Qatar to leave OPEC to focus on natural gas
Move blamed on toxic politics seen as setting troubling precedent for oil cartel
DOHA/SINGAPORE Qatar said it will leave OPEC next month, a rare example of the toxic politics of the Middle East rupturing a group that had held together for decades through war and sanctions.
Qatar, a member since 1961, is leaving to focus on its liquefied natural gas production, Energy Minister Saad Sherida Al-Kaabi told a news conference in Doha on Monday. He didn’t mention the political backdrop to the decision: dire relations with Saudi Arabia, which has led a blockade against his country since 2017, and a rhetorical onslaught from U.S. President Donald Trump against the cartel.
“The symbolism is profound,” said Helima Croft, commodities strategist at RBC Capital Markets LLC and a former analyst at the Central Intelligence Agency. “Given that the concentrating on LNG should not be incompatible with OPEC membership, the move will invariably lead many to conclude that the geopolitical divisions had become too intractable.”
A spokesman for the Organization of Petroleum Exporting Countries declined to comment.
Qatar is OPEC’s 11th-biggest oil producer, accounting for less than two per cent of total output, so its departure may not have a significant impact on discussions this week to cut production in conjunction with allies, including Russia. Yet it sets a troubling precedent for a group that prides itself on putting shared economic interests above external politics.
Even through extreme events such as the Iran-Iraq War in the 1980s or Saddam Hussein’s 1991 invasion of Kuwait, producers still saw the benefits of retaining their membership and co-operating on oil policy.
Qatar’s departure in far less severe circumstances is testament to the declining influence of OPEC in its historical form. Since nonmembers started co-operating with the group in 2016, direct talks between Russia and Saudi Arabia often bypass the cartel’s traditional decision-making process. The surge in North American oil production has also shifted the balance of power from the Middle East.
As crude rallied by the most since June on Monday, the cause lay not with OPEC. The market was reacting to an oil deal between Saudi Crown Prince Mohammed Bin Salman and Russian President Vladimir Putin at the Group of 20 meeting in Buenos Aires, and also Canada’s decision to order an unprecedented output cut in its largest oil province.
“The withdrawal of Qatar from OPEC is a wise decision, as this organization has become useless and does not bring us anything,” Hamad bin Jassim bin Jaber Al Thani, a former prime minister and member of the country’s ruling family, said on Twitter. “It is just being used for purposes that harm our national interest.”
Qatar is a minnow in oil and a giant in natural gas. Counting both its production of crude and condensate — a form of ultra-light oil — the nation pumps about one million barrels a day, less than a 10th of Saudi Arabia’s output. In the 2016 production-cuts deal between OPEC and non-members including Russia, Qatar made a reduction of 30,000 barrels a day, just 1.7 per cent of the total.
“Quitting OPEC is largely symbolic for Qatar,” said Amrita Sen, chief oil analyst at consultant Energy Aspects Ltd. in London. “Its oil production has been steady with limited prospects for increases.”
Add in natural gas, supplied to its neighbours by pipeline and globally as LNG, and the nation’s output rises to the equivalent of 4.8 million barrels of oil a day, with plans to expand that to 6.5 million, according to Al-Kaabi.
“Achieving our ambitious strategy will undoubtedly require focused efforts, commitment and dedication to maintain and strengthen Qatar’s position as the leading LNG producer,” Al-Kaabi said in a statement. “I would like to reaffirm Qatar’s pride in its international standing at the forefront of natural gas producers, and as the biggest exporter of LNG.”
Relations within OPEC are sometimes frayed and observers have often speculated that the group could fracture. Yet oil ministers from Iran and Iraq continued to attend the same meetings even as their nations fought a bloody war that included the use of chemical weapons.
In the mid-1990s, Venezuela appeared at times on the brink of pulling out. Some U.S. right-wing politicians also tried to convince Iraq to withdraw after the 2003 invasion, but Baghdad resisted the pressure.
Iran and Saudi Arabia have been bitter regional rivals for many years, backing opposite sides in civil wars in Syria and Yemen, but have still been able to negotiate compromises within the group’s Vienna headquarters.
In the history of the cartel, three nations have left the organization, although two later re-joined. Most recently, Indonesia suspended its OPEC membership because its status as a net importer of oil made joining the 2016 production cuts impractical.
Qatar was the first country to join OPEC after the five founding nations — Iran, Iraq, Kuwait, Saudi Arabia and Venezuela — formed the group in 1960. It’s the first Middle Eastern nation to leave the group.
Its departure comes amid a standoff between Gulf Arab nations.
A Saudi-led coalition implemented a blockade on Qatar in June last year, severing diplomatic, trade and transport links as they accused Doha of funding extremist groups and being too close to Iran.