Keywords

6.1 Introduction

Qatar presents a fascinating case study on how a small state has developed through its energy sector and has navigated the dynamics that this type of political economy entails. With this in mind, the question of sustainability and adaptation to the changing nature of the global energy landscape becomes an issue of central importance. Qatar has exhibited the characteristics of a ‘late-stage petro-developmental state’, given the role of political strategy and statecraft that have underpinned its rapid development and diversification (Wright, 2021). Amongst the economic development achievements, Qatar had the highest GDP per capita in the Middle East and North African (MENA) region by 2020 (World Bank, 2020). Although the economy remains energy-driven, as most government revenue is derived from this sector, progress towards a more sustainable political economy through diversification has been achieved. In practical terms, more than two-thirds of Qatar’s GDP comes from the non-energy sector (International Monetary Fund, 2022). Central to this is how a low-tax environment, coupled with high levels of fiscal spending, has enabled broader diversification and private sector growth. Nevertheless, what has underpinned this is the economic capacity that Qatar’s energy sector has provided. This makes the question of sustainability within Qatar’s energy sector a matter of pressing importance as it has broader implications in all sectors and industries covered in this important volume.

In terms of the question of change within the energy sector, it was the former Saudi Arabian Minister of Oil, Sheikh Ahmed Zaki Yamani, who famously stated, “the Stone Age did not end for lack of stone, and the Oil Age will end long before the world runs out of oil” (Fagan, 2000). Yamani's adage rings true today in that the accepted wisdom within the energy sector is that a ‘global energy transition’ is underway. This transition amounts to not just a change within the energy mix in favour of renewables, but a more systemic and fundamental change within the global system on political, cultural, economic, and social levels. Changing energy consumption patterns does not necessarily mean that there is no future for fossil fuels, but rather that demand will shift to alternative renewable fuels. In addition, research and innovation in this emerging sector can be a driver of economic growth and development. With this in mind, the central issue relating to sustainability within the energy sector is not just a simple question of how existing resources can be monetized, but how can the existing capacities (Obeidat et al., 2020), technical expertise, and comparative advantage be repositioned. For Qatar, this amounts to an assessment on how its energy sector can be used to venture and diversify into emerging sectors that can cater for sustainability.

It is with the above in mind that this chapter seeks to contextualize the global energy transition and how it relates to Qatar in three substantive sections. Firstly, it aims to engage in how global energy consumption has historically been dynamic and how major shifts in the energy mix have led to upheaval in geopolitical terms. Moreover, it seeks to draw attention to historical lessons with regard to how this has resulted in fundamental shifts in the global economy, and discernible changes in politics, culture, and society. Secondly, this chapter will engage in the nature of the energy transition and how it is redrawing the global energy landscape. By recognizing that a new ‘energy map’ has emerged (Yergin, 2020), it is possible to conclude that achieving sustainability requires adapting to this new dynamic to maximize relevancy, innovation, and economic returns. In the final section of this chapter, engagement is given specifically to how Qatar has begun to adapt to this changing reality and offers some observations on potential areas for future engagement. The central argument of this chapter is that achieving sustainability in the energy sector requires strategic foresight on how the energy sector is changing and how innovation into new sectors can help diversify revenue streams and position the sector for the future. Overall, a significant opportunity for Qatar is identified for achieving sustainability through building on its technical expertise, capacity, and market presence, to venture into new areas of economic activity related to the renewables sector.

6.2 The Geopolitics of Energy: A Globally Transformative History

Energy and geopolitics are inextricably linked and have played a central role in shaping contemporary world history. Energy commodities have a special significance as they have been catalysts for national economic growth and decline, geopolitical conflict and integration, and a driver of both new technological innovations and economic transformations. This volume examines various themes and dimensions concerning Qatar's potential for a sustainable future. Given the centrality of Qatar's energy sector, it is critical to appreciate the broader global context of energy and how it is poised to have a direct impact on the future character of Qatar's political economy. Therefore, it is appropriate to begin with some historical reflections to remind ourselves how energy dynamics have been transformative and impacted global geopolitics.

