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According to Exxon Mobil’s Outlook for Energy (2017), the global market for natural gas (NG) should expand by around 45% over the next 20 years with demand for liquefied natural gas (LNG) expected to grow by more than 2.5 times within the same period. Acknowledged as a low carbon-intensive fossil fuel, natural gas is a cleaner, environmentally-friendly, and sustainable option for energy transition that reduces the use of high carbon-intensive fossil fuels, such as coal and crude-oil distillates. Natural gas is also ideal for increasing energy efficiency on the basis that energy release per mass during NG combustion is the highest amongst fuels (fossil- and biomass-based). Moreover, the amount of energy produced from renewables cannot supply global demands for a complete replacement of fossil fuels.

Accordingly, the LNG market is becoming highly competitive with more than 20 countries already supplying customers around the world. Major suppliers currently include Qatar, Australia, Malaysia, Russia, United States, Nigeria, Indonesia, Algeria, Egypt, to name but a few. Increased capital expenditure in the sector is coming and new LNG players are expected to enter the market in the years ahead. These include countries around the Eastern Mediterranean; the United States Geological Survey (U.S. Geological Survey Fact Sheet 2010 – 2014) estimates that the Levant Basin (involving Cyprus, Egypt, Israel, Lebanon, Palestine, and Turkey) contains 122.4 trillion cubic feet of technically recoverable gas.

In such a competitive environment, Qatar managed to maintain its position as the largest LNG exporter in the world (at 77.8mn tons) in 2019 (2020 World LNG Report), and is massively investing to preserve its role as the main global player. Qatar’s future strategies not only include the expansion of production capabilities by around 64% by 2027 to reach 126 million tons of LNG per annum (The Peninsula Qatar, 2019), but also its shipping capabilities through investment in a new fleet of LNG carriers. For instance, on June 1 this year, Qatar Petroleum announced the signing of the largest LNG shipbuilding agreement in history to secure more than 100 ships valued in excess of QR 70 billion to cater for its LNG growth plans (The Peninsula Qatar, 2020). Additionally, Nakilat, the shipping arm of Qatar’s LNG, will significantly increase its current 15% share of the global LNG fleet carrying capacity and will remain the largest owner of LNG carriers in the world for the coming decades.

This strategic investment will propel Qatar from being the world’s largest LNG exporter and producer to a globally-recognized champion of LNG supply chains. As things stand, an LNG supply chain commonly consists of three main links: exploration and production; treatment and liquefaction; and shipping and distribution. Expanding shipping capabilities will definitely strengthen the third link of Qatar’s LNG supply chain, whereas the first two links are already very well established.

By owning and controlling the whole LNG supply chain, Qatar has acquired a significant competitive advantage and moved further ahead of the competition in the LNG market. For instance, by owning independent shipping capabilities on top of well-established production and liquefaction facilities, Qatar will be better prepared and ready to respond to future unexpected risk events. Crucially, the country will also be able to recover quickly from any potential disruptions.

Accordingly, Qatar is building one of the most effective and resilient LNG supply chains in the world. The resilience of the country’s LNG supply chains will also increase international buyers’ trust and confidence in Qatar as a reliable LNG exporter. This reputation will in turn consolidate Qatar’s actual portfolio and help earn new market share. Being seen as a reliable supplier is extremely important in a business environment driven by oil-indexed long-term contracts of 15-25 years. Moreover, being the largest owner of LNG carriers in the world will provide Qatar with a huge competitive advantage in the spot and short-term markets. For instance, the LNG market was traditionally dominated by long-term contracts covering 20-25 years. However, thanks to the emergence of new suppliers and consumers, spot market purchases of LNG have also become a common practice. Indeed, spot and short-term LNG trades made up 32 percent of overall import volumes in 2018 (EnergyWorld, 2019) and are expected to rise over the coming years.

To sum up, by expanding its LNG shipping capabilities on top of its well-established production and liquefaction facilities, Qatar is building a holistic, efficient and resilient LNG supply chain. This will provide the country with a unique and significant competitive advantage in a highly competitive LNG business landscape.

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Dr. Adel Elomri and Dr. Brenno Menezes are Assistant Professors at the College of Science and Engineering, Hamad Bin Khalifa University.

This article is submitted on behalf of the author by the HBKU Communications Directorate. The views expressed are the author’s own and do not necessarily reflect the University’s official stance.

The Corruption Perceptions Index (CPI) is an index published annually by Transparency International since 1995 which ranks countries “by their perceived levels of corruption, as determined by “expert assessments” and opinion surveys.

The CPI currently ranks 176 countries “on a scale from 100 (very clean) to 0 (highly corrupt).” Denmark and New Zealand are perceived as the least corrupt countries in the world, ranking consistently high among international financial transparency, while the most perceived corrupt country in the world is Somalia, ranking at 9–10 out of 100 since 2017.

This short video link below provides an overview of the Corruption Perception Index.

One could argue that there could be a direct correlation between the number of FCPA Violations and how high a country ranks on the Corruption Perception Index (CPI). Upon analysis, there is no such correlation and therefore the reliance by Chief Compliance Officers on the CPI as published each year by Transparency International comes into question

Upon further investigation of the survey developers – Transparency International (TI) based in Berlin Germany, it becomes clearer why the survey cannot be relied on.

The Corruption Perceptions Index has received criticism over the years. The main one stems from the difficulty in measuring corruption, which by definition happens behind the scenes. The Corruption Perceptions Index, therefore, needs to rely on third-party surveys which have been criticized as potentially unreliable. Data can vary widely depending on the public perception of a country, the completeness of the surveys and the methodology used. The second issue is that data cannot be compared from year to year because Transparency International uses different methodologies and samples every year. This makes it difficult to evaluate the result of the new policies.

Another issue is historically been funded since its inception in 1993 by large multinationals – Exxon/ Mobil, Shell, and Hedge Fund KKR being the largest donors. One cannot help but question the objectivity of the survey with large private donors. TI’s International Board of Directors reacted to this conflict of interest by stripping its US affiliate – Transparency International USA – of its accreditation as the National Chapter in the United States and it was reported by TI Headquarters that TI-USA came to be seen in the United States as a corporate front group, funded by multinational corporation given the large donor base.

Secondly, the surveys themselves are conducted by organizations such as Freedom House, which have known biases. In August 2019 whistleblower accounts from seven current and former TI Secretariat staff emerged describing a “toxic” workplace culture under the current Managing Director, Patricia Moreira. Reported in The Guardian, the misconduct reported ranged from gagging orders in termination agreements to bullying and harassment of critical internal voices

Although the Corruption Perception Index remains popular with its audience as it is unveiled each year, it becomes more clear after digging deeper into Transparency International why there \’s not a more robust correlation between FCPA Violations as identified by the SEC and DOJ and the faltered Corruption Perception Index.

Qatar’s Strategies Towards Building a Sustainable and Resilient LNG Supply Chain

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