Ford's $5 Billion EV Loss Sparks Strategic Shift Towards Hybrids

By ZeroHedge - Aug 22, 2024

• Ford cancels its planned electric SUV and delays its electric pickup truck launch due to pricing pressures and increased competition.
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• The company will take $1.9 billion in charges and write-downs as a result of the cancellation.
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• Ford is shifting its focus to hybrid versions of its popular Explorer and Expedition models, reflecting a broader industry trend of automakers scaling back EV investments
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• 
  
• The trend of legacy autoakers ditching their plans and investments in EVs continues, with Ford reportedly the latest to cancel plans for a large three-row electric sport-utility vehicle, according to a new report from the Wall Street Journal.

The company will take $1.9 billion in related special charges and write-downs as a result, the report said. 

Ford is canceling due to pricing pressures and increased competition, instead opting to focus on hybrid versions of its popular Explorer and Expedition models.

This decision reflects a broader trend among automakers that we have written about over the last year or two, especially since the UAW extorted negotiated their latest labor contracts from the Detroit automakers. 

Additionally, consumer demand has been weaker than anticipated, with concerns over cost and charging infrastructure. As a result of all of these factors, combined with increased competition out of China, legacy automakers are scaling back EV investments. VW also announced it was stepping back from EVs to focus on hybrids earlier this year, as we wrote in May.  

Ford Chief Financial Officer John Lawler commented: “Based on where the market is and where the customer is, we will pivot and adjust and make those tough decisions.”

The WSJ reported on Tuesday that Ford has also delayed the launch of a new electric pickup truck to 2027, marking the second postponement, and reduced its EV investment to 30% of its budget, down from 40%.

The company expects to lose $5 billion on its EV business this year, with a loss of about $44,000 per vehicle in the second quarter. Executives are focused on reducing losses and ensuring future EVs are profitable.

Despite recalibrating plans to include more hybrids, Ford is still moving forward with several full EVs, including an electric commercial van in 2026 and two new pickup trucks in 2027, according to the report. 

Farley said last month: “We believe that the fitness of the Chinese in EVs will eventually wash over our entire industry in all regions.”

We wrote back in June that nearly half of EV drivers in the U.S. were considering switching back to gas. Forty-six percent of EV owners surveyed in the United States say they will likely return to driving gas-powered vehicles.

Globally, the survey of 30,000 respondents in 15 countries found that more than one-quarter (29 percent) of EV owners are likely to go back to driving gas-powered cars.

Recall back in April we noted that Ford was "re-timing" its efforts to go all electric and back in February we wrote that GM was shifting to plug-in hybrids, too. 

CEO Mary Barra said on an earnings call back in February: “Let me be clear, GM remains committed to eliminating tailpipe emissions from our light-duty vehicles by 2035, but, in the interim, deploying plug-in technology in strategic segments will deliver some of the environment or environmental benefits of EVs as the nation continues to build this charging infrastructure.”

By Zerohedge.com

 

OMV Announces Major Gas Discovery In Norwegian Sea

By Alex Kimani - Aug 23, 2024

• OMV announced a major natural gas discovery offshore Norway on Friday.
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• OMV estimates total recoverable natural gas volumes of up to 140 million barrels of oil equivalent (boe).
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• Back in March, Norway's Aker BP made a much bigger-than-expected oil discovery in the Yggdrasil area of the North Sea.

Austria's integrated energy company OMV (OTCPK:OMVJF) has announced a major natural gas discovery in the Norwegian Sea. In a statement released on Friday, OMVB said it had found preliminary estimated total recoverable natural gas volumes of up to 140 million barrels of oil equivalent (boe) after completing a drilling operation in the Norwegian Sea targeting its Haydn/Monn exploration prospects. The deepwater prospect is located 300 km west of the Norwegian mainland at a water depth of 1,064m.

