Tale of two countries

Iran and Qatar share a gas field, but manage to have opposite effects on energy investors, chiefly due to their diplomatic policies. Qatar for its part has investors queuing, while Iran has managed to scare most of them away.

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By  Nicholas Wilson Published  April 4, 2006

|~|Commentwebby.jpg|~||~|Should a developing nation that has recently struck black gold -— say West Africa’s Sao Tome and Principe -— want an example of how to get it right, and one of how to get it wrong, they could look at a couple of distant neighbours in the Gulf that share one of the world’s largest gas fields: Iran and Qatar.

Facing each other across 200 kilometres of an extremely wealthy sea, the two countries are opposites in many ways: size — Iran is vast, Qatar is tiny; population — Iranians number 70 million, Qataris barley 150,000; but it is at the political and economic level that their differences are most obvious. Qatar invited Uncle Sam to set up an air force base, while Iran is going for an eyeball-to-eyeball confrontation with the West that is driving up oil prices.

Choosing between the two nations’ economic models wouldn’t take an aspiring hydrocarbon player long.

Since it exported its first barrel of liquefied natural gas (LNG) to Japan in 1996, Qatar has impressed global consumers with its reliability and open arms policies to foreign investment. It has gone on to meet the specifications of eight Japanese companies and deliver them the gas of their choice on time, again and again and again.

As the world watched the sun rise over Qatar’s energy industry and its satisfied Japanese partners, the glow of confidence in Qatar’s dependability spread first to Korea and then buyers in three continents and finally even to the United States, despite its mistrust of the Middle East.

Not content with simply being an energy supplier, Qatar’s leaders want to attract international energy firms to set up their regional headquarters in the tiny emirate as it becomes a giant energy player and strives to be a regional hydrocarbon hub.

Iran, in contrast, seems to be doing everything in its power to scare investors off — and the flight is being lead by the same buyers who started the rush for Qatari gas — the Japanese.
Some economists may even question if the word “economic model” could even be applied to the shambles that is Iran’s energy industry.

Despite sitting atop vast oil and gas reserves, it imports petrol and has barely begun to tap into its giant South Pars gas field that it shares with Qatar. Indeed, any analyst asked about Iran’s energy plan may well look surprised and answer, “What plan?”

While Qatar intends to boost its LNG production to 77 million tons per year (tpy) by 2010, making it the top global exporter, and then to 225 million tpy by 2024, dwarfing its vast neighbours’ relative trickle, Iran is focused on a nuclear showdown with the West and has threatened to wipe Israel off the map.

The fallout is sending Japanese buyers running for cover and making its other buyers and investors nervous.

Qatar plans to set up an international commodities exchange and is prepared to set aside some of its highly sought-after LNG on a spot market to create the world’s first LNG derivatives contracts. It will take on the global masters of crude trading: London, Singapore and New York, at their own game.

Its aim is to make the money that is attracting some of the best US universities to set up shop in Doha and raise the level of education and standard of living of its citizens.
World investors are taking the plan and country very seriously.
Iran, meanwhile, has grand plans for a regional oil bourse and speculates about pricing its products in euros — to spite the United States.

Global investors are not exactly lining up to risk their money in it, any more than Iran’s neighbours shudder with pleasure at the thought of Tehran getting the bomb.

Meanwhile millions of Iranians live in poverty and struggle to buy kerosene to light their homes.

Not only is this damaging for Iran and Iranians, it doesn’t do the other Middle East producers any good either. As a major Saudi investor, Sheikh Salah Rashid told Oil&Gas Middle East at the recent launch of the proposed Energy City Qatar, “Oil prices will stay high, which is good for the GCC countries, and things should stay this way — unless the Iranians start fighting with Israel or America.”

It is Qatar’s economic lighthouse that would allure a new member of the energy club, not the darkened shores of its distant neighbour across the water.

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