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Can Western oil giants break the Gulf impasse?

HIROFUMI MATSUO, Nikkei senior staff writer

TOKYO — One after another, the top executives of Western oil majors have been stepping into the great Persian Gulf rift.

It has been more than two months since Saudi Arabia and other Arab states severed diplomatic ties with Qatar, and there are no signs of a thaw. But soon after the decision was made, a oil bosses began heading to Doha, the Qatari capital.

On June 14, just nine days after Qatar’s neighbors closed off their airspace and closed the sole land border, Royal Dutch Shell CEO Ben van Beurden met with Qatari Emir Sheikh Tamim bin Hamad al-Thani. Exxon Mobil CEO Darren Woods followed on June 24. Total CEO Patrick Pouyanne took his turn on July 11.

What brought the executives to Qatar was the country’s intention to significantly increase production of liquefied natural gas. Qatar is already the No. 1 exporter of LNG, with annual production capacity of 77 million tons. It announced on July 4 that it will raise that number to 100 million tons.

Qatar is home to one of the world’s biggest single natural gas fields, the North Field. The Anglo-Dutch, American and French majors are all running large LNG and oil development projects in the country. The chance to take part in another big gas project was too good to pass up.

But did Qatar’s plans and the executives’ visits just happen to coincide with the diplomatic freeze?

Saudi Arabia, the United Arab Emirates, Bahrain and Egypt set 13 conditions for normalizing relations with Qatar. They included cutting ties with the Muslim Brotherhood, a religious fundamentalist organization, and pulling away from Iran. Qatar rejected the demands through Kuwait, which has been serving as a go-between, on July 3. The announcement of the LNG output boost came the next day.

LNG has been the fuel for Qatar’s growth. The country worked with the Western companies to turn its tiny economy into an energy powerhouse. Assuming the confrontation with the other Arab states will drag on, Doha appears to be leaning on the Western majors for security.

The companies, for their part, are loath to let instability fester in the Gulf.

Exxon Mobil and Shell have made hefty investments in Qatar but are also deeply committed to oil and gas businesses in Saudi Arabia and the UAE. Total has just entered into an agreement with Iran, Saudi Arabia’s archenemy, to develop a natural gas field there.

Though the oil majors do not hold as much sway over Middle Eastern energy as they used to, they may still be able to serve as mediators — if not easing the tensions, then at least preventing the situation from deteriorating further.

This may be what Qatar is hoping for.

Personal mission

The divide between Arab oil producers appears to be gnawing at U.S. Secretary of State Rex Tillerson more than most.

In December 2010, as CEO of Exxon Mobil, he attended a ceremony in Qatar celebrating the LNG output milestone of 77 million tons. When group photos were taken, Tillerson stood next to then-Emir Sheikh Hamad bin Khalifa al-Thani in the front row.

Qatar’s natural gas reserves were developed by Mobil, which later merged with Exxon. This gave Exxon a foothold in the LNG business, where it had been falling behind Shell and other rivals.

“Private Empire: ExxonMobil and American Power,” a book on Exxon Mobil’s inner workings by Steve Coll, recounts how Lee Raymond, then-CEO of Exxon, remarked that the North Field alone was worth more than the price of the Mobil deal.

While U.S. President Donald Trump has openly sided with Saudi Arabia, Tillerson has repeatedly urged all sides to resolve the dispute. He visited both Saudi Arabia and Qatar in mid-July. Perhaps, given his longstanding ties to both countries, he felt especially compelled to step in.

SOURCE

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