VisualPolitik fans, it seems that the European Union takes it for granted:
gas supplies from Russia will not be sufficient to cover the energy demand of the old continent.
And take note because it is no longer a question of Brussels wanting to look
for alternatives to punish Russia for the cruel invasion of Ukraine, that is already behind us.
Now the issue is that it is the Kremlin itself that seems willing to use gas as a measure of
pressure and retaliation both against the sanctions approved by the West and against
the military and economic support that both the European Union and its member countries
are providing to the Kyiv government. This is what explains, for example,
that Nord Stream 1, one of the largest gas inflows for Germany,
is operating at barely 20% of its capacity. And, of course, if we add to all this the very
low levels of investment in new fields and new capacity that the sector has maintained over the
last few years, we can understand why the price of gas has soared and why there is so much concern
from practically all the governments of Europe. The situation is so serious that, for example,
the gas price curve in Europe suggests that
things will not normalize until at least well into 2025. Check it out.
And, take note, because in the short term things could get even worse, much worse.
The onset of winter and the reduction of Russian supplies to Europe anticipate a pitched battle
between Asian and European economies to get their hands on as much gas as possible.
N1 (26 July 2022: Global LNG Competition Intensifies on New Russia Supply Cut. Bloomberg)
Therefore, some experts suggest that the price of non-Russian import gas for Europe could soar well
above $40 per million British thermal units. To give you an idea, this is no less than 5
to 10 times the usual gas price over the last five years ....
VisualPolitik fans, the increase in oil prices has been a blessing for producing countries
such as Saudi Arabia, Kuwait and the United Arab Emirates. However, the jackpot may end
up going to another small emirate of the Persian Gulf, the same one that stars in the most watched
video in the history of VisualPolitik: I am, of course, talking about Qatar.
We have told you about it on several occasions: Qatar is fundamentally a colossus,
a huge producer and exporter of natural gas. Despite having little more than 11,500km2,
that’s 4,400 square miles and fewer than three million inhabitants, Qatar is the third largest
gas exporter in the world and the second largest exporter of liquefied natural gas,
the gas that is transported in liquid form in large LNG tankers and which has become the
European Union's only hope of freeing itself from Russian gas and the resulting yoke of Moscow.
But okay, in order for us to fully understand the enormous influence
that Qatar has in this business, we have to take into account that this country is
responsible for almost 20% of all global exports. The image you see on the screen, for example, is
the port of Ras Laffan. Located some 80 km north of Doha, the country's capital. From here, Qatar
liquefies and exports more than 70% of the nearly 128 billion cubic meters of gas that this emirate
sells to the rest of the world every year. From here, large methane tankers leave for the major
ports of Japan, China, South Korea and India. So you may never have heard of Ras Laffan, but
right now this port is one of the most important strategic enclaves on the
planet. An accident here could cause one of the biggest energy crises in history.
The fact is that since war broke out in Ukraine, senior officials from the
European Union and member countries have been traveling to Doha with a very clear mandate:
to buy as much gas as possible. Now, to what extent is Qatar really
important in the energy market? How much money does this small emirate extract from gas
exploitation? Why do we say that it is one of the big "winners" to come out of the Ukrainian war?
Well, in this video we are going to answer all these questions, but to
start, we need to look at a bit of history. But before we go any further, we have some very,
very special news to tell you. VisualPolitik fans, our community is expanding in all
directions. In just a few days we will have a new channel to add to the family: VisualEconomik.
A brand new channel conceived with the aim of better understanding how the world of economics
works. Have you heard of perpetual debt? What problems does the electricity network have?
Can money be created without generating inflation? What would happen if all the banks went bankrupt?
Well, you can now subscribe and click on the little bell to be notified of
our first video. We can't wait for you to join us and to see what you think. For now,
the first question is over to you. If Hawaiian shirts are distinctively VisualPolitik, what will
be the characteristic look of this new channel? Any ideas? Place your bets. We'll leave you the
link here and also in the description. We hope you like the new channel and above
all we are looking forward to your comments. T1 (THE DISCOVERY THAT CHANGED EVERYTHING)
Qatar's love affair with natural gas dates back to the early 1970s,
when the British oil company Shell made a formidable discovery in the
waters of the Persian Gulf, specifically in waters belonging to Qatar and Iran.
