Energy security is a major axis for strengthening relations between America and the Gulf states (article)

Energy security is a major axis for strengthening relations between the United States and the Gulf Cooperation Council countries, which have been strained since the outbreak of the “Arab Spring” events, and have deteriorated in recent years due to the war in Yemen, the Iranian nuclear file, and the war in Ukraine recently.

Cooperation in the energy sector, especially investment in energy infrastructure, is one of the effective tools in developing bilateral relations, in addition to highlighting the influence and presence of countries in energy-producing regions. The United States has become one of the largest producers of liquefied gas in recent years, and the energy crisis has intensified. America’s role in the European energy market.

America, along with Qatar, has become the world’s two largest exporters of liquefied natural gas, as the two countries exported 81.2 million tons of liquefied gas last year.

And had it not been for the US Freeport LNG station fire, in mid-2022, and its closure until the end of the year, the United States would have surpassed Qatar in exports.

US gas exports, plus exports from the Freeport terminal, are likely to reach 86 million tons.

And energy research firm, Rystad Energy, announced that if exports from the Freeport terminal resume this year, the US could see an 11% increase in LNG exports, which would officially make it the largest exporter of gas in the world.

Joint US-Qatari projects

Despite the competition between the United States and Qatar in the LNG market, the two countries have invested in joint ventures.

During the visit of the Emir of Qatar to the United States in March 2022, the two sides paid special attention to the role of energy in relations between the two countries and the important role of the State of Qatar in gas supplies. Europe’s need to replace Qatari gas with Russian supplies in the European market was raised.

The North Field expansion project in Qatar will help the country become a major player in the LNG field. The first phase of the expansion project will see a 43% increase in LNG production.

This will increase LNG production in the country to 110 million tons from the current rate of 77 million tons by 2025. The second project phase will push LNG production to 126 by 2027.

In 2019, Qatar Energy began investigating partners for the first phase of the project, the North Field. In July 2022, Qatar announced the joining of Shell, ExxonMobil, ConocoPhillips, Eni and Total Energy as partners in this stage.

For its part, Qatar Energy Company strives to achieve sustainability and is studying ways to reduce greenhouse gas emissions.

The state-owned Qatar Energy Company, in partnership with US Chevron and Singapore’s Pavilion Energy, has developed a plan to track the release of greenhouse gases from LNG production and transportation in the country.

It should be noted that in recent years, ExxonMobil and Qatar Energy have expanded their cooperation in the field of natural gas around the world, from the United States to Mozambique.

The sovereign wealth fund, the Qatar Investment Authority, will help RWE, Germany’s major energy producer, to acquire ConEdison’s clean energy business. Qatar will provide $2.43 billion of the $6.8 billion required.

The investment body will issue mandatory convertible bonds giving it a 9.1% stake in RWE. The acquisition will allow RWE to nearly double its renewable portfolio in the US, making it a significant player in the industry.

Furthermore, the purchase will add 7 GW to RWE’s regional pipeline, bringing its total to more than 24 GW.

The role of the petrochemical industry

The petrochemical industry can play an important role in the transition to a carbon-neutral society, because this industry provides products and technologies that are used to save energy and use renewable energy.

Besides, attention should be paid to improving global and regional cooperation on reducing energy consumption and greenhouse gas emissions.

Qatar’s investment in the petrochemical project shows that Qatar is preparing for an energy transition, with its vast natural gas resources, and using advanced technology for American companies that produce cheap petrochemical products, and could become a competitor to Saudi Arabia and Iran.

This project will also lead to strained relations between Qatar and the United States.

In early January, Qatar signed a contract to build a huge petrochemical complex worth $6 billion with the US company Chevron Phillips.

The Ras Laffan complex of Qatar Energy Company, the largest petrochemical complex in the Middle East with an annual production capacity of 3.8 million tons, is scheduled to start operating by 2026, and this complex will be fed from natural gas.

Under the new contract, Qatar Energy Company will own 30%, and American Chevron Phillips will own 70% in the construction of the huge Ras Laffan petrochemical complex.

This complex will double Qatar’s production of ethylene and increase the production of polymer products in this country from 2.6 million tons annually to more than 4 million tons. Qatar’s capacity to produce all kinds of petrochemical products will reach 15 million tons annually.

Qatar and the US company Chevron Phillips recently reached an agreement on a $8.5 billion contract to build a petrochemical complex in Texas.

Qatar Energy and Chevron Phillips announced their investment in the construction of the Golden Triangle Polymers plant in the US state of Texas, at a cost of about $8.5 billion. It is its second largest project there and the largest in the field of petrochemicals.

According to the Qatar News Agency, the new factory will be located in the Gulf Coast, Texas, 180 kilometers east of the American city of Houston.

The Qatari Minister of Energy and CEO of Qatar Energy, Saad Al-Kaabi, said: “The decision taken constitutes the largest investment of Qatar Energy in the petrochemical sector, and highlights the company’s position as a major player in the liquefied natural gas sector and the international exploration sectors, and a global producer of petrochemicals.”

This project is the second largest investment by Qatar Energy in the United States after investing $11 billion in the Golden Pass LNG production and export project, which is currently under construction and is expected to start operating in late 2024.

Energy recycling

Energy recycling through a circular value chain will enable producers to access new opportunities. The Finnish company Nesti has worked with producers in the petrochemical industry and has succeeded in providing them with vital raw materials.

Moreover, refineries can take advantage of the ample opportunities for recycling plastic waste. Ethane, LPG, and naphtha are petrochemical feedstocks derived from oil, and their main use is in the manufacture of synthetic fibers, plastic polymers, and other petrochemical intermediates.

These products are constantly in high demand and their investments are generating huge profits on a global level. The Arab Gulf states need time to gradually reduce oil revenues. Given the current situation and in light of the energy transition, the Gulf states and the United States can develop their relations.

Energy security and infrastructure non-targeting is an issue on which the Gulf states expect more cooperation from the United States.

The Houthi drone attacks on Saudi Aramco oil facilities showed that regional stability and security require the participation of the Gulf states and the support of the United States.

Without stability and security in the Arab Gulf states, global energy security will face a serious challenge. Oil and gas are among the main factors for stability in the region, and at the same time they can cause disagreements.

Oil and gas will maintain their importance in the global economy, at least during the next two decades, and this will mean the continued importance of the Arab Gulf states in the global energy equations.

* Dr. Umud Shoukry, senior advisor on foreign policy and energy geopolitics, is the author of U.S. Energy Diplomacy in the Caspian Basin: Changing Trends Since 2001“.

*This article represents the opinion of the author, and does not necessarily reflect the opinion of the energy platform.