Dr. Wright is an associate professor of international relations and Gulf studies in the Gulf Studies Program at the College of Arts and Sciences, Qatar University.
Qatar is a unique example of a small-state actor that has achieved rapid economic development domestically and nurtured a foreign policy with an international reach. The key driver behind its success is the country's extraordinary reserves of natural gas. Qatar's North Field, for instance, shared jointly with Iran, is the largest non-associated natural-gas field in the world, and the strategic decision to exploit it during the 1980s has enabled Qatar to emerge as the leading exporter of Liquefied Natural Gas (LNG).1 The profits have provided the capacity for the nation's economic growth and huge investment in its gas industry, including a global fleet of LNG tankers that can supply gas to every corner of the world. While Qatar has experienced a golden age of expansion in global consumption of natural gas, transformative changes are occurring in the market. In the absence of significant competition, market dynamics have prompted global investment in natural-gas exploitation — accelerated by unforeseen advances in the exploitation of shale through fracking for both oil and gas, in addition to coal-seam methane.2 The challenge from this changing environment will, I argue, result in a necessary recalibration of Qatar's energy policy and supply linkages. The changing market dynamics underpin and largely determine Qatar's wider trading, foreign-policy and investment relationships through what can be understood as an example of complex interdependence.3
The global LNG market has witnessed seismic changes in demand variables, new growth areas of LNG supply, and the manner in which LNG is traded and priced.4 In the space of a decade, the United States has gone from being projected to become the world's largest LNG importer — ahead of Japan — to emerging as a major producer of shale gas and an actual exporter of LNG. It is destined to be the third-largest exporter, with clear implications for the Middle East.5 Yet, while the last decade has been particularly telling for the global LNG industry, the next five years alone should be categorized as "revolutionary" in redefining geopolitical areas of natural-gas supply, and overall global trade patterns, in a commodity that has the second-largest trade volume globally: around $150 billion per annum. Indeed, the IEA has projected that the total global export capacity of LNG will rise by 45 percent between 2015 and 2021, and the fundamentals to be those of an oversupplied market,6 leading to depressed prices. This has several implications for the geopolitics of Qatar's energy relations.
In terms of the future, while Qatar is by far currently the largest exporter of LNG globally — in 2015, exporting three times what its nearest competitor achieved — Australia has emerged as a rising area of importance in the energy industry, due to its massive deposits of coal-seam gas, coupled with a strategic decision to use this for export purposes. Projections of LNG export capacity indicate that, by 2017, Qatar will be "eclipsed by Australia, which in turn is expected to be overtaken by the U.S. in the early 2020s. More than 150 billion cubic meters of new liquefaction capacity is currently under construction, with half of it located in the U.S. and a third in Australia."7 Since Qatar implemented a moratorium on further exploration and development in its giant North Field, its export capacity has plateaued, yet it can still claim to be the world's largest exporter, with around a third of the global LNG market share, though this is expected to change in 2017. From a supply perspective, the next decade is going to be marked by a heightened level of competition in LNG, on the back of higher crude-oil prices.8
Regarding China, while growth and demand expectations did not decline in 2015, they fell considerably short of the gravity well that was supposed to spur continual market expansion and absorb excess capacity. Hubris regarding the Chinese economy carries considerable implications in terms of how the market will cope with an oversupply of natural gas. The indications for the next five years point to the glut of natural gas increasing further.9 In terms of demand, over the last five years, projections for future natural-gas consumption had centered largely on growth in China and ASEAN, in addition to the Indian subcontinent to a lesser degree. Nonetheless, these expectations have proved largely unwarranted, as the growth in demand has started to decline, especially in key markets such as Japan and South Korea.10 Indeed, prior to the 2012 Fukushima nuclear-reactor meltdown and the subsequent suspension of the Japanese nuclear-power sector, the global gas market was already showing signs of a glut, so the Japanese move from nuclear- to gas-based power production gave the market sustenance.11
However, in the case of Japan, it is because of the slow and incremental startup of its nuclear reactors that it is now able to reduce its need for LNG.12 One factor that will challenge this trend towards a gas glut stems from climate-change negotiations and the recent UN Paris Accord on climate change. As part of a country's efforts to reduce carbon emissions, cleaner fuels such as natural gas can be expected to form a greater part of the energy mix, in addition to renewable and alternative energy. Moreover, with Beijing's commitment to moving away from coal-based power production by 2020, it will be telling to observe how its own energy strategy might evolve. It could prove to be a silver lining against the indicators of a significant gas glut.
