Qatar’s Emir Tamim struck a defiant tone during his 19 September speech at the UN General Assembly. “I stand before you while my country and my people are subjected to an ongoing and unjust blockade imposed since 5 June by neighboring countries.” Addressing the embargo imposed by Saudi Arabia, UAE, Bahrain and Egypt the Emir said “We have refused to yield to dictations by pressure and siege.”
The Emir says these countries have sought to pressure Qatari citizens “to change their political affiliation to destabilize a sovereign country. Isn’t this one of the definitions of terrorism?”
Saudi Foreign Minister Adel al-Jubeir hit back on 21 September, calling on Qatar to itself “adhere to the principles of combating terrorism.”
RECORD EXPORT VOLUMES
Qatar continues to demonstrate that concerns over its ability to supply clients with oil and gas in the face of the restrictions have been overstated. The emirate’s exports of refined products hit a two-year high in July according to the latest data from the Riyadh-based Joint Organizations Data Initiative (Jodi).
Energy Minister Muhammad al-Sada says that “during this blockade we have never missed a single shipment of oil or gas to any of our consuming partners.” What he didn’t mention is that exports of refined products soared 22% month-on-month to average 592,000 b/d in July, the highest since July 2015 (see chart 1). Little wonder then that oil products revenues soared 54% over the same period to a four-month high of $420mn (MEES, 8 September).
The key driver was the ramp-up in refinery intake following outages at the 146,000 b/d Ras Laffan-1 condensate splitter in Q2 (the splitters are included in Qatar’s refining data). Refined products output had also been hit earlier in the year by the temporary closure of Shell’s 140,000 b/d Pearl gas-to-liquids (GTL) plant in Q1 (MEES, 4 August). These outages offset gains from the start-up of the 146,000 b/d Ras Laffan-2 splitter in late 2016, which are only now being fully realized (MEES, 25 November 2016).
With products output – from Qatar’s 429,000 b/d refining capacity, its 174,000 b/d GTL capacity and LPG from the LNG trains – increasing 80,000 b/d to an all-time high of 805,000 b/d in July, the export volume gains ought to have continued in August (see chart 2). Especially as refining intake also rose 8% in July to 384,000 b/d.
Qatari products exports had been in decline, falling for the past four consecutive years, largely on the back of soaring domestic demand. 2016 exports averaged 451,000 b/d, the lowest since 2009, and domestic demand of 230,000 b/d had more than doubled since 2010. Despite the earlier outages, exports ought to breach 500,000 b/d for 2017 for the first time since 2013.
Crude oil exports also rose in July to a four-month high of 496,000 b/d. The upshot is that total Qatari oil exports rose to 1.09mn b/d, the highest figure since November 2014.
Despite the products gains, July hydrocarbon export revenues were $4.18bn, down from $4.54bn in May prior to the blockade. The reason appears to be that Qatar handed discounts to buyers as reassurance. Certainly the economy is not “better than ever” as Economy Minister Ahmad Al Thani told CNBC this week – the central bank’s foreign reserves fell by 30% to $24.4bn during June alone.
1: Qatar Products Exports Rise To Two Year High In July ('000 B/D)...
2: ...While Products Output Soars To All Time High In July ('000 B/D)
3: Qatar’s Trade Surplus Grows As Imports Crash Following Diplomatic Rift ($Bn)
DEMAND DOWN AS FLIGHTS GROUNDED
The increase in products exports is bitter-sweet for Qatar as there is also an element of reduced domestic demand stemming from the embargo. Domestic demand fell 15% month-on-month to 219,000 b/d in July. Yet gasoline demand edged up 5% to 41,000 b/d and diesel demand rocketed to 13% to a record 77,000 b/d. The cause for the steep drop-off was slumping demand for jet fuel.
This collapsed 40% to just 78,000 b/d in July, the lowest since March 2015. The clear driver behind this is the embargo led by Saudi Arabia, UAE, Bahrain and Egypt on Qatar air traffic. No direct flights between these countries and Qatar are permitted, and Qatar Airways flights have been banned from their airspace. The drop-off in jet kerosene demand highlights the impact on air traffic through Doha. Jet-kero exports nearly doubled to 30,000 b/d as a result.
Qatar has been a net importer of jet-kero since 2015, and imported an average of 53,000 b/d of the fuel in the first half of 2017. This stopped in July when Qatar ceased imports. Overall products imports fell from 67,000 b/d in June to just 3,000 b/d in July. This has contributed to the slump in overall imports under the embargo (see chart 3), which prohibits imports via the Saudi land border and through the UAE’s ports. However, the economy minister sought to put a positive spin on this. “We discovered a new market and we opened a new route, we opened a route with Turkey, with Kuwait, with Oman, with other countries all around the world.”
