The news earlier this week that an agreement had been reached between Qatar and neighbouring Bahrain over the supply of natural gas was welcomed in both countries – although just what reaction Saudi Arabia will have to the announcement remains to be seen.
The official Bahrain News Agency reported on May 8 that Bahraini Prime Minister Sheikh Khalifa bin Salman Al Khalifa had told a meeting of his cabinet that day that the opening of gas supplies would have a positive impact on industrial and economic development in Bahrain. He then added that it would boost economic integration among Gulf Cooperation Council (GCC) states.
The hook up had also been announced earlier by Qatari Energy and Industry Minister Abdullah bin Hamad al-Attiyah, who said that a joint Bahraini-Qatari committee was finalising the proposed project, of which he gave no details other than that it would be implemented as soon as possible.
However, industry reports suggest that what is being proposed is an undersea pipeline linking the two countries, which both lie in the Gulf off the Arabian Peninsula.
Qatar has been long seeking to establish such a link to Bahrain, signing a protocol on this as far back as 2001. Yet, Doha has even more ambitious plans in mind for its gas exports than just this.
Located too far from the big gas markets to export its huge gas reserves by pipeline, Qatar has had to look to other projects in order to exploit its assets. This has mostly involved encouraging investment in liquefied natural gas (LNG) and gas-to-liquids (GTL) plants, as well as the development of new gas markets such as India.
However, Qatar has also been active in encouraging the development of projects to supply a number of its regional neighbours by pipeline. Growing demand for electricity and industrial development in other GCC countries such as Bahrain, Kuwait, the UAE and Oman is one potential area for export, as is the developing yet more distant Pakistan.
While selling gas to the GCC may seem unusual, given their generally large existing energy reserves, the idea makes sense because liquid petroleum products are too expensive and too environmentally damaging for electricity production. Natural gas is the obvious solution, and Qatar has 25.6 trillion cu metres of it.
Yet the idea for a gas pipeline to Bahrain has met with great difficulty. Central to this has been a dispute between Qatar and neighbouring Saudi Arabia. This is because the pipeline is part of a longer planned pipeline through to Kuwait, which would pass through Saudi territorial waters.
As far back as the year 2000, Qatar Petroleum (QP) signed a letter of intent with the Kuwait Petroleum Corporation (KPC) to supply gas along such a route.
Both companies signed a memorandum of understanding (MoU) with US oil giant ExxonMobil, which then conducted a feasibility study for the construction of a 950-km underwater pipeline linking the two states. Bahrain could then be added to this route, with the proposed line, costed at around $2bn, expected to supply between 8bn and 15bn cu metres per year to Kuwaiti and 14m-28m cu metres per day to Bahrain.
Under the agreements signed, gas for Bahrain and Kuwait is to be supplied by al-Khaleej Gas (AKG), a $1.1bn joint venture between ExxonMobil and QP, which has licences to extract gas from the north field.
The initial idea was that the pipeline would be up and running this year. However, first of all, the scheme was delayed due to continued wrangling between Qatar and Bahrain over the disputed Hawar Islands.
Now this territorial issue has been resolved, the Saudi objection was the last obstacle to the project going ahead. This week’s announcements then, indicate that Doha and Manama may have reached an accord that gets around the objections of Riyadh.
The blocked pipeline was supposed to head north from Qatar to Bahrain and then through Saudi waters to Kuwait, which has been trying to ease longstanding Saudi-Qatari strains in order to get the pipeline built.
These strains largely reach back to 2002, when Riyadh recalled its ambassador from Doha in response to a debate on the Qatar-based al-Jazeera TV channel in which participants strongly criticised the Saudi royal family.
Now, all eyes are watching Riyadh, while details of how the pipeline will proceed are also awaited, not least by the Saudis themselves.
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