The following interview was done in Qatar in late September 1997 by John Duke Anthony, president and CEO of the National Council on US-Arab Relations.
DR. ANTHONY: What are Qatar's economic objectives?
DR. ATTIYEH: They are to increase Qatar's prosperity for future generations through the optimum utilization of its oil and gas resources, the cornerstone of our economic development. Energy will remain at the forefront of our growth. A related objective is to achieve political stability in our region based on mutual respect. Although Qatar is small, it has done what it can to bring about peace in the Middle East and in the Gulf in particular.
Q: What role do Qatar's energy policies play within the country's overall economic development?
A: Qatar's energy policies have two objectives. One is to sustain and, where possible, increase the level of the country's oil production. The second is to maximize the return from our gas reserves. Our gas reserves are estimated to be fifty times the extent of our oil reserves.
Q: How are these objectives to be achieved?
A: Given our technical and human-resource limitations, we have no choice but to form alliances with international partners. We have decided to do this through production-sharing agreements and joint ventures. The agreements concluded thus far have enabled us to achieve foreign investment and the best in modern technology for developing our energy resources. At the same time, the investors obtain a reasonable rate of return on, and the prospect of being able to quickly recover, their investment.
This is the way we are proceeding with ELF Aquitaine, Occidental and others. The companies' investments are being fully offset by the additional reserves and increased production they have made possible in existing fields. We're now at a sustained production level of 400,00 barrels a day (bpd) and are headed in the direction of producing over 700,000 bpd by or soon after 2000.
Q: What about gas?
A: In gas, our prospects are exceptionally bright. We have the largest single non-associated gas field in the world. We are proceeding to develop the field in accordance with a strategic master plan. The plan has three parts. The first involves the early assignment of specific quantities of gas in order to enhance the investment prospects of particular projects to export gas in the form of LNG or pipeline gas. Second, we are seeking projects that will bring added value. Third, we are in the process of expanding the infrastructure required for such projects to succeed.
Q: How do you determine which projects to pursue?
A: The projects have to be economically feasible. In this regard, it is essential that there be a guaranteed market; the long term demand forecast must be sound.
Q: Other than its increasing role as a feedstock for the generation of electric power, what other uses do you envision for Qatar's gas?
A: We're keen to increase our production of ammonia, urea, methanol, polyethylene and other products. The overall objective is to increase Qatar's role in the world's gas industries and in the international petrochemicals business in general. We are proceeding with the very positive and substantial involvement of American institutions. In so doing, we are able to benefit from their competitive position in the international marketplace. What we offer the associated companies and the downstream customers in return are a long-term energy feedstock, a favorable fiscal and legal regime, and flexible economic conditions.
In Ras Laffan and other projects, our partners have been impressed by Qatar's economic and political stability and its historical commitment to international partnerships.
Q: Among specialists, there is a divergence of viewpoint as to whether Qatar's production-sharing approach is an aberration or the first step in what is likely to become a regional trend. Would you care to comment?
A: In deciding to allow the equity participation of others through production sharing and joint ventures, we did so for very specific reasons. In particular, we saw three possible advantages. First, it would enable us to obtain the necessary investment to search for additional oil reserves. Second, when new oil reserves are found, we end up sharing the profits for a very long time. That's good for both partners. Certainly, it's been good for Occidental, which is producing 100,000 bpd as a result. It's been equally good for Maersk. In addition, Atlantic Richfield (ARCO) is producing 20,000 bpd, a figure that will soon increase to 60,000 bpd. Pennzoil stands to gain in a similar way.
We'll be entering into the same kinds of arrangements with regard to our gas production via Qatargas. Qatargas will soon complete construction of its third LNG train. (As each train consists of at least two million tons, this means that Qatar will soon be producing and exporting more than six million tons of gas per annum.) We are the first country to build two grass-roots LNG projects at the same time. Rasgas production is scheduled to leave Ras Laffan in 1999 for South Korea. All of this is being achieved through the joint-venture approach. Additionally, various other projects that use gas as a feedstock or fuel, such as petrochemical, gas-to-liquid conversion, etc., will expand our industrial base.
The third benefit is that, in the process, we obtain valuable technology and human-resource training and development.