Within energy studies, important research on historical energy transitions has gravitated towards shifts in the energy mix: such as from wood to coal, from coal to oil, from oil to gas, and how electrification of rural areas has taken place along with its implications (Bridge et al., 2013). The broader conclusion is that energy transitions have been a catalyst behind significant political, social, and economic changes. As shifting patterns of energy demand and the rise of new commodities have historically had a transformative effect, this dynamic is instructive for any evaluation of Qatar’s potential for a sustainable future. Such changes in the global energy market have impacted the relationships between energy exporting and importing nations. Moreover, it has also had a far-reaching global impact that fundamentally alters the international system in terms of its political, economic, and social relationships. While the move towards greater use of renewables and a carbon–neutral future is poised to have a disruptive and transformational impact globally, the nature of this change has clear relevance for Qatar, both in navigating the transition and strategically positioning itself from a sustainability perspective.

The quest for energy resources has proven to be a consequential backdrop of modern world history, with coal being the first global energy commodity. Coal proved to be an enabler for the British Empire to expand its influence through industrialization overseas. It also allowed for a projection of military power as the adoption of the steam engine proved revolutionary for the British Royal Navy to secure and expand the trade routes and territorial possessions of the Empire on a global basis (Gray, 2017). On the other hand, the lack of energy resources has also proved to be a driver of war and territorial expansionism. For example, coal proved to be intertwined with geopolitics, economic growth, and stability in Europe and was an important factor in the origins and outcome of the two World Wars. After all, it was only through the establishment in 1951 of the European Coal and Steel Community, which was founded by France, Germany, Italy, Belgium, Luxembourg, and the Netherlands, that an equitable arrangement with steel and coal resources could be achieved within the continent. This allowed the inherent competition over natural resources between Germany and France to be finally resolved, thereby bringing a new era of peace and stability to the European continent that laid the foundations of the European Union.

In his capacity as First Lord of the Admiralty, Winston Churchill was to take one of the more consequential decisions in world history by re-purposing the British Royal Navy as one based on oil rather than coal. The strategic advantages of this transition were clear as it allowed for a more advanced naval force that had greater speed and efficiency, yet it also marked an era where oil became a strategic commodity that shaped future foreign policy and national interests. Moreover, it allowed the British Navy to be a faster fleet than its German rival, yet it also marked a new era whereby naval military superiority depended on access to oil. Daniel Yergin reminds us that, “…Churchill, on the eve of World War I, had captured a fundamental truth, and one applicable not only to the conflagration that followed, but to the many decades ahead. For oil has meant mastery throughout the twentieth century” (Yergin, 1992).

Throughout the twentieth century, control over oil resources has been central to understanding the origins and outcomes of several conflicts. During World War II, the Japanese attack on Pearl Harbor was motivated by the strategic desire to protect Japan's oil resources in the East Indies. The decision by Nazi Germany to launch a surprise invasion of the Soviet Union, which proved consequential in the outcome of the war, was motivated by a need for Germany to capture the oil fields in the caucuses (Yergin, 1992). Beyond this, oil resources have played a central role in several conflicts in the latter half of the last century. Key examples include the Nigerian Civil War 1967–70, the Iran-Iraq War 1980–88, Iraq's invasion of Kuwait in 1990, and the 2003 Iraq War. Therefore, there is justification to recognize that energy resources should be considered distinct from other commodities, given their central role in security calculations.

The weaponization of energy resources first took place with key Arab states responding to the Yom Kippur War in 1973 by implementing an oil embargo that triggered an ‘oil shock’ to the global economy. Rapid rises in oil prices are highly consequential for the global economy, given they have led to significant periods of inflation, which resulted in a decline in economic growth and prosperity. Following the 1973 oil shock, the world economy was subjected to a second oil shock due to the Iranian revolution in 1979. The subsequent Iran-Iraq War (1980–88) compounded the geopolitical risk from regional instability and added to the turbulence in the oil market. The sensitivity of the oil market to geopolitical risk was a trend that was to follow in subsequent decades, most notably with Iraq's invasion of Kuwait in 1990, along with the broader global challenges brought on by the War on Terror, which saw a joint US and British invasion of Afghanistan in late 2001, and subsequent invasion of Iraq in 2003. Nevertheless, the pattern of energy commodities being impacted through geopolitical instability without subsequently having an impact on the global economy is a recurrent pattern in world history. More recently, Russia’s invasion of Ukraine in 2022 exposed how coal, oil, and gas resources could become weaponized commodities with particular regard to the European Union, given its inherent dependency on Russian energy imports. Periods of geopolitical instability have fed into concerns about supply disruptions of oil to the global market, so sharp increases in oil prices that accompanied key periods, such as Iraq's invasion of Kuwait in 1990, resulted in far-reaching global consequences given the economic impact on a global basis. For example, the Gulf conflict of 1990–91 contributed to a recession in the United States which then saw a shift from a Republican administration to a Democratic one headed by Bill Clinton in 1993. Indeed, the interlinked nature of the global energy market to economics and politics is what makes energy commodities distinct and so consequential.