We are talking about the so-called North Field, a 6,000 km2, that’s 2,316 square
mile field that is nothing less than the largest natural gas field ever found on the planet. It
is estimated that the North Field alone may represent more than 15% of all conventional
natural gas reserves.... worldwide. However, there was a problem... When
the discovery was made, gas had practically no value, at least not in this location. At that
time gas was a secondary product that depended on the construction of large infrastructure and
pipelines to connect producers and consumers. And of course, at the prices that gas was sold
at that time, it was not profitable to build infrastructure that, for example, connected
Qatar with Europe. So the discovery was, so to speak, more of an anecdote than important news.
However, things soon changed completely. In the late 1980s, the Qatari authorities began to
realize that the country's crude oil reserves were too small, insufficient by any standards to secure
the country's future, and that gas could instead become a major player in the energy industry.
It was just a matter of making it easy and relatively inexpensive to transport.
So... As we say around here, no sooner said than done!
The Qatari government has begun to invest large amounts of resources to promote the development
of liquefaction technology and subsequent regasification of natural gas. In order to be
transported in large ships, the gas must first be converted to a liquid state, which requires
cooling it to 161 degrees celsius below zero. To make this technology viable, both technically
and, very importantly, economically, the Qatari government invested heavily
in the entire production chain: Pipelines, liquefaction plants,
large methane tankers, storage facilities, regasification plants..... It was a huge
commitment to research, development and vertical integration... And it worked like a charm.
In December 1996, QatarGas sent the first shipment of liquefied natural gas to Japan.
And so a business was launched that would change this small nation’s fortunes and revolutionize
the world's energy industry. Qatar thus became one of the world's largest exporters of natural
gas and a major supplier to countries such as Japan, South Korea, Taiwan and China.
A huge success in Asia that, however, could not be replicated in Europe. Why? Well,
we’ll let Abdullah Bin Hamad Al Attiyah, former Minister of Energy, tell us.
C1 ("In 1997 or 1998 I went to Germany, met German officials and we discussed whether
Qatar could become a supplier. They replied, 'Oh, we don't think we need your LNG because
we will get much more gas from Russia through pipelines and it's cheaper.'" Abdullah Bin Hamad
Al Attiyah, former Qatari Energy Minister) At that time Qatar tried to use the energy
security argument... But the Europeans in general and the Germans in particular did
not pay much attention to them... Until now. Now, of course, things are radically different.
And Volodymyr Zelenskiy himself stated in his speech to the Doha Forum that Qatar
could play a key role in preventing Russia from using energy to blackmail the world.
But you already know that story.
The question now is, how much money is this emirate making from gas? Why do we
say that it is one of the big "winners" to come out of the Ukrainian war? How
much gas exactly does this tiny country have? What can it mean in geopolitical
terms? To what extent has this gamble become something of a golden goose?
Well, let's take a look. T2 (MUCH
MORE THAN YOU CAN IMAGINE)
When we say that Qatar is essentially a huge pool of gas, what exactly are we talking about? Exactly
how much gas does this little emirate have? Well, VisualPolitik fans, hold on to your chair, because
at the end of 2020, Qatar's proven reserves amounted to some 25 trillion cubic meters.
To give you an idea, this represents 13% of all the reserves discovered to date worldwide, three
times the reserves of Latin America and almost 70% of all the natural gas reserves of Russia itself.
But of course, Russia is 1,500 times bigger and has 50 times more inhabitants.
Now, do you think that having a lot of gas is its only strong point? Well... If so,
you are very, very mistaken. Qatar not only has lots and lots of gas,
it also has the lowest LNG extraction and export costs in the world, so its margin is considerably
higher than those of other major exporters. Take a look, for example, at this news item:
N2(17 June 2020: Asian LNG spot prices breach $38/MMBtu as supply risks exacerbate - SPGlobal)
What’s more, as we saw before, the price curve tells us that
the price of liquefied natural gas will most likely remain above $25 for several years.
Well, do you know what the cost of extraction and export of Qatar is? .... Well, we are talking
about barely four dollars. Its cost curve is unmatched
by virtually anywhere else on the globe. Qatar currently exports some 110 billion cubic
meters of gas annually, which means that in 2022, and despite having a large part of its exports
linked to long-term contracts, the emirate could earn more than $100 billion dollars from its gas
sales. An enormous fortune for a tiny country. And the question is, what do you think
Qatar will do with that kind of money? A good part of it will be used to further
fatten its already gigantic Sovereign Wealth Fund. A fund with which the Qatari government has
some 450 billion dollars invested in companies, real estate and projects all over the world.
