Host Jason Bordoff speaks with HE Abdullah bin Hamad Al Attiyah, the former deputy prime minister and minister of energy and industry in Qatar about: the rise of Qatar as an important global natural gas player; the future of a globally integrated gas market; reasons for and implications of Qatar's decision to lift its moratorium on gas production; and recent regional tensions and the impact on the current embargo on Qatar.
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Jason Bordoff: Hello and welcome to the Columbia Energy Exchange, a podcast from the Centre on Global Energy Policy at Columbia University, I'm Jason Bordoff today we are discussing Qatar and the global natural gas market, well Qatar is a small Middle Eastern nation by population and by land mass, it's a huge player in the global natural gas market, holding the worlds third largest reserves after Russia and Iran, it's also the worlds largest exporter of LNG, and just ended it's moratorium on development of off shore gas fields, it has ambitions now to raise production 30%.
To understand what these developments mean for global energy markets, for Qatar and how this ties into recent geopolitical issues and tensions in the region, I'm speaking with his Excellency Abdullah bin Hamad Al Attiyah, he is the former deputy Prime Minister and the former minister of Energy and Industry in Qatar, he started his career in the ministry of finance and petroleum in 1972, and then for nearly two decades in the 1990s and the 2000s he was the energy minister, overseeing Qatar’s rise as a global gas superpower and was as central as anyone to developing the modern LNG market as we know it today. Your Excellency thank you for joining us on Columbia Energy Exchange.
Al-Attiyah: Thank you very much.
Jason Bordoff: I want to talk a little bit about what's happening in the global gas market today, but before we get there, I thought it would be interesting for our listeners to hear from you, you are in many ways someone at the very center of responsible for the global LNG market we have today, you saw that market develop, you saw in Qatar when gas was discovered, when it wasn’t even what people were looking for and didn’t think it was very valuable, and then created a global market with international partners for LNG, just help our listeners understand the story about how Qatar became so central to the global LNG market, and how that market developed?
Al-Attiyah: Okay as you see that we enter to the energy world, since the first cargo lift of oil in Qatar is 49—1949, after forward that we becoming an oil producers. Take the whole the 50s and the 60s and the 70s that all we are what we produce some oil we export our oil, so we invested the oil money in how to build the new country, because before 1950 Qatar was nothing, we have nothing at all, we have no oil extractors, no hospitals, no teachers, no schools, so 19—
Jason Bordoff: Remarkable to think about for people who have seen Doha recently.
Al-Attiyah: Yeah I was born in 1953, I'm lucky because I was born after school—that they open school, so I believe that in 1971 Shell discover, the biggest hydrocarbon field in the world, but it was gas not oil, it was shock both to the government and to Shell. So Shell they left it and they say we are not interesting, it's gas what I should do with gas, in that time gas market except in Japan start to import LNG from Malaysia, Indonesia, Brunei. But they believe that Qatar and other countries are far away to import LNG. So it took us 20 years until—
Jason Bordoff: The largest gas field in the world and Shell walks away from it?
Al-Attiyah: Yes because in 71 no one looking for nonassociated gas everyone looking for oil. So in – after 20 years so the word start, the word is change, so we decided on that time how to use the biggest nonassociated gas field in the world, with a proven 900 TCF, both Qatar the third gas reserves after Russia and Iran but with one advantage in Qatar that the whole gas came from one field, in Russia and Iran it's from different fields, some fields are very difficult, some field are easy.
So we start to put our map road, how can Qatar can be export LNG, in the first thought it was very difficult because we have to find a customer, so we are searching who will be our customer. So we -- because Japan in that time was the biggest Asian consumer of LNG, so we put all of offers to create our first market in Japan, it takes few years to discuss with the Japanese, Japan is not easy to discuss but finally we succeed, and we signed the first contract to Japan, and by the nine—the first cargo life Qatar 1997, and after we sign with Japan, Korea came, Taiwan came, India came, China came, now Pakistan, Bangladesh, Thailand, in Europe we are a big supplier to the U.K over 30% of U.K consumption of gas came from Qatar, France, Belgium, Poland, Italy, Belgium so also now in we are a big player in the European gas. So Qatar is also we sell to the United Arab Emirates through pipeline subside.
Jason Bordoff: And that is continuing even though there—
Al-Attiyah: No it is continue yes, we never breach our contract we respect our contract—even though Emirates they one of their acquisition against us that we are financing terrorist, we say how we can finance terrorist that you are still buying from us, a huge quantity of gas, giving us 100s of millions of dollar a month, if it's through you never do it. And you will never continue to buy our gas, but this is a fake acquisition, because they can't find—they try to hack our news agencies, trying to hack our the Emir speech and they put a speech show that the Emir is supporting terrorist, but this speech he—the Emir never say it.