While the weaponization of oil exports has underlined the distinctive character of energy resources as a commodity, it has also proved transformational in the global political economy. A key example of this was how Japan responded to the oil price shock of 1973. Japan's reliance on imported energy put it at risk through supply security and price volatility. As a result, the oil shock left Japan with its first trade deficit since 1964 and sparked public fear, as prices skyrocketed due to a 20% inflation rate and the economy contracted for the first time in postwar history. Additionally, it triggered a strategic change in Japan’s industrial base away from high-energy sectors and towards electronics and semiconductors. Indeed, Japan's energy instability and sensitivity to global oil geopolitics and geoeconomics were the catalysts for an economic and industrial revolution (Yergin, 1992). It was also a clear example of how national energy security calculations shift as a response to price volatility. The impact of the 1973 oil shock was a catalyst behind Japan's expansion of nuclear power and its progressive adoption of natural gas as an alternative to coal-fired power stations.

On a broader level, access to low-cost energy has been an enabler of rapid advances in economic growth, particularly within the OECD economies (Nye, 1999). Accessible, low-cost oil has been a central enabler of globalization, given it has enabled low-cost transportation and trade (Dicken, 2007). On a broader level, however, it is also observable how economic development is correlated with energy consumption patterns. Fluctuations in energy prices, which limit their affordability and availability, are undoubtedly key inhibitors to economic growth, which can perpetuate stark inequity within the international system.

When taken together, this brief sketch on the relationship between energy, political economy, and broader geopolitics underscores the far-reaching and transformative nature energy commodities have had. It is also clear that it has direct implications for economic development and the stability of the international order. On this basis, we can recognize that as Qatar is a leading exporter of liquefied natural gas (LNG) and gas-to-liquid fuels (GTL), the transformative nature of the global energy transition will undoubtedly be a critical factor facing Qatar's energy sector and its sustainability in the future. As highlighted above, the impact of energy pricing and geopolitics can have a far-reaching impact globally. The nature of the global transition towards a renewable energy future has the potential to recalibrate Qatar's international linkages based on demand variables but also the manner in which it strategically positions its energy sector. In this regard, the above historical observations underscore the volatility and far-reaching impact of the global energy market on the international system. While Qatar's political economy has shown clear potential in terms of diversification from energy export dependency and has the character of being a petro-developmental state, its economic capacity and composition remain driven by energy export revenue. It is with this in mind that the next section of this chapter will consider the nature of the global energy transition and what characteristics it is expected to have. This will provide the context for examining Qatar's energy sector and the considerations needed from a sustainability perspective.

6.3 Conceptualizing the New Energy Landscape

It is uniformly recognized within energy studies that an ‘energy transition’ has commenced on a global basis. The transition is driven by government policy and investments to comply with carbon–neutral targets to offset the risks of climate change. Research and innovation are proving to be a key enabler of a progressive adoption of renewable energy sources, given that they are becoming more competitive with traditional fuel sources. Although the motivations behind the energy transition are established, there is no clear consensus on how this transition will manifest. Indeed, significant variance can be observed globally in terms of how nation-states are engaging and adapting to the energy transition (Hafner & Tagliapietra, 2020a). However, what is clear is that it has the potential to have a transformational impact on social, technical, cultural, economic, and political systems globally (Davidson & Gross, 2018). At the very least, it is expected to be as significant as in previous transitions, given the multidimensional impact such shifts have historically had. While the interrelationship between geopolitics and energy is well-established, scholarship remains in its initial stages in assessing the broader political, economic, and geopolitical implications of the new energy transition towards renewables and the decline of fossil fuel consumption (Hafner & Tagliapietra, 2020b).

