QATAR REVISITING THE IDEA OF A NATURAL GAS CARTEL?

C O N F I D E N T I A L DOHA 000074

SIPDIS

SIPDIS

DOE FOR GEORGE PERSON, JAMES HART, AND GINA ERICKSON

E.O. 12958: DECL: 01/29/2017
TAGS: EPET ENRG PGOV RU QA
SUBJECT: QATAR REVISITING THE IDEA OF A NATURAL GAS CARTEL?

Classified By: CDA Michael A. Ratney, reasons 1.4 (b) and (d).


1. (U) During a January 25 news conference at the World
Economic Forum in Davos, Switzerland, Qatar's Deputy Prime
Minister and Minister of Energy and Industry Abdullah
Al-Attiyah said that gas-producing countries will discuss the
idea of forming a "gas OPEC" at the next meeting of the Gas
Exporting Countries Forum (GECF) to be held in June in
Moscow. The GECF last met in Doha in April 2007 and agreed
to form an "experts committee" to review issues related to
the gas industry. At the time, Al-Attiyah said the committee
would review issues such as pricing, marketing,
infrastructure, and problems affecting both producers and
consumers. A "high expert" will reportedly report his
findings on the idea of a gas OPEC in Moscow, though
Al-Attiyah noted to the press in Davos that forming such an
organization would not be a simple matter because of the
differences between gas and oil markets. He added that it
was still too early to comment on the potential creation of a
cartel.


2. (C) Several Embassy contacts in the energy industry
echoed Al-Attiyah's skepticism over the inherent problems in
forming a natural gas cartel. For example, the head of one
major U.S. firm in Qatar told Econoff January 28 that Qatar
is engaged in two simultaneous conversations. The first is a
public one where Al-Attiyah and Qatar do not want to be seen
"breaking ranks" with other gas producers and thereby "thrown
out of the conversation." The second conversation is a
private one with industry representatives and others where
Al-Attiyah presents an "honest and credible realization" that
the gas market could not achieve the same kind of
commoditization as oil and, therefore, does not lend itself
to the formation of a cartel. In private, Al-Attiyah appears
to see a gas group as functioning more like a forum among
producing countries and not one that would plan quotas or
pricing.


3. (C) Separately, the director of liquefied natural gas
(LNG) marketing for a major U.S. firm in Qatar also told
Econoff January 28 that managing gas output is fundamentally
different than that of oil given that set prices and volumes
in LNG contracts can extend to 25 years. Moreover, such a
cartel would ultimately run counter to Qatar's commercial LNG
philosophy, which is based on set long-term contracts and
re-directing excess supply as needed to capitalize on high
prices in the spot market.


4. (C) COMMENT: It is likely that Qatar is feeling pressure
from other gas producers to explore the idea of a gas cartel.
It is hard to see how the formation of a true cartel would
be in Qatar's economic interests given its contracting system
for LNG and preferred role as a swing supplier. In the past,
Al-Attiyah has stated publicly and explicitly that a natural
gas cartel is not only unworkable, but antithetical to the
interests of his country, which prides itself on keeping
customers happy even as they rake in billions. Al-Attiyah's
recent comments most likely are yet another indication of
Qatari officials' propensity to try and play all sides,
ultimately pleasing none.

RATNEY