Qatar still gets more revenue from oil

Nov 07, 2001 01:00 AM

Despite all its well-justified optimism about gas for the future, Qatar still gets more revenue from oil. Indeed, it is the cash from oil that has provided the state's downpayment on the infrastructure required to develop the gas.
Qatar's oil output fluctuated in the 1970s and 1980s, but in recent years has risen as Qatar Petroleum squeezed more oil out of the big Dukhan onshore field which it operates, and as foreign operators have increased output and discovered more reserves offshore. This has "showed the benefit of getting the international companies into the country", says Mohammed Moabi of Qatar National Bank.
The biggest production unit in the country is the Dukhan field, discovered in 1939, but only developed after the second world war. The first export of Qatari oil in 1949 came from this field. Four years ago, a southern extension to Dukhan was discovered. Today, its 700 wells are pumping out around 350,000 bpd, compared to about 280,000 bpd in 1997. But the biggest proportional increase has come from offshore fields operated by foreign companies. The most dramatic results have been achieved by Occidental at the Idd al-Shargi field.

According to Qatar Petroleum officials, this field, which produced only 10,000 bpd in the mid-1990s, is now churning out 90,000 bpd, thanks to modern techniques of increased oil recovery and horizontal drilling. And production levels are increasing further. TotalFinaElf produces about 20,000 bpd from the al-Khaleej field it operates, but plans to raise this to 60,000 bpd next year.
The operator of the biggest offshore field is the relatively unknown Maersk of Denmark, which plans to increase capacity from the al-Shaheen field from 120,000 bpd this year to as much 200,000 bpd in the next couple of years. As to future finds, Chevron has been combing onshore Qatar for the past three years for oil. But as Qatar's waters, Durkan apart, have proved more oil-bearing than its soil, more should be expected from two new offshore blocks Qatar has opened for exploration.
This opening comes as a result of the International Court of Justice settlement of Qatar's territorial dispute with Bahrain. Judges in The Hague confirmed that the disputed Hawar islands belonged to Bahrain, but also clarified Qatar's right to nearby waters where exploration is now to be licensed for the first time.

Like almost every OPEC member at present, Qatar is producing somewhat over its OPEC oil production quota, given the difficulty of adapting to this year's three successive quota cuts and the fourth one that is now in prospect. Mr al-Attiyah says production in October averaged about 620,000 bpd, while in fact Qatar's quota formally went down to 601,000 bpd in September. However, Qatar's oil production capacity is actually around 850,000 bpd, and on the rise, chiefly due to the expansion plans for foreign operators in Qatar.
Qatar had set itself the aim of hitting the 1 mm bpd mark in 2002. Mr al-Attiyah does not deny the 1 mm bpd target, but in the current sensitivities aboutOPEC over-production will only say the target will be achieved "in a few years' time". His caution is understandable. Bigger OPEC members have tended to overlook output excesses from Qatar, the cartel's smallest producer, partly because they themselves are much more significant quota violators.

But these are tense times for all OPEC members. None of them want to lose further market share to non-OPEC producers by taking more of their oil off the world market. That is why they all, including Mr al-Attiyah, are making a strong pitch this time for non-OPEC states to join them in output cuts.
The Qatar minister says his message to non-OPEC producers is: "You should not wait until the price collapses, and then come to talk and cry. Remember how long it took, nearly two years, before the price was re-established in spring 1999. It is better to act early." He adds a warning: "The non-OPEC should not force OPEC into a market share war, because most OPEC states are low cost producers." Producers outside the cartel might take OPEC more seriously if its members took their own quotas more seriously.
Discipline in OPEC has always suffered when the oil price is reasonably high, as it was for most of this year, because the temptation to pump oil in excess of quotas is correspondingly high. The slide in the oil price since September 11 may focus OPEC members' minds on discipline again, and even Qatar may feel forced to restrain itself.

Source: FT.com
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