It is becoming increasingly clear that changes over the next five years will lead to a buyer's market.13 In May 2016, Japan, the leading global LNG consumer with a market share upwards of one-third, developed a new energy strategy seeking to capitalize on these trends.14 The key aspects of the strategy are being coordinated not only at the G-7 level, but also among ASEAN partner states and with major LNG consumers in Asia. This level of coordination is significant, nudging the consumption of LNG procurement toward more flexible supply agreements and building the foundations for a move towards an increased level of spot trading in the LNG market, in addition to flexibility in how LNG supply agreements are handled.15 It is common for supply agreements to be rigid and have a "destination clause" prohibiting the purchaser from reselling the gas to a different market. This is also in addition to an end-to-end supply contract restricting the ability of the purchaser to take advantage of liquefaction facilities and competitive supply agreements.
Such a level of coordination is critical to understanding the evolution from a supplier's to a buyer's market, by fostering innovative forms of coordination16 that, in turn, affect pricing. In certain respects, one can argue that coordination among the G-7 countries, an effort led by Japan, aimed at transforming the consumption and supply dynamics of the global LNG market — a natural and pragmatic response. Indeed, there are some lessons to be learned from what OPEC achieved with regard to the price of oil in a supplier-dominated market, though what we have here is the diametric opposite of that example: in essence, buyers coming together to reshape the market. Actually, it was only because of the oil shock in the 1970s, as result of OPEC, that Japan's primary energy sources shifted away from oil and led to the growth of nuclear energy, in addition to natural gas.
Adding to these trends, ushered in through the emergence of a buyer's market, it is noteworthy that Japan has embarked on an approach to take advantage of its leading position as an LNG consumer by seeking to develop an LNG trading hub in the country.17 The importance of this undertaking should not be underestimated; such trading hubs have the potential for securing lower prices, capitalizing on re-export, and facilitating the development of a move towards spot-market trading for LNG.18 There is an inclination towards the development of other market hubs, aggravated by the United States as an LNG exporter. The addition of Japan's JERA and Singapore's SGX LNG Index Group — as well as efforts by Malaysia — underlines that new energy hubs are emerging to allow for a more competitive market across the region.19 In this regard, both the UAE and Qatar have started moves to develop their own gas-trading hubs. The net effect could spur greater competition, more flexibility, lower prices for consumers — yet diminishing returns for major suppliers such as Qatar.
GLOBAL MARKET TRENDS
Adding to the complexity of the supply picture, the United States started exporting LNG in March 2016. Given the agility of the shale industry in the United States in adapting to the global decline in oil prices, this form of supply has established itself firmly as part of the energy landscape of the United States. Yet, while Australia is leading in terms of the growth of supply to the global LNG market, future projected increases in global LNG exports will also come from the United States.20 Optimistic projections expect that within a decade, the United States will emerge as the largest exporter of LNG, ahead of both Australia and Qatar.21
In certain respects, the United States has the potential to become a swing supplier of LNG, as it commonly employs a "tolling agreement" for the sale of LNG, rather than a "combined purchase and sale agreement." The difference between the two rests on flexibility; under a tolling agreement, the customer purchases gas for delivery to a liquefaction plant and then pays the operator for having it liquefied, with delivery by ship based on a contract. This gives considerable flexibility to when LNG can be purchased and in what volumes. The combined purchase and sale agreement can be understood as a more traditional approach. The seller manages all three aspects of the sale and typically operates on a "take-or-pay" basis that binds the purchaser to the contracted volume and price. What is important here is that the trading system adopted by suppliers in the United States offers flexibility. Increasing volumes of LNG can be sold on a competitive basis, thus challenging the very nature of the long-term-contract approach typically employed by established exporters such as Qatar. Indeed, in a period when there is a glut in the global gas market, the competitiveness of the United States will become increasingly clear within both the European22 and East Asian markets.