According to the International Renewable Energy Agency (IRENA), the new energy landscape is projected to have profound implications:

This ongoing transition to renewables is not just a shift from one set of fuels to another. It involves a much deeper transformation of the world's energy systems that will have major social, economic and political implications which go well beyond the energy sector. The term 'energy transformation' captures these broader implications. The global energy transformation will have a particularly pronounced impact on geopolitics. It is one of the undercurrents of change that will help to redraw the geopolitical map of the 21st century. The new geopolitical reality that is taking shape will be fundamentally different from the conventional map of energy geopolitics that has been dominant for more than one hundred years. (IRENA, 2019)

A key observation from IRENA’s study on the global energy transformation is that the dynamics of change are far deeper than a more simplistic transition from a move towards increased use of cleaner alternative fuels would imply. The broader observations are that the move towards renewables and the decline of fossil fuels would have much deeper repercussions within societies with the resources to adopt renewable fuel sources progressively. Innovation, digitalization, and electrification of key sectors of the economy have the potential to be transformative within advanced economies. This aligns with work that has been done on the ‘Green Deal’ scenario, which argues that the seismic nature of the energy transition will lead not just to economic growth through innovation and new industrial commitments made towards carbon neutrality, but also broader means of spurring global economic development basis on a more equitable basis (Leonard et al., 2021). In this regard, BP observed that the role of LNG as a ‘green’ transitional fuel could be expected to increase at least to 2030 (Dale, 2022). BP also noted that depending on the speed of the energy transition, demand for gas would increase potentially beyond 2050.

In advance of the 2021 United Nations Climate Change Conference (COP26) in Glasgow, the International Energy Agency (IEA), published a roadmap for the global energy sector for it to achieve net zero by 2050 (Bouckaert et al., 2021). The IEA's roadmap sought to provide a pathway for how states would achieve the legally binding disclosures on targets set by the Paris Agreement (COP21) in 2015. The COP21 was noteworthy in that it was a legally binding agreement adopted by 196 parties that limited global warming to below 2 °C, but preferably a limit of 1.5 °C was to be targeted. From this, states were to provide declarations on their emissions, despite there being no legal consequence for not meeting the targets set. This report by the IEA was noteworthy in that it advocated no additional investment in fossil fuels beyond those already committed to as of 2021. It is worth noting here that while this is a progressive goal, it is questionable whether it is realistic in practical terms. Moreover, it outlined the ambitious target of upwards of 90% of electricity generation being from renewables and a goal of over 60% of total energy supply by 2050 coming from renewable energy. The position taken by the IEA is significant in that it underlined the transformational nature of the energy sector, which would amount to fossil fuels “declining from almost four-fifths of total energy supply today to slightly over one-fifth by 2050” (Bouckaert et al., 2021). By 2021, more than 120 countries had made pledges towards significantly reducing emissions by 2030 and achieving a net zero by around 2050. Furthermore, more than 100 countries have committed to making a 30% cut in methane emissions by 2030. While it is recognized that this is a future target rather than an assessment of what has been accomplished, it is instructive in that it provides an early indication of the scale of the transformation needed for governments to achieve their pledges. Despite such pledges being made, it has been noted that there is a credibility, action, and commitment gap, particularly with the major emitters (Stockwell et al., 2021).

For energy-exporting countries, the energy transformation is expected to create systemic risks concerning their fiscal ability to sustain their respective economies. This was an argument advanced by the IMF in an influential study conducted in 2020 (Pescatori et al., 2020). It was argued that the energy-exporting states of the Gulf face clear risks to their political economy due to projected shifts in energy demand as part of the energy transition. They argued that the broader Middle East is projected to confront various risk factors that would potentially destabilize their economy in the 2030s due to growing populations and stagnant revenue streams. IMF econometric modelling indicated that given the rising demand for fossil fuels, maintaining fiscal expenditures, currency pegs, and social welfare programmes by Gulf countries would become unsustainable. This prognosis has clear implications for any assessment of future sustainability and underlines the necessity for Qatar and other energy-exporting countries to navigate the energy transformation strategically.

It is noteworthy that key oil-producing states face the challenge of how they will adapt their energy sector to the changing energy landscape. Central to this is how they can reduce emissions of their energy sector, monetize their reserves, and reposition their energy exports as a cleaner ‘blue-energy’ export commodity. The case of Saudi Arabia is particularly striking and serves as a useful comparison for Qatar. Saudi Arabia's state-owned oil company Aramco pledged to be carbon neutral by 2050, and Saudi Arabia as a country by 2060. Its 2060 carbon–neutral goal focuses on what Saudi Arabia will do internally, and it does not have a bearing on oil exports as emissions associated with oil exports—dubbed ‘Scope 3’ emissions—will be omitted from the count.

