Saudi-Qatar’s true battleground is 5,500 kilometers east in India, China and Southeast Asia

• Posted in OilGas
• on June 7, 2017
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That’s because the petroleum market’s center of gravity, along with that of the global economy, is in Asia these days. As recently as the 2003 Iraq War, the U.S. and Europe accounted for more than half of the world’s oil imports. The share has now fallen to barely more than a third, as imports by the north Atlantic countries have stood still while those by China, India, South Korea and the Philippines have surged. That makes the stance of Qatar’s major Asian trading partners — Japan, South Korea, India and Taiwan — a crucial factor in how the embargo will play out. More than half of the Emirate’s liquefied natural gas exports go to those four countries, or about two-thirds if you add China and Thailand.

To see how this might play out, it’s worth considering the dynamics of Asia’s gas market, and the differing degrees to which the countries are dependent on Qatar and its Arab rivals. Take Japan. It’s Qatar’s largest export destination and the buyer of almost a fifth of its traded gas — but Australia and Malaysia are its more important LNG suppliers, with the Emirate accounting for just 17 percent of imports in 2015 and as little as 12 percent in recent months. Saudi Arabia, by contrast, supplies close to 40 percent of Japan’s crude. The disparity is heightened by the fact that Japan is short of oil, and awash in natural gas. Its regasification plants are running at about 44 percent of capacity compared to 88 percent at its oil refineries. Should Jera Co. choose this moment to press its long-standing case for renegotiation of gas contract terms with Qatar Petroleum, it could find itself with a great deal of short-term leverage.
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