An additional aspect that will facilitate the competitiveness of the United States is the now completed $5.3 billion expansion of the Panama Canal. This transit route has reduced the cost of shipping from the U.S. Gulf Coast to Asia by 11 days. Therefore, export capacity from the U.S. West Coast and the Gulf Coast will be competitive for the Asian market; the initial shipments of U.S. LNG have traveled to Hong Kong and Taiwan. Even within the Arab Gulf region, U.S. natural gas is now being supplied to the UAE, among others. It would not be an understatement to call the expansion of the Panama Canal a "game changer" in the industry. With the rapid increase in the U.S. production of shale oil and shale gas, in addition to the easing of restrictions to allow export, the transit time to East Asia has been considerably shortened. It is also an issue in terms of price: the Panama Canal is competing with the Suez Canal tolls for the transit of LNG and oil.23 With the Panama Canal offering a more attractive route for U.S. shipping in terms of both price and time, it is further enabling the presence of the United States within its key market and allowing it to compete against both Qatari and Australian supplies.
Another major player over the next five years will be Russia, when it expands its LNG export capacity. In 2013, the Russian parliament took the pragmatic step of loosening the role of the natural-gas company Gazprom in producing and exporting gas globally. Through liberalizing its export rules, in addition to allowing for greater competition in the Russian LNG market, it is expected that a greater volume of LNG will emerge based on the growth of domestic operators. Expectations are that, by 2020, Russia will have doubled its volume of LNG exports to around half of what Qatar currently exports. Given the geopolitical position of Russia, it is able to play a very important role in the export of natural gas to East Asia, in particular to the Asia-Pacific market, which collectively forms between 55-60 percent of global LNG consumption. Indeed, Russia is especially competitive in the major markets of Japan and China and has the potential to provide gas through pipeline-based supply.24
IMPLICATIONS FOR QATAR
Considering the above trends, one can argue that the very nature of Qatar's energy policy, in addition to its revenue projections, is going to have to adapt and change. Its energy strategy has been the offer of fixed long-term contracts along with a pricing structure linked to the global price of crude oil. LNG is sold on a commercially driven basis to maximize profit. Moreover, LNG supply has been provided in what can be considered an inflexible manner to customers, to ensure that it is not re-exported. While Qatar's early adoption of a gas-based energy strategy has yielded clear dividends over the last 15 years in terms of revenue, the changing nature of the global LNG landscape, particularly in East Asia, makes change unavoidable.
The principal global consumers of Qatar's LNG exports are Japan, South Korea and Taiwan; they collectively consume 27 percent of its total output. India and China collectively constitute 15 percent, while 30 percent is consumed in Europe. Another 5 percent goes to flexible supply contracts. The Japanese market has a special importance in Qatar's energy strategy, given the higher price differentials it can command when compared to Europe, for example.25 Nevertheless, what is significant here is that 95 percent of Qatar's LNG supply agreements are long-term contracts, the majority of which will be up for renewal between 2017 and 2022, especially within East Asia.26 Qatar can be expected to be more flexible in how it supplies its LNG, and, given that it enjoys the lowest unit costs of any LNG producer, it will aim for a competitive approach, albeit with lower yields. In several respects, the major markets of Europe and East Asia will all be able to choose among the newly emerging centers of energy supply in what is clearly an increasingly competitive market.27
Qatar has responded to the global decline in the price of crude oil through implementing an austerity program,28 increasing its borrowing from the global and domestic bond markets, increasing indirect taxation, and implementing a direct value-added tax starting in 2018. Reliance on LNG revenue will decline further than what it is currently, arguably, giving impetus to greater economic reforms. The global price of oil, once a clear indicator of the revenue the country would take in, will also decrease as a guide for national income projections. With the adoption of increasingly flexible supply agreements and with pricing influenced through the emergence of trading hubs, over the next five-year period there will be increasing pressure to reform the country economically, based on a lower revenue stream. Such reform comes with clear implications at the socio-political level.