"This latest commercial discovery will further advance our diversification, while high-grading our portfolio in Norway. Ultimately, today's news further solidifies our position as a reliable gas supplier in Europe. It could also unlock significant potential in the area and extend the life of the Aasta Hansteen gas hub," Berislav Gašo, Executive Vice President of Energy at OMV, said. According to Berislav, OMV has a target to increase the share of gas in its production portfolio to 60% by 2030.

Back in March, Norway's Aker BP (NYSE:BP) (OTCQX:AKRBF) made a much bigger-than-expected oil discovery in the Yggdrasil area of the North Sea, the energy company reported on Thursday. Preliminary estimates indicate a gross recoverable volume of 40 million-90 million barrels of oil equivalent (boe), much higher than the company's earlier projection of between 18 million and 45 million boe. A month later, Norwegian oil and gas operator, DNO ASA, made a significant gas and condensate discovery on the Carmen prospect in the Norwegian North Sea. Preliminary evaluation of comprehensive data indicates gross recoverable resources in the range of 120-230 million barrels of oil. Carmen ranks as the largest discovery on the Norwegian Continental Shelf since 2013.

"Norway is the gift that keeps on giving. Carmen proves there are important discoveries still to be made and Norway's oldest oil company, DNO, will be part of this next chapter of the country's oil and gas story," said DNO's Executive Chairman Bijan Mossavar-Rahmani. 

Norway has become the largest supplier of natural gas to Europe after the continent cut ties with Russia following its war in Ukraine. Norway's pipeline gas exports to continental Europe have been robust in the current year, with flows averaging 313 million cu m/d. 

By Alex Kimani for Oilprice.com

 

$1 Trillion LNG Infrastructure Boom Threatens Climate Goals

By Felicity Bradstock - Aug 23, 2024

• A report by Earth Insight warns that the planned $1 trillion expansion of LNG infrastructure could harm ecosystems and hinder climate progress.
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• Wealthy Western nations, despite advocating for a green transition, are leading this expansion and issuing the majority of new oil and gas licenses.
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• Climate activists criticize this as hypocritical and call for greater investment in renewable energy, especially in developing countries.

There is a massive natural gas project pipeline for the next decade, as several world powers have increased their gas production in line with the rise in demand. Much of this production increase will come from wealthy Western countries, with several states using gas as a transition fuel in the shift away from more polluting coal and oil. However, this is leading climate activists to point out the hypocrisy of these states calling for a green transition while also contributing heavily to the rise in global gas production. 

The demand for natural gas has been rising, as several countries decrease their dependence on coal and opt for gas as a transition fuel in pursuit of a shift to green. The Russian invasion of Ukraine in 2022, and subsequent sanctions on Russian energy, also led several gas powers to increase their output to fill the gap and ensure that countries that were heavily dependent on Russian gas could maintain their supply. This has created a mid-term rise in demand that is expected to level out as countries increase their renewable energy capacity.

A recent report by the Sacramento-based NGO Earth Insight suggests that the project pipeline for new LNG infrastructure, which totals over $1 trillion, will contribute to environmental degradation and the deceleration of net-zero progress. Earth Insight warns that greater LNG output could threaten fisheries, human health, ecosystems, and the global climate. It will also make it extremely difficult to achieve the 1.5-degree warming limit set in the 2015 Paris Agreement. 

Tyson Miller, the Executive Director at Earth Insight, stated, “Investing in LNG infrastructure – especially in some of the world’s most important nurseries of marine life – just doesn’t make any sense. At this point in the energy transition and nature crisis, it’s a one-way ticket to stranded assets and won’t help us solve the climate crisis.” 

Yet, most of the countries contributing to the massive LNG expansion pipeline are those also calling for a global green transition. Certain oil-rich states, such as Russia, Saudi Arabia, and Qatar, have been repeatedly criticised for doing little to reduce their fossil fuel production and reduce greenhouse gas emissions in recent years, in response to pressure from organisations such as the International Energy Agency (IEA) to transition to green. However, green transition champions, including the UK, the US, Canada, Norway and Australia, are increasingly being seen as “the other petrostates”, due to their continued pursuit of fossil fuels. 

