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Qatar's natural gas: the foreign-policy driver.

Article Excerpt
Qatar finds itself in a very peculiar position, nestled sometimes uncomfortably between oil powerhouse Saudi Arabia to the south and a bellicose Iran and chaotic Iraq across the Persian/Arabian Gulf. (1) For most of its existence as an independent nation, Qatar has striven to carve out an independent foreign policy. In order to understand Qatar's overall gas policy, it is important to view it through the prism of the country's ambitious foreign policy initiatives.

Qatar's exploitation of its immense natural-gas reserves, estimated to be the third largest in the world (after Russia and Iran), at 910.5 trillion cubic feet, is key to its 1980s quest to become the "Saudi Arabia" of liquified natural gas (LNG) and natural-gas sales. (2) Recent natural-gas availability reports, as illustrated by Figure One, show that Qatar has compiled absolutely compelling numbers.

Most of Qatar's natural gas lies in the largest field of non-associated gas in the world, the immense offshore North Field. (3) A multitude of domestic and foreign challenges in the early 1980s moved the emir, Khalifa bin Hamad al-Thani, to rearrange Qatar's oil-production priorities in favor of natural gas, which had been treated as a nuisance. It is now the cornerstone of Qatar's ambitious foreign-policy initiative.

A VOLTE-FACE

Qatar hosts one of the most extensive welfare states in the Middle East: free medical care, education and low cost housing are available for its citizens. Critics argue that, however subtly, the generous social programs may represent a conscious decision to undermine internal dissent to Qatar's generally benign autocratic rule and buy out all opposition. As long as the benefits flow, the people (or those able to mobilize politically) seem satisfied with the status quo. (4)

Rising oil prices in the 1970s enabled the emir to provide a vast array of social programs. The end of the boom rudely awakened Qatar to the fact that the golden days of Qatari oil production were finite. International oil companies (IOCs) had become unhappy that contracts were less lucrative, in part because Qatar's fields were beyond their prime. The fall in oil prices in 1982 and 1983 caused the social contract to fray. After years of government budget surpluses, oil production hit a plateau that caused Qatar to incur seemingly endless deficits....