THE EAST ASIAN MARKET
Japan's LNG sector, as of 2016, was dominated by Australia, Malaysia and Qatar, though prior to 2012, Malaysia had been the principal supplier. After the 2012 suspension of its nuclear industry, increased levels of LNG were imported from both Qatar and Australia, though Qatar has been progressively losing market share to Australia. This can partly be attributed to price: "While volumes from Qatar have fallen, recent months have seen the average price of Qatari supplies fall from being among the most expensive [up to 2015] to being the cheapest of Japan's top five suppliers every month [in 2016] — for June, Japan paid just $5.06 million BTU for Qatari supplies on a delivered basis, and a mere $4.96 million BTU in May."29 This competitive market has seen a significant decline in the price Japan pays for its LNG; in 2012, it was above $16 million BTU and has declined sharply since 2015.30
Adding to this complexity is the fact that Japan's import volumes have also slowed, attributable largely to energy-efficiency measures that are becoming more widely adopted. However, such a trend would accelerate further in a scenario where nuclear power plants are reactivated. The overall impact of this scenario is that market competition, and the price that leading suppliers of LNG have been used to obtaining, are increasingly being challenged. For Qatar, dynamics have shifted towards its ability to compete with Australia in terms of price, despite a broadly established trading partnership that Japan enjoys with Australia. Moreover, for Japan there is also the issue of the regional origins of its LNG. The majority is sourced from GCC countries; therefore, any diversification away from this source could conceivably be understood as a commercial option enhancing energy security and ultimately incentivizing Australian and Malaysian LNG.31 It should not be forgotten that the United States is now an increasingly important actor in the supply of LNG to the East Asian market. With the expansion of the Panama Canal, LNG shipments from the United States to Japan take a mere 20 days, easily within competitive reach.32
Unlike pricing mechanisms in North America and Europe, LNG has traditionally been supplied to Japan through long-term oil-indexed contracts with rigid destination clauses through the Japan Customs-cleared Crude (JCC) model.33 This is the main reason Japanese consumers pay higher rates than, for example, Europeans. Nonetheless, it should not be forgotten that, following the March 2011 tsunami and the suspension of all nuclear reactors within the country, Japan increased its LNG consumption by 26 percent from what was already the world's highest. This took place at a time of perceived neglect in the global gas market and acted as a means of sustaining higher prices. Nevertheless, it is important to appreciate that the majority of Japan's supplemental LNG purchases since 2011, to meet this shortfall in electricity production, were counted from the spot market, which serves the purpose of absorbing excess capacity. Indeed, a significant proportion of the gas came from Qatar.
The importance here is that an artificial and short-term demand cycle can be understood to have been created34 based on the logic that Japan's nuclear sector would gradually be reactivated once upgraded safety standards had been certified. The overarching challenge this poses for Qatar is that the combined forces of a progressive restarting of the nuclear reactors, in addition to the longstanding impact of energy-saving measures that have been developed since the nuclear-reactor suspension, are likely to lead to a progressive reduction in the amount of LNG Japan consumes. Certainly, the IEA has indicated that it expects a progressive decline up to 2020, even without the reactivation of the nuclear sector.35 Such a decline has significant implications for the global energy market and the ability of Qatar to maintain its longstanding energy strategy.