So then we find out we ask the FBI and the British Intelligence to support us, to see where this hacker come from—
Jason Bordoff: And those supplies to the UAE will continue or do you think if this conflict, continue they might be disrupted?
Al-Attiyah: We respect our obligation, because we have a lot of suppliers, we don’t mix politics with contractual otherwise then you will be others how they can trust you. So we will continue we respect our obligation, and we never and the Abu Dhabi for sure they love our gas, 30% of their power generated from Qatari gas, so they will never think to not to receive it, because their leader. If they have alternative they will try their best but unfortunately they will stick with it, and they are very embarrassed I think in myself, because they are now they are fury of that we are financing terrorist is not exist and they know that is not exist and they know Qatar never finance terrorist and Qatar is a modern country, lover country hosting over 150 nationality working in Qatar, even many soldiers they work in Qatar, Emirates, Bahraini, Egyptians, we have more than 350,000 Egyptians.
Jason Bordoff: So I want to come back to what's happening today in the GCC, but just to sort of finish the history of how Qatar became energy producer—
Al-Attiyah: Yeah so then we start, they always as Mao Tse-tung say “That 1000 mile start with the first mile” So the first mile that we succeed to bring Japan, after we bring Japan we bring the others, now today Qatar sell over produce 77 million tons, putting Qatar as the biggest LNG producers in the world, also Qatar operating the biggest gas transportation company in the world. So Qatar is the most flexible supplier LNG to the world, they have the quantity, they have the reserve, and they have the ships.
So even when the Japan faced the big Tsunami, the big earthquake to Tsunami a few years ago, they forced to close the 34 nuclear power stations, so Japan facing a big shortage of power, so they ask us to supply them more gas. In just one month we divert 100 of cargos of LNG to them, and we save them.
Jason Bordoff: Just one we can talk about the history for a long time, I know we have limited time, but just one question I know many of our listeners will know, that historically LNG prices have been linked to the price of oil?
Jason Bordoff: That’s starting to change first tell people where that came from, why it was linked to price of oil, and then I want you to tell me what the pricing structure is going to look like moving forward?
Al-Attiyah: No not really, mainly that price of LNG or gas is different area to area, in Asia traditionally because Japan they are related to oil, so start a common Asia to in Europe for instance Britain is MVV, so they have their own discretion, other they sell it in a different sub price to oil, so this is a different where the allocation, and what the practices so you can, still in mostly in Asia is related to oil, related oil they have some concept mainly sometimes it's against sellers, sometimes against player, it depends what the oil price. For the last 10 years or so the oil price was very high, so the seller they don’t like it.
Jason Bordoff: Are we moving toward--
Al-Attiyah: Now the oil price is very low, so the seller they like it, so sometimes when you don’t like you try to change this discretion, no need to have different style, so the way still when it comes now you can't see the Asians produce consumer they don’t want to change it, because oil price is very low, so they love it. So consumers they are—producers are not happy they want to see another formula so that they give you more money, so but I think they are still uncertainty among between producer consumers, because every time they enter to a shock, and then we don’t know where they—how they calculate their step, so I think still will continue related to oil until they reach a compromise among themselves, how can you make a civilization in the LNG market not affect the producers or the consumers.
Jason Bordoff: Are we moving toward a singular integrated global gas market, more like the oil market more gas close to the water?
Al-Attiyah: I don’t think so. As I said it's a different location, different ways, and also is oil is different than gas, especially LNG, LNG it cannot store it, you have to have customer first and then you build the project, but in oil you discover it, you storage it easy, and you and you produce it in speculation if you have easy to reduce production, easy to storage it more than LNG or gas, because if you inject it again it will be very costly, and LNG you cannot store it for a long time, because it's very costly, and the ship is very costly so you have to have a lot of motivations. So it's a very difficult to compare oil and gas, you cannot apple to banana.
Jason Bordoff: So now we have a lot of new sources of LNG coming into the market from Australia and the U.S and at the same time, Qatar has lifted the moratorium on production and it's trying to grow production from tell me if these number are right, 77 to a 100 million tons, what was the reason for doing that and then let's talk about—
Al-Attiyah: Oh I think—
Jason Bordoff: What it means?
Al-Attiyah: Qatar for sure they are trying to be having more share of the market, first of all we learn a lot of lessons, secondly we are revamping the existing once, so maybe the first 10 millions it will be revamp, maybe the other 20 million or 30 million you need, or the 20 that you need different, maybe you build another plant.
Jason Bordoff: You can get part of the way there through the bottlenecking and then you need additional investment?
