diverse supply sources is another matter.

QP must also confront a brewing domestic challenge: the continuation of the moratorium on new exploitation of the giant North Field gas reservoir. This means there is little prospect of ramping up production of export gas, though having long ago reached its 77m tonnes-a-year LNG output target, increasing volume is not necessarily the main priority right now.   

Downstream view

So if it doesn’t expand domestic gas production, QP will concentrate its efforts on helping to build Qatar’s downstream sector, via projects such as RasGas’s Barzan gas project, which is to supply feedstock for domestic petrochemicals industries. Expanding petrochemicals will enable the diversification of Qatar’s economy, exploiting the base material of the explosive growth that has made QP such an important player over the past 20 years. 

QP’s future status is a central issue for Qatar, as it is ultimately responsible for half of the country’s GDP. Its remit has been extensive, encompassing upstream oil and gas, as well as petrochemicals and associated activities in financial services and real estate. The next few years will force changes on it. Tamim’s must ensure that QP adapts and survives, without hurting the goose that lays Qatar’s golden eggs. 

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