These five countries contributed over two-thirds (67 percent) of all new oil and gas licences issued worldwide since 2020. One of the main criticisms of this heavy contribution to global oil and gas output is the fact that these countries have the economic capacity to fund a green transition, with little need for long-term fossil fuel production to meet their domestic demand. Olivier Bois von Kursk, the co-author of the report, stated, “It is deeply concerning that exploration activity has not just continued since the COP28 agreement but increased. Rich countries with relatively low dependence on fossil fuel revenues should be the first to stop issuing licences. We’re not seeing that in the data.” 

Harjeet Singh, the global engagement director for the Fossil Fuel Non-Proliferation Treaty Initiative, highlighted, “The hypocrisy of wealthy nations, historically responsible for the climate crisis, is staggering as they continue to invest heavily in fossil fuels – putting the world on track for unimaginable climate catastrophe while claiming to be climate leaders.” Singh added, “Despite having the economic means to transition away from fossil fuels, these nations are petrostates choosing profit over the planet, undermining global efforts to avert the climate emergency.”

So far this year, around three dozen high-capacity, low-dependency countries, including the U.S., the U.K. and Norway, have awarded 121 new licenses, which is more than the rest of the world combined. As much as 11.9 billion tonnes of greenhouse gas emissions could be released during the lifetime of all existing and upcoming oil and gas fields expected to be licensed by the end of the year. Many of these projects will be established in developing countries, which do not have the economic means to invest in a green transition. 

Several developing states have called for greater funding from high-income countries to support a green transition in the developing world during the COP climate summits in recent years. India’s Prime Minister, Narendra Modi, has repeatedly called for greater support from some of the world’s richest countries to achieve India’s green transition. In 2021, Modi called on developed countries to set a target of contributing at least 1 percent of their GDP to green projects in the developing world. Although new schemes for funding have been developed, there is a severe underinvestment in the increase of renewable energy capacity in the developing world, with most financing continuing to go to oil and gas operations. 

By Felicity Bradstock for Oilprice.com

Why U.S. Refiners Are Worried About Canada's New Oil Policy

By Julianne Geiger - Aug 20, 2024

• Canada's proposed emissions cap could limit oil production and increase costs for Canadian producers.
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• This could significantly impact U.S. refineries, many of which are specifically equipped to process heavy Canadian crude.
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• A reduction in Canadian heavy crude supply could lead to higher prices, operational challenges, and potential fuel shortages in the U.S.

Gasoline prices in the United States have recently dipped, with diesel prices falling to their lowest in 900 days. While this offers temporary relief for consumers, a looming change in Canada's oil policy could disrupt the supply chain, particularly for U.S. refineries dependent on heavy crude oil imports.

Canada's Emissions Cap Proposal

Prime Minister Justin Trudeau has proposed a cap on emissions for the oil and gas industry to align Canada's environmental policies with its climate commitments. This cap is anticipated to limit production and raise operational costs for Canadian oil producers. A Deloitte report, commissioned by Alberta, suggests that without a cap, Canadian oil production could continue to rise, but the cap may stall or reduce output, affecting the overall supply.

U.S. Refining Capacity

The U.S. Energy Information Administration (EIA), pegs total U.S. oil refining capacity at 18.4 million barrels per day. The U.S. is the world's largest refiner, and Canadian crude oil accounted for 24% of all its refinery throughput in last year, and is essential for U.S. energy security.

U.S. Dependence on Canadian Crude

Canada plays a crucial role in supplying crude oil to the United States, especially for refineries in the Rocky Mountain and Midwest regions. In fact, many U.S. refineries are specifically tooled to process the heavy oil found in Canada's oil sands. The refineries in these specific regions, according to the U.S. Energy Information Administration (EIA), continue to process heavier grades of crude oil, which are becoming less prevalent in other regions due to the trend toward lighter crude oil processing. This reliance is evident in the crude oil import data, where Canada consistently tops the list of U.S. suppliers, providing over 3.8 million barrels per day according to annual EIA data.