Al-Attiyah: Yeah also we are planning to produce LNG from U.S.A with Exxon Mobil and Golden Pass you see we built jointly with Exxon Mobil the biggest LNG terminal in Golden Pass Texas that time to import LNG from Qatar, but in three years before and we just finish the whole picture is differently the Shell gas start to double.
Jason Bordoff: This is a project right nearby Cheniere which is now been exporting for two years.
Al-Attiyah: Yeah opposite Cheniere in Louisiana, in the Golden Pass, we are the other side of Texas, so when we just finish the terminal, I visit the terminal several times then the gas price from U.S.A dropped from $14 to $3 even cannot cover the cost of transportation, now then what we decided, we decided to convert it, to export LNG from United States, because we have the whole facility thanks, pipes, port except is regasification we change it to _____ [00:15:59]. So this also additional cost and then we can, this will be more cheaper and then turn it to LNG.
So because the whole infrastructure there, except that modification, so to convert it from regasification to gasification so this is now the way that we already agreed.
Jason Bordoff: And will that project happen?
Al-Attiyah: Yeah already we got the whole license, and we hopefully I was discussing with Exxon Mobil few weeks ago, what I was asking them what is upgrading, what is going on, they say everything go okay by 2023 we may start produce a new LNG project, so it also, this is it will be part of the Qatar portfolio LNG, so Qatar by far if we produce more gas from Qatar are in Golden Pass that Qatar will be exceed even more maybe 110 million tons a year.
Jason Bordoff: And where do you see all this gas going, we see a global market cost of new falling—
Al-Attiyah: We see that there are a lot of developing countries start to decided to consume LNG as you see we signed last year, big contracts with Pakistan, and now few weeks ago we signed another contract with Bangladesh, two years ago we signed a contract with Thailand, so now in our portfolio we are seeing is and now we are discussing with Sri Lanka, Philippine and Cambodia and other Asian market, Asia the developing countries will be a big market for us, India also and China are expecting they will need more demand, last year India we have a big contract with them, almost 8 million tons last year they add another one million ton so almost now nine million tons to India we believe, we may have also to increase the quantity.
So we believe that they will be a big demand from China, India and the developing country and middle east country, we see that Kuwait also we signed a contract with them for four years now, but maybe it will extend it, we see Jordan also now in the processing now to import LNG and also we also in Egypt for the last year even though we export to Egypt several cargos, spot LNG so we can find the markets in the Middle East and Asia, and also we believe Africa will be a big market also, because the developing countries mainly they will to develop, when you develop you need more power, and more electricity.
Also we know that they are almost two billion people in world they have no exist to energy and they are coming in the map, so we are—
Jason Bordoff: So that view is consistent with I think I mentioned to you and you study that the center on global energy policy just put out that showing for the last several years everyone been talking about the coming flood of LNG, and how the market was going to be gloated and oversupplied and you haven't seen in the data yet the marker is still relatively tight and part a big part of the explanation for that are these small emerging exporters Egypt, Jordan, Pakistan other that kind of flown under the radar.
Al-Attiyah: I'm not small—
Jason Bordoff: Well compared to India and China, but I think they don’t always get noticed but they have made a big difference.
Al-Attiyah: Yeah but they are a small producers.
Jason Bordoff: And floating storage and regasification helped?
Al-Attiyah: Five to six million that year is not a big—Bangladesh has served 2.5 and Bangladeshis are facing a big shortage for and they want to be developing their nation, so they need also more.
Jason Bordoff: And you mentioned power and electricity, but it seems like a big part of the potential growth is also in petrochemicals, Qatar has invested in it's downstream capacity do you see a lot of growth potential there?
Al-Attiyah: Yes now today we are operating, we are now took weeks _____ [00:20:37] for many years ago our because our gas we decided to create baskets, we call it the gas baskets domestically, all of our power 100% is gas fires, and we expand in our downstream we are a big producers in fertilizers, one of the biggest producers, we are a big producer in methanol and TPE _____ [00:21:08] also we are also producer aluminum, steel also we are—we built the biggest _____ [00:21:17] refinery in the world, almost 300,000 barrel to processing, the condensate because we became a condensate producers, we produce more than 750,000 barrel of condensate every day.
Also we find some helium in our gas, today we are the biggest producer exporter helium in the world, and second producer of helium after U.S.A so also we are, we built several ethylene cracker are the biggest cracker in the world, so then we converted to Bromethalin from all high density, low density millions so, then now also we are so now we are export to 95 countries from all our different products, so we have a variety, we have different market, we know the market we have a lot of experience either from LNG, also Qatar today is a biggest GTL producers in the world.
