The North Field, deemed the world's largest natural gas field, stretches 3,700 square miles in Gulf waters between Qatar and Iran. Graphic by The Arab Weekly
July 3 (UPI) -- Qatar's development of its giant North Field, which began more than 20 years ago, propelled the small Gulf state into the position as the world's largest exporter of liquefied natural gas. It also provided Doha with the substantial wealth and political clout to stand independently from its Gulf Arab neighbors on geopolitical issues, including interaction with Iran. Doha's distinctive stance toward Tehran has contributed to the crisis with other Gulf states.
However, Qatar's announcement that it has lifted a 12-year moratorium on new projects in the North Field, which it shares with Iran, is setting the stage for fierce competition between Doha and Tehran for global gas market share. That competition could strain diplomatic relations that the two Gulf countries carefully cultivated.
Iran is moving quickly to expand its own gas potential now that it is free from the most stringent international sanctions and is expected to surpass Doha's production levels from their shared gas field this year.
Since the easing of sanctions in January 2016, Iran has prioritized developing its portion of the North Field, known as South Pars, because it badly needs more gas to meet domestic power demand and for re-injection into ageing crude reservoirs. In November 2016, Iran signed a deal with French energy giant Total to develop its South Pars II project.
Qatar has been the largest global LNG exporter since 2006 but its top position is threatened by several gas-producing rivals, including Australia, which is expected to wrestle that crown away from Doha either this year or next. The Qatari regime needs a boost in gas production in the face of sliding oil production, sustained low oil prices and extravagant infrastructure expenditures as it prepares to host the 2022 FIFA World Cup.
The North Field, deemed the world's largest natural gas field, stretches 3,700 square miles in Gulf waters between Qatar and Iran. Qatar's portion, accounting for two-thirds of the field, is in the southern section. Qatar has aggressively developed North Field gas, while Iran got off to a slower start with its South Pars area due to international sanctions that imposed financial and technological constraints.
Doha's 2005 decision to place a moratorium on exploration in the North Field derived as much from political calculations as technical and economic determinations. Rapid production had raised concerns about pressure levels in the field and the field's depletion. Perhaps more importantly Doha was keenly aware that it was drawing Iran's ire through its fast expansion of the North Field while Tehran was unable to progress past initial South Pars development phases, leading to accusations in Iran that Doha was "stealing" Iranian gas from the shared field.
The Qatari moratorium, put in place 12 years ago, was as much to appease Tehran as it was to safeguard the reservoir from potential damage.
Iran shares several oil and gas cross-border fields and has been vocal when it believes its Gulf neighbors have been cheating Tehran. In December 2011, Emad Hosseini, then spokesman for the Iranian parliament's energy committee, accused Gulf Arab states sharing maritime borders with Iran of collaborating to exploit those fields to Tehran's disadvantage.
Hosseini said: "Sometimes Saudi Arabia helps Kuwait extract more oil and gas in the shared fields. Sometimes Kuwait helps the United Arab Emirates and sometimes the United Arab Emirates helps Oman." In reference to the North Field, Hosseini said, "Qatar exploits many times more than Iran from the shared gas field and started its exploitation several years earlier than Iran. There should be a way to solve this problem."
While diplomatic concerns may have prompted Doha to put further development of the North Field on hold for more than a decade, the fact that Qatar could lose market share to its neighbor as it faces intense competition from other gas producers was a clear incentive for lifting the moratorium. In announcing the end of the moratorium, Qatar Petroleum CEO Saad Sherida al-Kaabi said the state energy firm would develop a new project in the North Field that would increase Qatar's natural gas production capacity approximately 10 percent within seven years.
In February, when asked about the effects of Iran moving forward with work on South Pars, Kaabi insisted that Iranian development of its portion of the shared field "has nothing to do with what we do with the moratorium. It never did and it never will." Two months later, the QP CEO declared that the moratorium on new North Field development had been lifted.
This article originally appeared at The Arab Weekly.