Global Heavy Crude Oil Sources

Apart from Canada, other significant heavy crude oil suppliers include Venezuela, Brazil, and Iraq. However, geopolitical and logistical challenges make these sources less reliable. Venezuela faces sanctions and infrastructural challenges, while Brazil and Iraq have fluctuating production rates and export capabilities. Thus, Canada's stable and politically secure oil supply is critical for U.S. refineries.

Venezuela, Russia, and Iraq—all producers of heavy oil—pose logistical, security, and optical challenges for the United States. In Venezuela's case, sanctions, industry mismanagement, and corruption have impeded its ability to produce and export its heavy crude. Russia's crude oil exports are limited by a Western-imposed price cap. Iraq's oil industry is still wildly unstable. 

Implications of Reduced Heavy Crude Supply

A reduction in Canadian heavy crude supply could lead to increased competition for heavy crude from other sources, driving up prices and impacting refinery margins. This might lead to higher gasoline and diesel prices in the U.S. market. A shortage could also compel refineries to adapt their operations or invest in infrastructure to process lighter crude, which could be costly and less efficient.

Heavy crude oil is essential for producing a range of refined products, including gasoline, diesel, and jet fuel, as well as lubricants and petrochemicals. Processing heavy crude requires specialized equipment and expertise, which many U.S. refineries have invested in over time. These upgrades provide a competitive advantage but also come with significant costs.

The potential curtailment of Canadian oil production poses not only an economic threat but also raises environmental concerns. A decrease in heavy crude oil supply could lead to an increased reliance on lighter crude, which may not align with current refinery setups. Going lighter would also result in lower profitability as lighter crude comes with a higher price tag.  

Moreover, this shift could affect the global oil market, influencing pricing and supply dynamics. The U.S. refineries' need to secure heavy crude oil could lead to heightened geopolitical tensions as they vie for resources in a tightening market.

The resulting high refiner costs would then trickle down to industry. 

Canada's proposed emissions cap on the oil and gas sector presents a complex challenge for U.S. refineries and the broader oil market. As Canadian production potentially dwindles, U.S. refineries must prepare for a shift in supply dynamics that could disrupt operations and affect the national economy.

By Julianne Geiger for Oilprice.com

The World's 5 Largest Oilfields and Their Impact

By Michael Kern - Aug 19, 2024

• The Ghawar Field in Saudi Arabia is the largest oilfield in the world, with an estimated 170 billion barrels of original oil in place.
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• The Burgan Field in Kuwait, the Ahvaz Field in Iran, the Upper Zakum Oil Field in Abu Dhabi, and the Safaniya Oil Field in Saudi Arabia are also among the largest oilfields ever discovered.
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• These massive oilfields have played a crucial role in shaping the global energy landscape, influencing economies, politics, and technological advancements.

The world's energy landscape has been shaped by the vast reserves of petroleum hidden beneath its surface. These massive oil fields, often spanning hundreds of square kilometers and holding billions of barrels of oil, have fueled economies, powered industries, and transformed societies. In this article, we delve into the five biggest oilfields in history, exploring their geological significance, production capacity, and impact on the global energy market.

The Top 5 Biggest Oilfields

Ghawar Field	Saudi Arabia	170 billion barrels
Burgan Field	Kuwait	70 billion barrels
Ahvaz Field	Iran	65+ billion barrels
Upper Zakum Oil Field	Abu Dhabi, UAE	50 billion barrels
Safaniya Oil Field	Saudi Arabia	37 billion barrels

 

1. Ghawar Field (Saudi Arabia): A Geological Wonder and Economic Powerhouse

Located in the eastern province of Saudi Arabia, Ghawar stands as an undisputed titan in the world of oil. Discovered in 1948, this gargantuan field is estimated to have held a staggering 170 billion barrels of original oil in place. With over 88 billion barrels already produced, Ghawar continues to be a cornerstone of Saudi Arabia's oil dominance.