In sum, we're committed to the joint-venture, production-sharing approach with highly qualified and competitive international partners. In the eyes of our people, this is a big improvement over previous arrangements. In the past, some used to say that "foreign companies came to the region only to suck our blood and then leave." Doing it this new way holds out the prospect that we'll all be winners.
Q: What were the principal reasons for past delays in arriving at such a bold, strategic decision?
A: In the 1980s, there were a great many people, chief among whom were those associated with BP, who concluded that such projects couldn't happen. Instead of proceeding with just one company, we are developing our energy resources in close association with more than half a dozen American, Asian and European partners.
Q: Some ask, "Why haven't more European and Japanese companies won contracts?"
A: We have European and Japanese, in addition to American, partners. We choose our partners based on the offers and the economic prospects of the projects in addition to the attitude of the company concerned.
When I was a university student in Michigan, there used to be a saying, "What's good for General Motors is good for the U.S." We have similar sayings in Qatar. We say, "What's good for Qatar Petroleum Corporation and Qatargas is good for Qatar."
Q: Some petroleum analysts have pointed out that the Organization of Petroleum Producing Countries (OPEC) acts as a constraint on what is possible in terms of any significant expansion of Qatar's production, given that the current OPEC-determined quota for Qatar is 400,000 bpd. Do you agree?
A: Whatever Qatar's future oil-production capacity may be, its output is likely to remain only a very small percentage of OPEC's overall quotas. As it is, Qatar has the smallest percentage of any OPEC country. We don't anticipate any difficulties in this area. OPEC has a history of respecting the special needs and interests of member countries whose production capacities, like ours, are so much lower than the others.
Q: Does Qatar intend to become involved in the emerging energy industries of Central Asia or the Caucasus?
A: Not at this time. Our commitment is solely to projects related to the development of our own energy resources. Neither are we in the business of providing economic assistance to such countries. This being said, we remain interested in exploring further the prospects for building pipelines that would carry our gas to Pakistan, India and China. In the same vein, we're also looking at the Philippines.
Q: Could you provide insight into how Qatar deals with the portion of its offshore gas field that extends into Iranian territory?
A: Iran is talking with Royal Dutch Shell and France's Total about ways to develop its share of the field, which Tehran calls the South Pars field. People are wrong to worry about whether we're in competition or dispute with Iran over the field's development and production. The field's reserves are so great that they are expected to serve Qatar's and Iran's needs for the next 100 years.
Q: What about Israel's interest in Qatar's gas?
A: Enron, via one of its affiliates, was prepared to buy five million tons of Qatar's gas per annum. Of this amount, it intended to sell two million tons to Israel. An agreement to this effect was signed with Israel's Labor government. The agreement provided for a certain amount of the gas to be exported, first to Jordan through its port at Aqaba. The remainder would go to markets elsewhere in Jordan and to customers in the West Bank and Israel.
We signed a Memorandum of Understanding to this effect. But then the Labor government fell, Likud came to power, and the new Israeli minister of energy, Ariel Sharon, canceled the agreement. The reason he gave was that he thought he could buy gas on better terms from Russia, Turkmenistan and other countries. But recently Sharon canceled the deal he was to have had with Russia.
Q: In what ways is Qatar privatizing its oil industry?
A: In a way, one can say that it is already privatized. That is, QGPC is administered autonomously. It's run as a profit-making company, without any government control or interference. Yet, at the same time, QGPC is 100-percent owned by the Qatar government.
The answer to the question is a little complicated. For example, in financing our gas-development projects, which are the responsibility of Qatargas and Rasgas, the government doesn't borrow at all. In financing our oil development, QGPC borrows money on its own account; the government itself is not the borrower. For example, not long ago, QGPC, for the first time, borrowed $400 million for a project that cost $1.2 billion. The money was borrowed, or one can say it was "expensed," through the mechanism that financed the project. The decision to do so was based on the project's economic merits.
Q: Could you be a little more specific as to how projects that cost billions of dollars are financed by sources other than the Qatar government?
A: Qatar's policy, quite simply, is that any project that cannot finance itself will not be approved. Because our partners represent enormous in some cases giant institutions, our view is that if a particular project is economically sound, then our partners ought to be the ones to come up with the necessary financing. If they can't or won't, then we won't do it.