We produce on both two projects, almost 200,000 barrel of GCL, so both in Qatar the biggest LNG, GTL, _____ [00:22:47] chemicals fertilizer are also aluminum steel another so Qatar today even small country but it has a lot of varieties, lot of markets, we understand now we have a lot of experience and how to market all this product directly without no mediator, so the way that we know very well the whole market either downstream or upstream or even the ability that so we, today if you come to Qatar and you see all their energy facilities I remember when I became minister in 1992 only Qatar produced 400,000 barrel and only we have no even—not a lot of service there is, but today we have huge service there is.
We calculated more than 70 companies that they are a subsidiaries of QB this is now why now Qatar is one of the leading in energy sectors in the whole world, we attract also many, many visitors, majors now we have Exxon Mobil kind of go for this total, we have Japanese _____ [00:24:18] we have also _____ [00:24:25] in aluminum, we have many, many other very.
Jason Bordoff: So a lot of growth in that?
Al-Attiyah: Yara of Norway and our partner in fertilizers so—
Jason Bordoff: I'm sorry well I know we only have a few minutes left, you brought up earlier the embargo against Qatar the tension within the GCC and that comes on top of new questions about the future of the Iran Nuclear Deal, tensions with Hezbollah, economic reform efforts, Saudi actions outside of the kingdom in Yemen, and recent efforts with the Royal family and business leaders there that are seen by some as efforts to consolidate power in the Royal Family, so it's lot of uncertainty in the region, what will that mean moving forward for relations between GCC energy producers and for natural gas?
Al-Attiyah: I think the unfortunately, when we established the GCC counsel 1981, it was four, six countries and even in one of the amendment that they have, where they call if there is a dispute between two countries or so, they have what they call a special committee for conflicts, so they have to go to this committee to study both what's happening, but they never the Saudi’s the other Bahrain and Yemen they divided the GCC, now three by three and then they just create an acquisition never even exist.
So this is the way now they are very embarrassment for the whole world, because the whole world ask them where are your evidence, then they fake a speech of his Highness Emir at the beginning, and they hack our, the Qatar news agency and they published a speech that they complain that his Highness the Emir of Qatar say it and he say that, they put the speech he support terrorist, he support Iran and other, but then we ask where is this speech come from, show us the link, for sure when Emir give speech for sure it must be televised not interesting, and they never show up.
So we ask the FBI and the British Intelligence to help us, to find out who the hackers, then after the Washington Post they report from the FBI that this hacker center is in Abu Dhabi and Saudi find out that they, they find them so they now they never talk about the speech, never even mention it and then they try to search for another acquisition they say financing terrorists, then they say and Qatar they have a special relationship with _____ [00:27:50] and they open office in _____ [00:27:52], but General Petraeus in the Washington Post he said no, we ask Qatar to open office for _____ [00:28:02].
Jason Bordoff: What impact does the blockade having in Qatar today on the economy and trading—
Al-Attiyah: In the beginning, in the beginning of the first few weeks it was surprising for us, because our economy all the GCC economy is a very integrated, we have an economic agreement transit, traveling without visa, we have a very good airlines connections, if you saw Qatar Airways they have 17 flight for Dubai, and also Emirates Airlines they have 17 also, from bus only from Qatar to Dubai they are about 35 or 40 flights daily and Bahrain Saudi Arabian all?
Jason Bordoff: Is it having a big impact on the economy today?
Al-Attiyah: Both for all but we mostly it used to be we are independent in Jabal Ali for transit, so we are many, many business people in Qatar their import through Jabal Ali as the transit, so in the first two weeks, three weeks we were and in a very difficult because suddenly all medicine food agriculture blocked because they came through Saudi Arabia in transportation because we are import from Turkey, import from Jordan and Kuwait and other through the road transportation who is also into Saudi Arabia then Doha, they block the borders, then Jabal Ali they blocked the transfer the transit. So then kick all our student who—
Jason Bordoff: But now there has been an adjustment people.
Al-Attiyah: Now we are okay give us a few months, the government and other camp they reallocated, because we just finish building one of the biggest port in the area, it's called Hamad Port, now also we start now building the logistic area there, so it has a lot of storage now just in few months I hope that will be open so to let the business or private sectors to hire a lot of storage in the port, the logistic, so they can bring all commodities direct to Qatar.
Jason Bordoff: So we need to make this a two part program or a 10 part program to talk about current geopolitics and the gas market and the history of the gas market as I said.
Al-Attiyah: It's a long history.
Jason Bordoff: Few maybe no one has been more central to the history of the global LNG market than you have, so really appreciate your visiting us at Columbia University, and thank you for taking time to talk with us on Columbia Energy Exchange for more information about the Columbia Energy Exchange and the center on Global energy policy visit us online at Energypolicy.columbia.edu or follow us at ColumbiaUEnergy, we’ll see you next week.