The overall conclusion that can be reached is that the traditional approach of securing inflexible long-term contracts with rigid destination clauses is likely to be unsustainable. A clear change in the manner in which LNG is contracted, supplied and priced will come increasingly under scrutiny. The main challenge, however, is whether the JCC pricing index will become uneconomical in a context of high oil prices.36 Nevertheless, the global decline in the price of crude oil has somewhat relieved the pressure for a new and reliable pricing mechanism to be developed. All the same, on a long-term basis, the dynamics of an oversupplied market, in addition to declining consumption patterns, will give buyers a greater ability to influence pricing. A key challenge Qatar's energy policy should anticipate for the future will be how to shape a reliable pricing-index formula that benefits both the consumer and the producer.
A similar picture can be observed in South Korea's consumption patterns. As the second-largest consumer of LNG after Japan, under the presidency of Park Geun-hye, a new national energy strategy was adopted with an emphasis on nuclear power.37 Over the long term, by 2029, South Korea expects to have the combined capacity of 16 new nuclear reactors come on-line, while in the short term, 7 gigawatts of new capacity is expected to be provided through new nuclear power plants by 2021. The importance here is that the energy security mix of South Korea is evolving to one that places a greater emphasis on nuclear energy than on LNG through imports. In this respect, it is observable that South Korea's energy strategy is grounded primarily in energy security calculations rather than economic considerations, given the comparative cost between LNG-fired power stations and nuclear reactors. With South Korea's being a primary market for Qatari LNG, the projected market changes have clear implications. As is the case with Japan, what adds to this complexity is the greater competition in the LNG market, which may drive prices down progressively. Therefore, maintaining market share will depend increasingly on the willingness of supplier countries to discount their LNG based on market considerations, in addition to incentivizing supply agreements through adopting more flexible contracts and removing some of the more onerous issues such as destination clauses.
Despite the increasingly competitive picture with regard to Japan and South Korea, and in addition to the anticipated declines in their consumption patterns over the medium to long term, the main driver of future global energy consumption remains China.38 It is in light of such projections that East Asia remains a "gravity well" in terms of future LNG consumption globally. Even with the declines expected in Japan and South Korea, China's projected consumption needs would offset them. Such projections, however, should be viewed with a degree of caution, as they assume that China would not seek to exploit its massive deposits of shale, which hold the potential to reduce its LNG import needs significantly. Moreover, the shift towards electricity production through gas rather than coal is largely dependent on the application of new environmental legislation. The risk is clear: the slow adoption of an environmentally driven domestic energy policy will have stark implications for the validity of such consumption patterns.
Given its vastness, China has the potential for diversified energy security through multiple suppliers. While Qatar is well-positioned to supply an increasing proportion of its volume to China, it will also face competition from Australia, the United States, Central Asia and Russia. It is noteworthy that Russia's own energy policy has become focused on East Asia following the progressive application of sanctions by the European Union after the EU Council in March 2014 condemned Russia for violating Ukrainian sovereignty. Given the significant production capacity open to Russia, in addition to its ability to provide gas through pipelines, it is well-positioned to offer a highly competitive LNG supply to the various inland regions of China. The net effect of such competition is that it serves as downward pressure on LNG pricing and on the flexibility such a customer can demand from its suppliers.39 The implication for Qatar is that it will face continued competition from Australia for the supply of natural gas to China's LNG terminals. China will, in turn, be in a position to balance imports through LNG terminals against what it can receive through pipelines from its northern and eastern borders.
LOCKING IN EMERGING ACTORS
In the context of the heightened levels of competition that Qatar is experiencing in three leading LNG-consuming countries, an observable trend can be identified: it is seeking to increase its share in Taiwan, in addition to seeking long-term market share in India and Pakistan.40 Indeed, India and Taiwan are the fourth- and fifth-largest import markets for LNG. The driver of this shift can be attributed largely to the anticipated heightened level of competition from Australia. In terms of the Indian market, Qatar supplies the majority of its LNG needs and achieved a market share of 89 percent in 2013-2014.41 Although it has since declined, Qatar is nevertheless the dominant supplier. A distinction can be observed, however, with regard to India when compared to Japan, South Korea and China. It is not regarded as a "premium buyer" because its energy strategy has been characterized as both opportunistic and pragmatic; it seeks to secure imports at the lowest possible price. Although it is a growth area, it cannot be considered a comparable market in terms of profitability when compared to the three leading consumers in East Asia.