To put this into perspective, this works out to about $160,000 dollars per capita. However,
since more than 80% of the Qatari population is made up of immigrants with temporary residence,
if only Qatari nationals are counted, then the per capita wealth accumulated so far by the government
exceeds $1.3 million dollars per head. 1.3 million. Not bad, don't you think? An
amount to which will now be added another huge rain of banknotes.
And we could almost say that the Qatari government is very close to achieving what
is often referred to as financial freedom. But real financial freedom, not the kind that is
usually talked about in spaces like Twitter. You don’t believe me? Well, take a look.
The government's annual budget comes to about $55 billion. And so, if we take, for example,
the historical return that the Norwegian Sovereign Wealth Fund has achieved since its creation,
that is 6.45%, with $850 billion dollars the Qatari government could, for example, finance
all its public spending with the annual return of the fund without having to raise a single dollar.
And that’s apart from the fact that oil and gas would continue to add to this massive fortune.
So pay attention, they are not that far away.... Especially if we take
into account the enormous amount of money they are going to receive over the next few years.
And wait, we're not done yet. We haven't even reached the key point.
Qatar Energy, the national energy company, is currently investing more than $30 billion
to increase its gas exports by 60% before 2027 and another $19 billion to expand its
fleet of 70 LNG tankers with 100 new ships to sell gas around the world.
We are talking about a mega-investment that, until relatively recently, many experts considered
would be difficult to make profitable because the country would simply not be able to find
a market for such a large amount of gas. Now, as you can imagine, the situation is
completely different: Qatar is not only connecting all that huge amount of gas with long-term
contracts, but is even considering launching another expansion... Because right now contracts
are literally pouring in from all sides. In fact, all indications are that at least half of
the new capacity will go to Europe. A relatively new market for Qatari gas. Check it out.
N3 (Germany clinches long-term gas supply deal with Qatar. FT)
In other words, thanks to Russia, Qatar is finding more than enough
customers to supply wild quantities of liquefied natural gas for the long term.
We are talking about hundreds and hundreds of billions of additional
dollars that will soon start flowing into Doha. C2 ("It is an incredible opportunity. Qatar will
be one of the most important exporters of gas and its market will probably be very
strong for years to come". Karen Young, analyst at the Middle East Institute)
Of course all these natural resources and all this money ... In addition to bringing
them closer to total financial freedom, will also give the government enormous
political clout. Even more than it already has. Because, it seems unbelievable given its size,
but over the last few years, this country, which hosts the largest US military base in the Middle
East and one of the largest in the world, has become not only an influential player in terms
of energy but also in terms of politics. N4 (20 March 2022: Qatar mediates between
Iran and US in nuclear talks. Gulf state acts as intermediary at request of Washington and
Tehran as negotiations reach crucial stage. FT) So, for example, if Washington, Brussels or any
other Western player wants to talk to the Taliban, Doha is the place to go. If they want to talk to
Iran, Doha is also the place to go. And if it is a question of seeking contact with Hamas,
with the Syrian opposition or with groups linked to the Muslim Brotherhood, well...
it’s the same story. Well, now that
role is going to increase even more. Because there is no doubt about it, money is a powerful tool.
N5 (Qatar Plans $5 Billion Egypt Investments in New Gulf Pledge. QIA wealth fund will play key
role in deal: Egyptian official. Bloomberg) Without going any further, in March 2022,
the President of the United States himself, Joe Biden,
issued a directive by which Qatar is granted the status of "major non-NATO ally". This
is the same category shared by countries such as Israel, Australia and South Korea.
This category makes it possible,
among other things, to purchase highly advanced US weapons much more easily.
Of course, a key factor in this decision was Qatar's new role in the global natural gas
market. A market in which competition will grow a lot in the coming years,
with countries such as the United States and Australia exporting left and right.
But, do you know what, it doesn't matter, everything indicates that the Russian
invasion of Ukraine will further fatten the already bulging Qatari cash reserves.
This country is undoubtedly one of the major beneficiaries in the new geopolitical context.
The questions now are: How will Qatar use all this money? How far will its new influence
extend? And which other countries do you think will benefit from Vladimir Putin's recklessness?
Leave us your comments below and let's open a debate. And of course,
if you found this video interesting, don't forget to like and subscribe to VisualPolitik
if you haven't already done so. All the best and see you next time.