Three reasons why Qatar left OPEC

Three reasons why Qatar left OPEC

Baku, Azerbaijan, Dec.5

By Leman Zeynalova - Trend:

Qatar’s decision to withdraw from OPEC is unlikely to have a domino effect within the cartel, Francis Perrin, Senior Fellow at the OCP Policy Center (Rabat) and Senior Research Fellow at the French Institute for International and Strategic Affairs (IRIS, Paris) told Trend.

"Qatar's decision to withdraw from OPEC is a great surprise. It is mostly a business decision. The country is a small oil producer and exporter and a big gas producer and exporter. It is the world leading LNG (liquefied natural gas) exporter. OPEC is dealing only with crude oil and not with natural gas or natural gas liquids. For Qatar the strategic priority is to focus on gas, especially LNG, which is the jewel in its crown and which presents interesting opportunities of growth in the mid-term and in the long-term," said the expert.

Another reason is that Qatar is a small country within OPEC, noted Perrin.
"It is the 11th oil producer within the organization which gathers 15 countries. It means that Qatar's weight within OPEC is not very important."

Perrin said Qatari leaders stress that this decision has nothing to do with the political and economic sanctions imposed since June 2017 by Saudi Arabia, the UAE, Bahrain and Egypt (Saudi Arabia and the UAE are OPEC member states).

"I would agree that this political issue is not a key issue to explain Qatar's decision. But it may have played some role even if it is a small part of the explanation," the expert noted.

Further, he said that Qatar's withdrawal will not have a significant impact on the oil market and oil prices because Qatar's crude oil production is only 600,000 barrels per day presently out of a total OPEC production of 33 million b/d.

"World oil production is 100 million b/d. Oil prices are a little higher today due to the agreement between Saudi Arabia and Russia in order to cut their oil output from the beginning of 2019 (the formal decision will be taken by OPEC and by 10 non-OPEC countries in a few days) and to an agreement between the US and China over trade matters."

As for the possibility of Qatar’s increasing its crude output after leaving OPEC, Perrin said it is out of question.

"Qatar's withdrawal will be effective from January 2019. It means that from next year onwards the country will theoretically be able to do what it wants to do with its oil production. But the Qatari Minister of State for Energy Affairs said that Qatar would comply with the decision that OPEC will take in a few days. Moreover Qatar does not have the capacity to increase its oil production even if it wanted to do this tomorrow. The future of Qatar is natural gas rather than oil. As far as gas and LNG are concerned the country has the capacity and the willingness to increase its production and exports and it will do this in the next years," said the expert.

Perrin said he doesn’t think that Qatar's move will have a domino effect within OPEC. "But the organization must take this decision into account and be receptive to the needs and constraints of all its member states, including the smallest producers. It is a kind of waking call for OPEC."

Qatar’s Energy Minister, Saad al-Kaabi, has announced that the country will leave OPEC with effect from 1st January 2019. Mr. al-Kaabi pinned the decision on the country’s desire to focus on investing in its LNG capacity and that, as a small oil producer, it had little influence over OPEC policy.

The announcement comes ahead of the meeting by OPEC and its allies including Russia on Dec. 6-7 to discuss cutting supply.

The minister said the decision was not easy as Qatar has been in OPEC for 57 years, but that the country’s impact on OPEC production decisions was small.

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Follow the author on Twitter: @Lyaman_Zeyn

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