Q: What percentages do Qatar's different oil fields contribute to the country's total petroleum production?
A: The Dukhan Field, which is the oldest and lies along the southwest coast, currently produces 270,000 bpd; it will soon be raised to 330,000 bpd. The rest 130,000 bpd comes from Bui Hanine, Medan Mehzam, Idd Al-Shargi North. This will be increased dramatically with the development of the offshore field being operated under the production sharing agreement.
Q: What's the possibility of Qatar's supplying the industries of Dubai or other emirates with gas?
A: There's the possibility of an agreement between Qatar and Dubai in partnership with ARCO. Dubai needs some 800 million cubic feet per day of gas. Elsewhere in the GCC region, there are other possible opportunities. For example, Kuwait uses lots of crude oil for electricity, which is more expensive than gas. So, if we succeed in working out something with Dubai, it's possible that we could expand the arrangement to include Bahrain and Kuwait as well.
Q: Why not?
A: Yes, why not?
Q: And Pakistan?
A: That's a separate project. It needs more work.
Q: What about water? A year ago, a Qatari cabinet official told me that Qatar was interested in the possibility of building a pipeline that would bring water from Iran to Qatar. He said the water would not be used for strategic purposes, such as drinking water, but, rather, for recharging aquifers that supply Qatar's industrial needs. Is this idea still being considered?
A: We continue to explore various possibilities, including being able to bring water one day via the Shatt al-Arab. We also continue to weigh the pros and cons of building additional desalination plants. In terms of water-purification technology, a continuing challenge is how to lower the cost of treating brackish water and sewage water. At present, it's possible to recycle such water to what is called the "third grade." However, in order for people to be able to drink it, it needs to be recycled to the "fifth grade." Yet the technology to do this now is too expensive.
Q: Isn't Phillips Petroleum interested in helping out in this area?
A: We are talking with Phillips mainly about its possible involvement in developing our gas industry. But it's true that Phillips has a division that deals with water issues. Something might develop. With regard to other liquids, we are exploring the possibilities for Qatar to become the first country to convert gas to high-quality diesel fuel on a commercial basis.
Q: The fact that Qatar is the headquarters for the Gulf Organization for Industrial Consultancy (GOIC) is no coincidence, in light of the pioneering industrial uses to which Qatar has put its gas resources for the past quarter century. Do you foresee a significant future for gas-fueled industrialization in Qatar or anywhere else in the GCC region?
A: Economically speaking, a country should stick to the areas in which it has a comparative advantage. It makes sense to industrialize only if one doesn't have to import the necessary raw materials. In Qatar's case, its comparative advantage is that it has abundant amounts of the fuel necessary for producing ammonia and urea for markets in South, Southeast and East Asia.
Not only in this way, but also geographically, we are ideally situated to be able to assure Asian customers of Qatar's being a long-term source of supply for these products. We intend to develop faster and further in this direction. By the year 2000, we expect to be a major player in the world of petrochemicals.
Q: What can you say about the official side of Qatar-US. energy cooperation?
A: Last June, when the Emir, H.H. Shaikh Hamad, visited the United States, I accompanied him to the meeting we had with Department of Energy Secretary Pena. It was a very good meeting. We're very satisfied with the bilateral agreement we signed in support of cooperation between us in the field of energy.
Q: In your role as president of OPEC, need one be concerned with any of the recent and present trends within international petroleum markets?
A: The oil market for whatever else it is in terms of demand, supply and cost is also a psychological market. In my view, the futures market plays a very negative role in this regard. For example, there have been times when prominent oil analysts have one minute said Iraq is coming into the market and a few minutes later said the opposite. This kind of thing makes it very difficult to maintain market stability. One needn't name names, but there are otherwise reputable entities that do this quite regularly. When their reports frequently contradict each other in such a compressed time frame, it's not unusual to see prices go up 30 cents and down 50 cents within the same hour.
The seasonality of certain demands, the availability of supplies, and economic growth trends these are additional factors that influence the market. But sometimes, there's no question that the impact is entirely illogical. That's why I say that the market is often more a psychological one than an actual one.
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