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In return, Qatar has long demanded customers sign up to long-term contracts that last decades, with strict terms that don’t allow for easy resale of shipments and with prices that are often higher than rival suppliers, all in the name of reliable and consistent volumes.
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The exact extent of damage at Ras Laffan is not yet known, and the escalating confrontation is only entering its fifth day. But for many in the industry that bargain is already looking more difficult.
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“The long held perception of Qatar LNG deserving a premium in terms and price is now shattered,” said Saul Kavonic, a veteran energy analyst at MST Marquee. “LNG customers, especially in Northeast Asia, will have to review their balance of supply sources after this and consider stronger weightings to sources outside the Middle East.”
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LNG is Qatar’s most important resource. Those riches have turned the country — which has relatively small oil reserves compared to its Middle Eastern neighbors — into the region’s wealthiest economy on a per capita basis, and brought with it significant diplomatic clout. It provided some insulation when frayed relations with its neighbors resulted in a three-and-a-half year blockade and has allowed the country to assume an increasingly prominent role as international mediator.
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Its independent foreign policy and consequent cordial relations with Iran added to the market shock over Monday’s drone attack.
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LNG Kingpin
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As chief executive officer of QatarEnergy, Al-Kaabi is arguably the most important person in the global LNG industry. Still an engineering student at Pennsylvania State University, he joined what was then Qatar Petroleum in 1986. Through the years that followed he helped build the country into a massive producer and, from 1997, a world-leading exporter.
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Apart from vast projects at home, it is now, through a partnership with Exxon Mobil Corp., poised to start up its massive US LNG export project Golden Pass on the Texas-Louisiana border. QatarEnergy has also established footholds in Argentina and Egypt.
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Al-Kaabi is also known among traders and gas buyers for taking a firm stance with those who do not cooperate.
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Japan, once a major buyer of Qatari LNG, let contracts expire without renewal and shifted its buying to American LNG. The growth of Qatar’s expansion in the 1990s was largely due to investment from Japan, underpinned through LNG shipbuilding in Japan and equity investment in the Ras Laffan buildout.
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During a conference in Tokyo shortly after that change, in 2022, Al-Kaabi made a point of noting that the Gulf state was no longer “a major LNG supplier to this pioneering market.”
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Europe’s green efforts have also irked Al-Kaabi, who has threatened to halt flows to the bloc because of efforts to impose environmental requirements that would penalize major fossil fuel producers. The overreach, he said, made “absolutely no sense.”
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Instead, he has remained a firm believer in — and advocate of — gas as a transition fuel, a means of weaning countries off their dependence on coal while easily balancing energy demands and expanding renewable power. The prospect of that profitable bridge means Qatar aims to nearly double exports by the early 2030s. The massive North Field East expansion is set to come online as early as end-2026.
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The catch is the need to find buyers for all those volumes, on Qatar’s terms. Contracts signed over the last few years only cover about 60% of Qatar’s planned production expansion — and that’s without including volumes from Qatar’s LNG export project in the US, which is set to start soon without a full roster of customers.
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