Qatar will leave the Organisation of the Petroleum Exporting Countries (OPEC) next month in order to focus on gas production, the Gulf state announced on Monday.
Qatar has been a member of OPEC since 1961 and the decision to pull out comes at a turbulent time in Gulf politics, with Doha under a boycott by former neighbouring allies including Saudi Arabia for 18 months.
In terms of oil production, Qatar is considered a mid-range player. It produces around 600,000 barrels per day, compared to the top OPEC producer Saudi Arabia who produces more than 10 million.
However, the country is currently the world's biggest exporter of liquefied natural gas (LNG), producing around 77 million tons per year.
Australia is close behind with a yearly production output of roughly 74 million tons per year, but the that Australia will surpass Qatar in 2019.
On Monday, Qatar's new Energy Minister Saad al-Kaabi reaffirmed that his country would look to ramp up production of LNG to 110 million tons per year.
Saad Sherida al-Kaabi, Qatar Minister of Energy and industry talks during a press conference in Doha, Qatar. Source: AAP
Qatar's LNG target and Australia's ambition
London based oil economist Mamdouh Salameh told SBS Arabic24 that if Qatar acted quickly it could reach its target within two years, putting an end to the Australian quest to become the world’s leading LNG producer.
In its pursuit, Qatar announced in April 2017 that it would lift of a 12-year self-imposed ban on development of the world’s biggest natural gas field, the north field.
And earlier this year the country announced a to reach the 110 million ton mark.
The Australian government's concluded that Australia overtaking Qatar was not a certainty given the narrow differences between the projected exports between the two nations.
It forecasted that Qatar would not be able to increase its production by 30 per cent for another 5 to 7 years.
Economics expert at Griffith University Dr Liam Wagner told SBS Arabic24 that Australia wouldn't be able to compete with Qatar if the Gulf nation was successful in surpassing the 100 million tons per year mark.
Origin Energy's Taloona gas plant. Source: AAP
"If Qatar can press above 100 a year, Australia would be really quite constrained above 85. I don't think we could match 100," he said.
"Australia would need to build more to increase its liquefaction capacity, and with the constraints of supply domestically and the constant calls for importing international gas, I just don't think anything else will happen."
Dr Wagner said while production of LNG increased, demand would also increase.
"Qatar putting more capital into LNG production is likely to drive prices down a little bit, however, demand for LNG is being driven up," he said.
"Demand for non-Russian gas is also going up from European countries, particularly Germany who are dependent upon Russian gas exports. The possibility that they can get non-Russian gas from LNG exporters will be very good. We're likely to see an increase in gas production globally anyway, but demand is also rising."
South East Asia and the Pacific region is the world's main LNG market, with China already overtaking Japan as the biggest gas importer.
An aerial view of a liquefied natural gas (LNG) storage tank of CNOOC (China National Offshore Oil Corporation) in Tianjin, China Source: AAP
South Korea comes in third place, and Qatar holds the lion’s share of supply to this region.
US LNG exports are set to triple to 70 million tons by the end of 2019 to sit tightly in the third place behind Qatar and Australia.
The latest on gas suggests that US production of LNG would challenge the top producers, but the country's trade war with China could affect future growth.
Will Qatar's exit from OPEC affect oil prices?
Economics expert at Griffith University Dr Liam Wagner said Qatar's exit from OPEC, meant that it no longer needed to abide by the cartel's quota system.
"With Qatar leaving, the real threat that was seen on the oil market was a potential increase of production. They're obviously not going to abide by the production quotas system which are the agreed production limits at the OPEC meetings every couple of months," he said.
"It would lead to a further oversupply. Oil prices dropped well below US$50 per barrel, they're now up again to $53 WTI [West Texas Intermediate], which is still well off the last 12-month high. So that's seen as a threat to oil production."
But Dr Wagner said Qatar didn't have the power to tip the balance of prices too much.
"Qatar's production of oil is actually quite small, historically they only produce about two per cent of the world's oil, so they're not a swing producer like Saudi Arabia or Russia," he said.
"They’re not going to tip the balance too far.
"Qatar is not going to be ramping up their production too much, or capable of doing too much more, they've been under an economic embargo for quite some time by other OPEC members in the Middle East, so they're in between a rock and a hard place and they're going to focus on LNG production."