The field's geological structure is a marvel in itself, consisting of an anticline—an upward fold in the Earth's crust—that traps vast quantities of oil. Its sheer size and productivity have made it a linchpin of the global oil market, influencing prices and supply dynamics for decades. Ghawar's significance extends beyond its economic value, shaping geopolitical relationships and energy policies worldwide.

2. Burgan Field (Kuwait): A Desert Giant Fueling a Nation

Nestled in the southeastern desert of Kuwait, the Burgan field boasts an estimated 70 billion barrels of original oil in place. Discovered in 1938, it has been a vital source of wealth and prosperity for the nation. The field's prolific production has not only driven Kuwait's economy but also played a crucial role in regional and international energy markets.

Burgan's geological formation is characterized by a massive sandstone reservoir, which acts as a sponge for oil accumulation. The field's vastness and accessibility have enabled efficient extraction techniques, making it one of the most productive oil fields in history. Despite facing challenges such as the Iraqi invasion in 1990, Burgan has demonstrated remarkable resilience, continuing to contribute significantly to global oil supply.

3. Ahvaz Field (Iran): A Complex of Fields with Immense Potential

Located in southwestern Iran, the Ahvaz field is not a single oil field but a complex of several fields, each contributing to its immense petroleum reserves. Estimated to hold over 65 billion barrels of original oil in place, Ahvaz is a geological marvel comprising multiple reservoirs and complex structures.

The field's development has been shaped by Iran's political and economic landscape, with production fluctuating due to sanctions and international relations. Nevertheless, Ahvaz remains a key player in the global oil market, with its vast reserves holding the potential to fuel the nation's energy ambitions for years to come.

4. Upper Zakum Oil Field (Abu Dhabi, UAE): An Offshore Behemoth

Venturing into the offshore realm, we encounter the Upper Zakum oil field, situated off the coast of Abu Dhabi in the United Arab Emirates. This underwater giant boasts an estimated 50 billion barrels of original oil in place, making it one of the largest offshore oil fields in the world.

The field's development has been a testament to engineering ingenuity, with advanced technologies employed to extract oil from beneath the seabed. Upper Zakum's production has not only bolstered the UAE's economy but also solidified its position as a major player in the global energy landscape. The field's future development plans, including artificial islands and enhanced recovery techniques, highlight its continued importance in meeting the world's energy demands.

5. Safaniya Oil Field (Saudi Arabia): The Offshore King

Returning to Saudi Arabia, we encounter another offshore behemoth—the Safaniya oil field. Located in the Persian Gulf, Safaniya is estimated to hold over 37 billion barrels of original oil in place, making it the largest offshore oil field globally.

Discovered in 1951, Safaniya has been a cornerstone of Saudi Arabia's oil production for decades. Its development has involved a complex network of platforms, pipelines, and processing facilities, showcasing the nation's commitment to harnessing its offshore resources. Safaniya's continued production plays a pivotal role in meeting global oil demand and maintaining Saudi Arabia's status as a leading oil exporter.

The five largest oil fields in history represent not only geological wonders but also economic powerhouses that have shaped the world's energy landscape. Their vast reserves, production capacity, and geopolitical significance have made them key players in global markets, influencing prices, policies, and international relations. As the world transitions towards cleaner energy sources, these giants of the petroleum industry will continue to play a crucial role in meeting the world's energy needs for years to come.

By Michael Kern for Oilprice.com

Russia's Coal Reserves to Last Over a Century Despite Market Pressures

By Julianne Geiger - Aug 23, 2024

Russia has announced that it possesses more than a century's worth of coal reserves, signaling its enduring role as a key player in the global energy landscape despite facing Western sanctions. According to Alexander Kozlov, Russia's Minister of Natural Resources and Environment, the country's coal reserves are estimated at an impressive 273 billion metric tons, with 46.4 billion tons currently being extracted. Even with increased production, which hit 392 million tons in 2023, Kozlov emphasized that Russia's coal supply will last for more than 100 years at current levels.