Regarding the geopolitics of energy supply to India and Pakistan,42 competition for Qatar within these markets can also be expected to come from Iran, depending, of course, on the price it can receive for its gas — given that there should be a cost-benefit relationship with its own need to invest in its production infrastructure. The easing of tensions through the signing of the Iran nuclear deal has resulted in greater flexibility in energy-supply partnerships. The physical location of Iran in relation to the markets of Pakistan and India gives it the potential to be a competitive supplier.43 Adding to this will be the manner in which Australia increasingly seeks to gain market share. In light of this competitive environment, the prospects for India and Pakistan to achieve a low contracted LNG price, through both spot trading and long-term contracts, seems particularly favorable. However, it also necessitates a more flexible pricing agreement from Qatar in order for it to maintain its market share.
As of 2015, Qatar was supplying almost half of Taipei's domestic import needs. Australia's supply was negligible. However, Australia, with the rapid growth of its LNG export capacity, has mainly been increasing market share in the top three consuming countries and challenging the volumes taken from Qatar. Based on this fact, Qatar faces the challenge of securing longer-term supply agreements with Taiwan and India — before Australia's export potential reaches a capacity that can enable it to compete in those markets.44 Nevertheless, the key challenge for Qatar will be the drive of those countries to diversify their supply platform so they do not rely too much on one country. That said, there is a clear need for Qatar to move quickly in the light of rising competition.
A GCC REGIONAL GAS MARKET
When considering the wider implications of changes in the global LNG market on the Gulf, it is clear that, except for Qatar, each of the five GCC states is suffering from shortages in natural gas for its domestic needs.45 As of 2016, both the UAE and Kuwait started importing LNG and had received shipments from the United States. Oman, in typically pragmatic fashion, signed an agreement with Iran for a pipeline that would deliver Iranian natural gas to cover its future needs. With Qatar's neighbors experiencing their own shortfalls, it is tempting to say that they should have imported gas from Qatar. However, this has not happened due to the opportunity costs for Qatar, given the pressure it would be under to offer LNG at a discount. Besides, its neighbors do not want to depend on Qatar.46 Nevertheless, Qatar is the main supplier of LNG to several MENA destinations, including Dubai, Kuwait and Egypt, but the majority of its gas is exported outside the region based on opportunity cost. Over the last 15 years, Qatar has adopted a commercially driven energy policy by selling LNG to the highest bidder.47
One likely foreseeable consequence of the changing nature of the global LNG market is that Qatar will increasingly sell natural gas within the regional GCC and MENA markets. This is not to say that its energy-supply arrangements will not be global in perspective, but the fundamentals of competition may drive it towards increasingly regionalized supply agreements. Indeed, this may be precipitated by its existing customers seeking to enhance their own energy-security mix, through seeking to capitalize on newly emerging centers of LNG supply. This will lessen the attraction of Qatari gas, unless it can compete significantly on price. In certain respects, it may serve as a catalyst for further integration within the region.
Such a conclusion can be contextualized within the broader MENA demand for natural gas. The Middle East region is one of the leading geopolitical areas in terms of the growth in demand. This is particularly remarkable given that it is a major supplier of crude oil; yet, in terms of natural gas, there is a narrowing feedstock supply for domestic electricity production against the export potential of such a commodity.48 Growth and demand is driven largely by a burgeoning population; the demographics of the Middle East region clearly show that it is one of the world's fastest-growing population areas.49 Conclusions can be drawn from such a trend: in the context of the growth in competition, especially within the East Asian market, greater market opportunities are emerging within the Middle Eastern region. This is particularly significant for a major supplier such as Qatar, whose energy relationships within East Asia are increasingly being challenged.
