Qatar's decision to leave OPEC not only highlights the bloc's declining importance but also provides yet another sign of the political discord within the Gulf Cooperation Council (GCC). And for Qatar, the decision furthers Doha's ambitious plans to expand into the liquefied natural gas (LNG) sector.
Qatar's diplomatic drift away from its neighbors continues. New Qatari Energy Minister Saad al-Kaabi announced Dec. 3 that his country would officially leave OPEC starting Jan. 1, 2019. According to the minister, Qatar will attend upcoming OPEC meetings in Vienna and abide by its commitments, but the country will ultimately leave the bloc to concentrate on its expanding liquefied natural gas (LNG) strategy, albeit while continuing to produce some oil. Al-Kaabi also appeared to issue a parting jab at Saudi Arabia, noting that the oil business was "controlled by an organization managed by a country."
Why It Matters
A number of factors have led to Qatar's decision. Doha was always unique in the bloc of oil producers because, as a massive exporter of natural gas, Qatar produces just 600,000 barrels per day of crude oil. Moreover, OPEC has become increasingly dominated by Saudi Arabia, which appears increasingly unable or unwilling to build consensus as its pursues a closer relationship with Washington. Some OPEC members believe this relationship has prompted more unilateral decisions that are counterproductive to the bloc's effectiveness at managing the oil market – concern that has only grown since the death of Saudi journalist Jamal Khashoggi.
Qatar wants greater independence from Saudi Arabia for multiple reasons, not least of which is the Saudi-led blockade of Qatar that began in June 2017 and sent relations between Doha and Riyadh to new lows. Leaving OPEC provides Qatar with more autonomy from Saudi Arabia, but it also allows Doha to further prioritize LNG. The LNG market is the real bread and butter of Qatar's economy, but the sector is in the midst of major changes at a time when Doha is planning a massive expansion in the industry. To compete in the rapidly growing sector, Qatar has reorganized part of its energy industry by merging its two natural gas companies earlier this year, among other steps.
Finally, U.S. lawmakers continue to submit legislation targeting OPEC and its members, giving Qatar another reason to leave the bloc. As a small oil producer, the benefits Qatar receives from its membership are not enough to justify the financial risk stemming from such legislation.
Qatar was not a founding member of OPEC, but it joined in 1961 — one year after the bloc formed. Qatar has been the world's largest exporter of LNG for most of the last two decades, but Doha lost that title to Australia in the last few years. Australia's capacity to liquefy natural gas has expanded significantly since 2012, and the United States is expected to draw level with Doha in LNG by the end of 2019. In a bid to remain competitive, Qatar announced in 2017 that it would end a 12-year moratorium on expanding its North Field natural gas deposit and boost its annual export capacity from 77 million to 110 million metric tons of LNG by 2024. After leaving OPEC, Qatar ultimately hopes it will be free – far from the influence of Saudi Arabia – to pursue whatever energy policies benefit it the most.