Saudi Arabia remains committed to exploiting and monetizing its resources to a maximum as an energy exporter (Krane & Young, 2021). It is worth recognizing that the length of time necessary for Saudi to monetize its reserves requires a climate strategy distinct from that of its smaller rivals, particularly shareholder-owned international oil corporations (IOC). Saudi Arabia's proven reserves are over 260 billion barrels, more than five times the combined reserves of the five largest international oil companies, ExxonMobil, Shell, Chevron, Total, and BP. Saudi Aramco has almost 50 years of production remaining from domestic reserves at present rates, which might increase further if more discoveries are made (Krane, 2021). Jim Krane notes:

Given the strong likelihood of additions to its proven reserves, the Saudi government has made allowances for Aramco to maintain its monopoly over the Saudi oil concession for as long as 100 years – until the year 2117. By contrast, IOCs’ proven reserves of just over 200 billion barrels would be collectively depleted in nine to 15 years based on current output rates. (Krane, 2021)

Therefore, adopting a carbon–neutral strategy can be interpreted as a means for Saudi Arabia to prolong and monetize the use of its oil sector, while progressively focusing on blue energy exports as a transitional fuel. This differentiates from Qatar's LNG, which currently is not processed into and exported as blue ammonia. ‘Sustainable’ blue hydrogen produced from hydrocarbons in Saudi Arabia might serve as transitional ‘premium fuel’ until sufficient green renewable energy is available. Nevertheless, a key issue for Saudi Arabia and other major energy exporters will be how to achieve a circular carbon economy which rests on the achievement of ‘four Rs’: “Reduce: energy efficiency, renewable energy and other low carbon energy such as nuclear; Reuse: carbon capture and utilization (CCU) and emissions to value (E2V); Recycle: natural sinks such as forests and oceans, bio-energy and hydrogen; and Remove: carbon capture and storage (CCS) and direct air capture” (Belaid & Al Sarihi, 2022).

The trend towards monetizing reserves while also seeking to integrate new technologies to cater for a reduction in emissions and the development of blue energy exports can also be observed in the United Arab Emirates. The UAE unveiled its Hydrogen Leadership Roadmap at the COP26, targeting a 25% market share of low-carbon hydrogen by 2030. This was outlined as central to the UAE's net-zero objective by 2050. With the decline of the UAE's oil and gas industry, gaining an early mover advantage in alternative energy sources underlines how the UAE is strategically seeking to position itself as part of the energy transition. Nevertheless, it is also recognized that the ‘green hydrogen’ sector remains in its infancy for all countries engaged in it. As a sector, green hydrogen faces key issues relating to the cost implications of large-scale hydrogen production, infrastructure investments, high volume storage, transport and logistics, safety considerations, and the uncertainty associated with matching supply and demand (Eljack & Kazi, 2021).

In addition to the above variables, it is important to recognize that the geopolitical impact of the 2022 Russian invasion of Ukraine is a significant factor that is fundamentally redrawing the global energy map. The overarching effect on energy geopolitics of the invasion amounts to a fundamental revision in the role of Russia as an energy supplier. As of 2019, the EU-27’s reliance on Russian energy amounted to 27.1% of total oil imports and 45.7% of natural gas. While debates over the dependence of the European Union on Russian energy have been long-standing, the response to the Russian invasion has seen the EU strategically commit to ending oil, gas, and coal imports from Russia as soon as feasible. Achieving this goal will give impetus to the European Union’s 2050 goal of achieving the European Green Deal that commits to carbon neutrality and renewable energy sources taking more significance.