Within the wider region, some observations can be made about a key strategic partner of Qatar, namely Turkey. Upwards of 50 percent of Turkey's electricity is now sourced through natural gas. However, while Turkey plays a vital role as a transit hub for energy, in partnership with Iran,50 it is nevertheless largely reliant on Russia for its gas needs and therefore purchases upwards of 60 percent from Moscow. A clear growth area for Qatar could involve taking advantage of its strategic relationship with Turkey to supply it with LNG as a means of enhancing Turkey's energy-security mix. Indeed, given the manner in which the United States will increasingly play a role in terms of supplying LNG through flexible supply agreements, it will be interesting to see whether and how Turkey redefines its energy mix in this increasingly competitive market.
In the final analysis, significant changes are underway in the global LNG market, and they are likely to accelerate over the next five to 10 years. Qatar will therefore face a changed and competitive landscape in which it will play a unique role as a driver of policy adaption and reform. Importantly, this change has implications for Qatar's political economy, as well as its foreign relations, based on the context of complex interdependence. Indeed, this paper has argued that this context will be nothing less than a new era for Qatar's LNG policy.
The nature of Qatar's LNG exports has been at the forefront of its trade and diplomatic relations over the last 15 years, spearheading increased integration with East Asia through what can be characterized as an "Asianization" process. In this respect, Qatar has followed a pattern similar to its GCC neighbors,51 yet the primary driver of its integration has been its LNG exports. While Qatar is a unique example in the Gulf region, based on its LNG dominance, it is expected that the increasingly competitive East Asian market will serve to roll back the degree of interconnectedness Qatar has achieved in that geopolitical arena. This is an important observation for Qatar's international relations and the concept of complex interdependence, the hallmark explanation for the greater connectivity that is experienced within East Asia, in particular.52 A key issue will therefore be the manner in which broader connectivity53 is challenged through what this paper has highlighted as a shift in the energy-supply relationships Qatar will enjoy.
While these market dynamics pose a clear risk to Qatar, they also present an opportunity. At face value, what is required is a flexible and adaptive energy policy, something its national oil company, which oversees the gas sector, will need to be responsive to. Qatar's low LNG production costs give it a good degree of flexibility in reacting to these market changes. Such market dynamics pose clear risks in terms of revenue and fiscal solvency, especially within the context of a significant decline in the crude-oil price. Undeniably, looking at historical trends and based on conclusions reached by the IEA, an era of crude-oil prices below or around $50 a barrel can be expected to be in place for more than a decade, until supply and demand dynamics necessitate an increase. This poses clear sociopolitical challenges for a country that essentially operates a centrally planned economic model that is dependent on hydrocarbon revenues. Nonetheless, such dynamics may foster Qatar's integration on a more regional level within the GCC, especially given that such global competitiveness would conceivably lead to increased supply agreements with its gas-hungry Gulf neighbors.
1 Justin Dargin, "Qatar's Natural Gas: The Foreign-Policy Driver," Middle East Policy 14, no. 3 (2007).
2 Bassam Fattouh, Howard Rogers, and Peter Stewart, The U.S. Shale Gas Revolution and Its Impact on Qatar's Position in Gas Markets (Center on Global Energy Policy (CGEP), 2015).
3 For discussion of the concept of complex interdependence, see Robert O. Keohane and Joseph S Nye, Power and Interdependence (Pearson, Longman Publishing Group, 2001).
4 Kenneth B Medlock, Amy Myers Jaffe and Meghan O'Sullivan, "The Global Gas Market, LNG Exports and the Shifting U.S. Geopolitical Presence," Energy Strategy Reviews 5 (2014).
5 Gawdat Bahgat, "The Shale Gas and Oil 'Revolution': Strategic Implications for United States Policy in the Middle East," The Journal of Social, Political, and Economic Studies 39, no. 2 (2014).
6 International Energy Agency (IEA), Medium-Term Gas Market Report 2016 (Paris: OECD Publishing, 2016).
7 "Qatar LNG: More Sales to Europe But Flexibility the Key," MEES, 2016.
8 International Energy Agency (IEA), World Energy Outlook 2015 (Paris: OECD Publishing, 2015).
9 "LNG Supply Glut to Depress Prices for Years to Come," MEES, 2016.
