Experts downplay Qatar’s decision to exit OPEC
Stakeholders in the oil and gas sector, yesterday, downplayed implications of Qatar’s decision to leave the Organisation of Petroleum Exporting Countries (OPEC). Most of the experts that spoke to The Guardian, noted that since Qatar only adds about 600,000 barrels of oil per day, which is less than 2 per cent of OPEC’s total production, ending the 57-year membership would have limited impact on the organisation and the oil market.
However, they feared that Qatar’s decision would further accentuate perennial debates on OPEC’s future relevance and influence, as a price modulating entity.
The experts included the Executive Director of Institute for Oil, Gas, Energy, Environment and Suitability (OGEES), Prof. Damilola Olawuyi, President of the Nigerian Association for Energy Economics, Prof. Wumi Iledare, Director, Centre for Petroleum, Energy Economics and Law (CPEEL), University of Ibadan, Prof. Adeola Adenikinju, PricewaterhouseCoopers’s Associate Director, Energy, Utilities & Resources, Habeeb Jaiyeola, Research Analyst, MENA upstream, at Wood Mackenzie Lynn Morris-Akinyemi, Technical Adviser to Nigeria Extractive Industries Transparency Initiative (NEITI) Dauda Garuba and Vice President, Macro Oils at Wood Mackenzie, Ann-Louise Hittle.
Qatar, though a leader in gas production, is OPEC’s smallest Middle East oil producer, and the group’s fifth smallest producer overall.
Earlier in the week, Qatar announced it would withdraw from OPEC on January 1, 2019 to focus on gas production.
OPEC observers said the decision could be a reaction to current regional crisis, which led Saudi and the United Arab Emirates to impose an embargo on Qatar in 2017, stemming from a long-standing border dispute and other political frictions.
“Due to several factors, OPEC’s influence has evidently waned over the last years,” Olawuyi said. “With ongoing oversupply in the oil market, ongoing drop in oil price, rise in renewable energy production, internal fragmentation amongst OPEC members and the rise in the influence of non-OPEC oil producing countries, such as Russia, OPEC member countries may have to urgently return to the drawing board to decide a strategic path to ongoing market relevance.”
The UK based-Nigerian professor insisted that Qatar made an informed decision that allows it to focus on its core comparative strength in the market, which is natural gas supply, especially liquefied natural gas.
According to him, Qatar’s dominance and leadership in the natural gas market, coupled with its membership of the Gas Exporting Countries Forum (GECF) that is headquartered in Doha, arguably allows it to maintain its geometric growth and positive trajectory outside of OPEC.
Jaiyeola, who equally noted that the decision would have limited implications, said Qatar wouldn’t be the first OPEC member to leave since the group was formed.
He said: “Indonesia left in 2008 and rejoined in 2014 and left again in 2015. Similarly, Ecuador that joined in 1973 left in 1992 and also joined again in 2007. We also have Gabon that joined in 1975, left in 1994 and joined again 2016. It is not impossible that a country that left won’t join again.”
He noted that the exit would not have impact on fringe countries like Nigeria, which has about time higher production capacity, compared with Qatar.
Vice President, Macro Oils at Wood Mackenzie, Ann-Louise Hittle noted that since Qatar has minimal spare capacity, its exit won’t affect the volume of oil supply in the market in 2019, or risk OPEC’s goal of reducing output next year.