Beyond this, however, ending European imports of Russian fossil fuels also has global implications in terms of the pricing of energy commodities and geopolitical supply and demand dynamics. Indeed, the prospect of sanctions, litigation, or risk assessments on making payments to Russia also has the impact of deterring countries from importing Russian energy, which in practical terms means a narrowing of potential importers. From a macro perspective, both China and India can be expected to be the main alternative target markets for Russia’s exports. While there are practical issues facing the supply of greater volumes of energy commodities to China, the repositioning of Russia’s energy sector also then means that competition for the East Asian market will increase. Prior to the 2022 invasion, projected increase in demand for oil and gas was largely from the non-OECD states, and in particular from China (Wright, 2017). The dynamic of China being able to source increased amounts of its energy needs from Russia places it in a more competitive position regarding energy exports from the Middle East and Australia. The expansion of the Russia-China ‘Power of Siberia’ pipeline to 38 billion cubic meters (bcm) by 2025 (versus flows of only 5 billion cubic meters in 2020) and a push to boost domestic output mean that further strong growth in China's LNG import volumes beyond the early 2020s is far from guaranteed as an export market for both Qatar and Australia (Wright, 2020). It is with this change dynamic in mind that the broader factor of the future need for Qatari LNG needs to be considered as thus far, the projection has been that future demand will come from East Asia and, in particular from China, but the repositioning of Russia's energy sector which may include the supply of discounted oil and gas, necessitates a more competitive market for Gulf region supplies to gain market share.

In the final analysis, the central conclusion on the changing international energy landscape is that a comprehensive energy transition is taking place, which will have widespread implications. Furthermore, it has been observed that the impact can be expected to span consumption patterns of fossil fuels, opportunities to offset the emissions from the energy sector, in addition to the broader socioeconomic implications on energy-exporting states. The above observations have clear implications for Qatar and necessitate adaptation in order to ensure sustainability. Given this observation, the subsequent sections of this chapter will engage on the specifics of Qatar’s energy sector and how it will need to respond to these broader trends.

6.4 A Sustainable Future for Qatar's Energy Sector?

Qatar's energy sector has been central to providing the country with the capacity to achieve development. Although oil exports initially drove Qatar's development, it was the strategic decision to focus on the gas sector that emerged as the defining feature of its political economy. Following the first shipment of LNG, which took place in 1996, Qatar has progressively emerged as the leading global exporter of LNG. This has come to define and drive the capacity to further economic growth. In terms of conceptualizing Qatar's political economy, it is appropriate to consider it as a ‘late-stage petro-developmental state’ (Wright, 2021). This is on the basis that Qatar's political economy should be understood in political terms, with the role of the energy sector providing the capacity for achieving development. Rentier-based conceptualizations have proven useful in understanding state behaviour and challenges. It lends itself to the phenomena known as the Dutch Disease, which essentially is a causal relationship between an economic boom triggered by a particular sector such as oil and gas, and a decline in growth, productivity, and diversification in other sectors. In this sense, it emphasizes structural challenges to the prospects for sustainable development. While such observations are valuable, they do not satisfactorily account for the political character of Qatar's economic development and how it has been achieved, hence the justification for looking at Qatar’s prospects through the lens of the developmental state approach. While Qatar’s economy remains energy-driven, it is observable that the majority of government revenue (85% in 2020) is sourced from this sector. Despite this, more than two-thirds of GDP comes from the non-energy sector, which underlines the character of diversification and growth that has been achieved in the private sector. Furthermore, it illustrates that income from natural resources has strategically been used to cover government costs, which has supported the growth of state capitalist activities and the private sector through a low-tax environment. Nevertheless, it remains clear that the energy sector is central to Qatar’s political economy. Hence, an assessment of how this can be related to the question of sustainability is of central importance (Meza et al., 2022).

In terms of the export markets for Qatari LNG, it is observable in Fig. 6.1 that as of 2020, 60% of Qatar’s LNG exports are directed towards the Asian market, of which India, South Korea, Japan, Taiwan, and Pakistan are the principal importing markets. This compared to 26% of supplies going to Europe. Although China is not the largest export market for Qatar’s LNG at around 10% of total exports, its strategic importance as a destination market is longer-term. As of 2022, Qatar’s LNG capacity stood at 77 million tons per year, but it is expected to increase capacity to 126 million tons per year by 2027. This raises the question of what the target destination markets will be once Qatar has increased its export capacity by around 50 million tons per year. As highlighted above, the projected future demand for LNG was primarily expected to be in the non-OECD, mainly from China (Piet & Wright, 2016). Given the repositioning of the Russian energy sector to increasingly focus on China as an export market, this brings it into direct competition with Qatar over future gas export capacity and Australia, which became the world's largest exporter of LNG in 2020. A strategic shift can be observed whereby the European Union will be increasingly seeking to secure gas significant volumes of gas to offset what Russia had been supplying it. What is important here is that the 2022 Russia-Ukraine war can be anticipated to have brought into question Qatar’s need to focus on China as an energy export market and instead opened an opportunity to reposition itself as a strategic supplier to Europe.