This announcement comes at a time when Russia's coal industry, much like its oil and gas sectors, is under significant pressure due to Western sanctions following its 2022 invasion of Ukraine. These sanctions have forced Russian coal miners to redirect their exports toward Asia, often at steep discounts to remain competitive. However, Russia's coal exports to Asia have faced challenges this year due to intense price competition from major coal producers like Indonesia and Australia.

Despite its vast reserves, Russia's coal exports to Asia slumped back in March as lower coal prices from Indonesia, South Africa, and Australia proved tough competition.

For the global energy market, Russia's vast coal reserves are a double-edged sword. On one hand, they represent a stable long-term supply for countries in Asia looking to diversify their energy sources. On the other hand, the current dynamics of the coal market, coupled with environmental concerns and the global push toward cleaner energy, raise questions about the long-term viability of coal as a cornerstone of Russia's energy exports.

While coal remains a crucial part of Russia's energy portfolio, the ongoing shift in global energy preferences and the competitive pressures from other coal-producing nations could challenge Russia's dominance in the sector.

By Julianne Geiger for Oilprice.com

 

The World’s Biggest Gas Reservoir Is At A Tipping Point

By Simon Watkins - Aug 19, 2024

• Iran is investing $70 billion to address declining output from the crucial South Pars gas field.
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• The decline in production threatens to reduce Iran's petrol output by 40% and increase petrochemical costs by up to $12 billion annually.
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• Challenges include outdated technology, geopolitical tensions with Qatar, and potential inefficacy of local and Chinese contractors to mitigate the field's production decline.

Iran is embarking on a US$70 billion investment programme of measures to attempt to halt a dramatic decline in output from its crucial South Pars gas field. A failure to do so will result in the loss of 40 percent of the country’s petrol output from the Persian Gulf Star gas condensate refinery, and the addition of up to US$12 billion a year of petrochemical costs, according to Iranian Gas Institute forecasts. “South Pars’ gas output provides nearly 80 percent of the our [Iran’s] total gas production, so it is vital to all segments of business and society that this does not drop significantly,” a senior energy industry source who works closely with Islamic Republic’s Petroleum Ministry exclusively told OilPrice.com last week.

In broad terms, the South Pars site spans 3,700 square kilometres and holds an estimated 14.2 trillion cubic metres (tcm) of gas reserves plus 18 billion barrels of gas condensate. In addition to generating 78 percent of the country’s gas production, it also accounts for around 40 percent of Iran’s total estimated 33.8 tcm of gas reserves (mostly located in the southern Fars, Bushehr, and Hormozgan regions). Crucially in the current context as well is that it is one part of the two that constitute the world’s biggest gas reservoir by far, with 51 tcm of reserves. The other part is Qatar’s 6,000 square kilometre North Dome (or ‘North Field’), which is the foundation stone of its world-leading liquefied natural gas (LNG) exporter status.Related: Libyan Central Bank Kidnapping Highlights Oil Wealth Rivalry

Iran split South Pars into 24 phases for development, with broad production targets ranging from around 28 million cubic metres per day (mcm/d) to about 57 mcm/d – the latter being a target for the perennially controversial Phase 11. After the Joint Comprehensive Plan of Action (‘JCPOA’, or colloquially ‘the nuclear deal’) had been implemented on 16 January 2016, France’s then-Total renewed its 2009 commitment to develop the Phase, which had been dropped in 2012 as the E.U. ramped up sanctions against Iran. The French oil and gas giant held a 50.1 percent stake in the Phase 11 project, ahead of the 30 percent stake of the China National Petroleum Corporation and a 19.9% holding by Petropars, a wholly owned subsidiary of the National Iranian Oil Company. Total quickly invested around US$1 billion in the Phase and made progress on the site, until in May 2018 came the withdrawal by the U.S. from the JCPOA, as analysed in full in my new book on the new global oil market order. Given the size and scope of Phase 11, it became a focal point of Washington’s attention in the aftermath of the withdrawal, and it put the French under extreme pressure to pull out of the project. Under the terms of the contract, CNPC then took charge and little progress has been made since then.