10 "East Asian Importers Take Less LNG in 2015; Little Sign of an Upturn in 2016," MEES, 2016.
11 Akira Miyamoto, Chikako Ishiguro, and Mitsuhiro Nakamura, "A Realistic Perspective on Japan's LNG Demand after Fukushima," Oxford Institute for Energy Studies, OIES Paper 62 (2012).
12 "LNG Demand Outlook Looks Bearish as Japan Restarts Nuclear Plant," MEES, 2016.
13 Howard V. Rogers, "Asian LNG Demand: Key Drivers and Outlook," Oxford Institute for Energy Studies, OIES Paper 106 (2012).
14 METI, "Strategy for LNG Market Development: Creating Flexible LNG Market and Developing an LNG Trading Hub in Japan," http://www.meti.go.jp/english/press/2016/pdf/0502_01b.pdf.
15 Jonathan Stern, "The New Japanese LNG Strategy: A Major Step towards Hub-Based Gas Pricing in Asia," Oxford Institute for Energy Studies, OIES Energy Comment (June 2016).
16 Vlado Vivoda, "Natural Gas in Asia: Trade, Markets and Regional Institutions," Energy Policy 74 (2014).
17 Howard V. Rogers and Jonathan Stern, "Challenges to JCC Pricing in Asian LNG Markets," Oxford Institute for Energy Studies, OIES Paper 81 (2014).
18 Xunpeng Shi and Hari Malamakkavu Padinjare Variam, "Gas and LNG Trading Hubs, Hub Indexation and Destination Flexibility in East Asia," Energy Policy 96 (2016).
19 Younkyoo Kim, "Asian LNG Market Changes under Low Oil Prices: Prospects for Trading Hubs and a New Price Index," Geosystem Engineering (2016).
20 "Qatar LNG: More Sales to Europe But Flexibility the Key."
21 "LNG Supply Glut to Depress Prices for Years to Come."
22 Christopher Goncalves and Anthony Melling, "Perfect Match? European Natural Gas Markets and North American LNG Exports," Natural Gas & Electricity 30, no. 8 (2014).
23 "Panama Expansion Puts East Asia in Reach of Nascent U.S. LNG Exports," MEES, 2016.
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27 Howard V. Rogers, "The Impact of a Globalising Market on Future European Gas Supply and Pricing: The Importance of Asian Demand and North American Supply," Oxford Institute for Energy Studies, OIES Paper 59 (2012).
28 Justin Gengler and Laurent A. Lambert, "Renegotiating the Ruling Bargain: Selling Fiscal Reform in the GCC," The Middle East Journal 70, no. 2 (2016).
29 "Aussie LNG Boom Squeezes Qatar in Core Asian Markets Amid Lackluster Demand," MEES, 2016.
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32 Anonymous, "Panama Expansion Puts East Asia in Reach of Nascent U.S. LNG Exports."
33 Rogers and Stern, "Challenges to JCC Pricing in Asian LNG Markets."
34 Tetsuo Morikawa, "LNG Supply and Demand after the Great East Japan Earthquake," IEEJ 2012 July Issue (2012).
35 Department of Economic and Social Affairs United Nations, Population Division, World Population Prospects: The 2015 Revision, Key Findings and Advance Tables, Working Paper No. ESA/P/WP.241 (United Nations, 2015).
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37 Se Young Jang, "The Repercussions of South Korea's Pro-Nuclear Energy Policy," http://thediplomat.com/2015/10/the-repercussions-of-south-koreas-pro-nu….
38 IEA, World Energy Outlook 2015.
39 Michael Chen, "The Development of Chinese Gas Pricing," Oxford Institute for Energy Studies, OIES Paper 89 (2014).
40 "Qatar Out to Woo LNG Customers in Face of Increased Competition," MEES, 2015.
41 "Aussie LNG Boom Squeezes Qatar in Core Asian Markets Amid Lackluster Demand."
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