Fig. 6.1
The bar graph m m t p a versus destination with the country represents the decrease in L N G exports.

(Source Woodmac, MEES, authors own calculations)

Qatar LNG exports by Destination (2020)

Full size image

As highlighted above, Qatar is developing its LNG export capacity with the target of 126 million tons per year by 2027. In practice, however, this export capacity is likely to become available from 2026 to 2029 gradually. Nevertheless, the potential for Qatar to increase the share of its gas exports to Europe has the potential to allow it to have a more balanced distribution of supply between the European and East Asian markets. The current reliance on the East Asian market has become more competitive owing to the emergence of Australia as the leading global supplier of LNG. However, it is noteworthy that the demand for LNG from Japan is projected to decline progressively. Japan has traditionally been the main export market for Qatar’s LNG but has declined due to an ageing population and energy efficiency savings. Compounding this is Japan's 2030 Energy Plan, which was published in 2021, as it set a target of reducing the consumption of LNG from 37 to 20% of the energy mix. With its LNG demand projected to be reduced, the share of renewables is expected to increase, which underlines the scale of the energy transition that has been discussed above. Nevertheless, with Japan's LNG consumption in decline and China being able to source more of its natural gas needs from Russia, there is reason to conclude that Qatar's uncommitted LNG will increasingly be directed towards meeting European demand. Given this, what is important here is what will an increased integration with the European market mean for Qatar? How should it position itself as an energy supplier within the context of the European Green Deal and its targets for a carbon–neutral Europe by 2050?

For Qatar to align with the global trend towards carbon–neutral targets in order to mitigate climate change, in addition to the recognition that growth in demand will primarily be coming from the OECD rather than China as has previously been the case, it is necessary to consider approaches for adapting to this changed reality for sustainability purposes. In March 2022, Qatar Energy announced a revised sustainability strategy that targeted 11 million tons a year of carbon capture and storage (CCS) along with progressive growth in the role of solar energy (Martín-Pomares et al., 2017). One of the major projects, according to QatarEnergy, is the deployment of carbon capture and storage (CCS) technology to collect over 11 million tons of CO2 per year in Qatar by 2035. These projects have the potential to cut the carbon intensity of Qatar’s LNG facilities by 35% and its upstream facilities by at least 25%, demonstrating Qatar's commitment to sustainably delivering cleaner LNG at scale to assist the energy transition (Anonymous, 2016).

The focus on CO2 capture and sequestration is part of the broader changing nature of the energy sector and within Qatar in particular (Al-Moftah et al., 2021). In line with the trend towards carbon neutrality, it is increasingly important for energy suppliers to demonstrate that their energy production offsets emissions for it to support targets for growth in renewables and the achievement of a carbon–neutral economy. Although the energy transition will necessitate a growth in renewables and a decline in fossil fuels, the role of natural gas and oil in an energy mix is expected to remain. Therefore, key exporting regions such as the European Union can be expected to be increasingly observant of the carbon emissions of any fossil fuel imports that they are receiving. This has a direct impact on the interests of Qatar to reposition its energy sector as one which is environmentally sensitive to safeguard demand and thereby support Qatar’s future sustainability.

The importance of reducing the carbon footprint of Qatar’s energy sector is a central aspect of its future growth and development. It was noted by Qatar’s Minister of Energy, Saad Al-Kaabi, that:

One of the most important environmental elements of the NFE North Field East project is its CCS that will integrate our wider CCS scheme at Ras Laffan, which once fully operational will be the largest of its kind in terms of capacity in the LNG industry, and will be one of the largest ever deployed or developed anywhere in the world. (Ingram, 2021)

As a sector, the liquification of gas for export is an energy-intensive process that comes with a clear carbon impact. A central aspect of Qatar's domestic electricity mix and the extent to which it has a carbon impact. Therefore, offsetting carbon emissions within the electricity sector can be an important means of reducing the national carbon footprint of as a fossil fuel exporter. The electricity sector within Qatar is predominantly gas powered, but the expansion into the solar sector is an important development that allows Qatar to position its LNG exports as more environmentally sensitive. The Al Kharsaah Solar Power Plant is a photovoltaic plant currently which will produce 800 MW of energy, making it the world's biggest solar power plant utilizing high-efficiency, half-cut bifacial solar modules (Byrne, 2022). A key benefit of Qatar investing in solar energy is that it allows it to free up gas for LNG export purposes rather than using it for its own domestic electricity needs.