This provides a microcosm of what has happened to Iran’s oil and gas sector since then. The key problem in the substitution of leading Western oil and gas firms with Chinese ones has been that the latter lack the latest technology available to the former. The same is now true of Russian oil and gas firms which have been denied much of the same technology through various sanctions since it invaded Ukraine’s Crimea region in 2014. According to assessments from Iran’s own National Development Fund, the country’s gas production will fall by at least 25 percent within the next 10 years due to falling pressure in the fields, with South Pars seeing a 30 percent decline.

To attempt to redress this, March saw Iran’s Petroleum Ministry agree to a US$20 billion programme with various local firms to build 28 massive platforms to boost pressure on the South Pars site. However, little progress has been made on these, as neither the domestic companies nor their Chinese and Russian backers have the required technology and know-how. The latest programme to be announced by the Petroleum Ministry – the drilling of 35 new wells across the South Pars site – appears geared towards maximising production from the field while it still can, rather than addressing the fundamental causes of the reduction in pressure and attempting to slow them down. Indeed, according to official Petroleum Ministry statements, the new drilling is intended to boost output over the site by 35 million mcm/d over the next three years. “Part of the problem is the geology of the site, with a natural drift towards the Qatari side in several places rather than the Iranian one,” the Iran source told OilPrice.com last week. “But another part has been the many clumsy attempts by local contractors at optimising extraction over the years with no thought of the longer-term consequences,” he added. “There are multiple examples of the wrong areas being drilled, which has weakened the surrounding structures, so drilling 35 new wells having done this is only likely to make situation worse,” he said.

Given this, Iran is looking to China to increase its pressure on Qatar to take a more cooperative approach to developing the two halves of the supergiant gas reservoir, the source added. “Qatar had a moratorium on gas production from its own North Dome field from 2005 to 2017, during which time it often accused Iran of drilling activity that reduced pressure on this side, and asked China to intervene on its behalf with Iran, which it did,” the source told OilPrice.com. “At that stage in early 2017, the two sides [Qatar and Iran] sat down and agreed to work together to ensure the sustainability of the site, so Iran wants the same assurance now from Qatar,” he added.

This is even more urgent on Iran’s side, as Qatar is now embarked on its own drive to dramatically increase its production from the North Dome. The Emirate’s expansion program will see six major new developments in the North Field East (NFE) and North Field South (NFS) to 2029. Four new ‘trains’ (production facilities) – each with 8 million metric tonnes per annum (mtpa) – will be built on the NFE site, and two (with the same production capacity) in the NFS site, totalling 48 million mtpa of new LNG production. At the end of February, QatarEnergy announced another set of projects – focused on its North Field West (NFW) – that will increase its LNG output from the current 77 million mtpa to 142 million mtpa before the end of this decade. This compares to the 404 million mtpa of LNG traded globally in 2023 and to industry estimates that this figure will reach around 625-685 million mtpa in 2040.

The problem for Iran in all of this is that although Qatar is famously diplomatic in its dealings with both the East and the West, pressure from the U.S. and its allies on steering the Emirate into their sphere of influence have intensified since Russia invaded Ukraine on 24 February 2022. Prior to that, it had spent the previous year busily signing huge long-term LNG contracts with China, as also analysed in full in my new book on the new global oil market order. With extraordinary prescience – or something – Beijing knew ahead of time that some major global event would results in LNG becoming the world’s emergency energy source very soon. Consequently, the competition between the U.S. and its allies and China and its partners for upcoming long-term LNG contracts from Qatar has been extreme. It is likely to remain so, with oil and gas major Shell forecasting that global demand for LNG is projected to increase by more than 50 percent by 2040, even without any new major conflict (such as in Taiwan) in the next few years.

By Simon Watkins for Oilprice.com