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GCC row has no immediate impact on energy sector

05 Jun 2017 09:09 (+01:00 GMT)
GCC row has no immediate impact on energy sector

Dubai, 5 June (Argus) — Gulf Co-operation Council (GCC) members Saudi Arabia, the UAE and Bahrain, as well as north African neighbour Egypt, have severed diplomatic ties with Qatar, citing alleged sponsorship of terrorist groups, including Isis and al-Qaida, and accusing Doha of undermining the sovereignty of its neighbours.

There has been no direct impact on the regional energy sector so far. Qatar has the world's third-largest gas resources after Russia and Iran, and is the largest exporter of LNG. Kuwait, the UAE and Egypt have all imported LNG cargoes from Qatar recently, and demand from those countries is growing amid rising domestic power consumption, particularly in summer.

Gas supplies to the UAE and Oman through the 3.2bn ft³/d (33bn m³/yr) Dolphin pipeline from Qatar have not been affected yet, according to operator Dolphin Energy. The company will issue a statement soon.

The UAE imports about 2.2bn ft³/d through the pipeline. The agreement is between Qatari state-owned QP and Dolphin Energy, a joint venture uniting UAE state-run investment firm Mubadala, Total and US independent Occidental Petroleum. Oman imports about 200mn ft³/d via Dolphin.

Saudi Arabia, the UAE and Bahrain have given their own nationals 14 days to leave Qatar and have given Qatari nationals 14 days to leave their respective countries. And they have closed all access to or from Qatar through their land, sea and air ports.

The diplomatic row comes two weeks after Saudi Arabia, the UAE, Bahrain and Egypt blocked access to Qatari state news amid claims of controversial comments by Qatari emir Sheikh Tamim bin Hamad al-Thani that appeared to criticise Riyadh. Qatar claims that its news websites were hacked.

GCC members Kuwait and Oman have so far not commented on the spat.

The freezing of diplomatic relations is likely to be economically challenging for Qatar as the tiny Mideast Gulf nation is a peninsula, sharing its sole land border with Saudi Arabia.

Qatar has faced significant economic headwinds since 2014 amid lower oil and gas prices, despite its vast natural resources and its global-leading GDP per head. Ratings agency Moody's cut Qatar's rating late last month.

Riyadh wants companies doing business in Saudi Arabia to sever ties with Qatar as well. A number of large oil companies, including ExxonMobil, Shell and Chevron, do business with both countries' respective state-owned oil firms Saudi Aramco and QP.

Qatar's foreign ministry has responded by saying that "the state of Qatar has been subjected to an incitement campaign based on fabrications … which indicates intentions to harm the state, even though Qatar is an active member of the GCC, and is committed to its charter and respects the sovereignty of other countries, does not intervene in their internal affairs, and plays a role in fighting terrorism and extremism".

The ministry has also warned that "the creation of reasons to take such measures against a sister state in the GCC is clear evidence that there is no legitimate justification for these actions which were taken in co-ordination with Egypt in a clear aim to impose guardianship over the state of Qatar. This is, by itself, a violation of its sovereignty as a state, and is completely rejected."