The benefit of Qatar increasing its renewable energy capacity is that it allows it to offer a less carbon-intensive LNG product and the ability to venture into the ‘blue energy’ sector. As highlighted above, a central part of the energy transition concerns the move into the hydrogen economy. Increased use of hydrogen as a fuel source has enormous environmental potential, but it faces practical issues with regard to its cost. Essentially, the difference between blue hydrogen and green hydrogen depends on the method of production (Yu et al., 2021). The first is low-carbon blue hydrogen, which is made from natural gas using standard carbon-intensive processes but with CO2 collected and stored using CCS technology. The second is green hydrogen, which is created by electrolysis, which uses renewable energy to divide water into hydrogen and oxygen. Given the processes that are needed for the production of green hydrogen, its overall cost may be upwards of five times more expensive than conventional LNG, while blue hydrogen is double the price of LNG (Ingram, 2020). Although LNG is more cost-effective than renewables, the long-term trend indicates that renewables will continue to become more cost-effective. The steady expansion of the hydrogen sector is a longer-term issue for the LNG industry as the world's first cargo of blue ammonia arrived in Japan from Saudi Arabia in 2020, which underlined its potential to serve as a fuel source for existing gas-fired power stations. While LNG can be converted to blue ammonia, making it a cleaner fuel source than it is presently, the main challenge will be how to do it at a cost that is competitive. Nonetheless, the move to a hydrogen-based economy and the recognition that blue ammonia from LNG may one day be a viable fuel source opens up opportunities for research and development and technological innovation to make that option more cost-effective. For Qatar, blue ammonia is likely to have the most significant potential, given that it can be processed from existing resources (Okonkwo et al., 2021).

What can be observed here is that as Qatar has a comparative international advantage in its energy sector through the expertise it is accumulated, it has the potential to take a leading position in the energy transition by investing in both the blue/green hydrogen and ammonia sectors. When this is complemented with CCS, the carbon impact of Qatar's LNG can be reduced significantly, positioning itself for the market as part of the energy transition. By ensuring market relevancy, it caters for sustainability, growth, and profitability. A key observation here is that enhancing the role of renewables in the energy production cycle will allow Qatar to position itself as a more attractive energy supplier to countries seeking to achieve carbon neutrality. In essence, adapting to the energy transition both allows for more innovation and growth into new sectors of the economy for Qatar and enhances its attractiveness as an energy supplier to countries seeking to achieve carbon neutrality strategically.

6.5 Concluding Observations

It is worth recalling that ‘sustainability’ as a concept was defined in 1987 by the United Nations Brundtland Commission as, “meeting the needs of the present without compromising the ability of future generations to meet their own needs” (Redclift, 2005). Therefore, when considering the question of sustainability in Qatar's energy sector, it is important to recognize that achieving this goal has implications on how it adapts to the energy transition and advances greater diversification of the economy. The stakes concerning Qatar's energy sector are arguably one of the more important issues within this book. The economy is energy-driven, and an inability to adapt to changing realities would have broader implications in Qatar’s political economy.

In conjunction with the energy transition towards renewables and carbon neutrality, the Russian invasion of Ukraine in 2022 has served as a systemic shock to the global energy market. This has manifested itself with an upending of Russia’s position as a reliable energy exporter. The strategic decision by the European Union to cease imports of Russian energy amounts to a fundamental shift in market dynamics. Given the scale of Russia’s energy exports and the size of the European market, it has profound implications on the flow of trade in oil and natural gas. It has been identified in the above text that a consequence of this geopolitical instability is that Qatar is likely to see strong growth in its trade with the European market based on market fundamentals. Furthermore, given the leading manner in which the European Union is moving towards a green economy, an opportunity is identified for Qatar to integrate with this market shift to achieve further diversification within its energy sector, which enhances its relevancy and sustainability.

In the context of this, this chapter has made observations on the historical significance of the energy transition and how the energy landscape is being redrawn in a way that has clear implications for Qatar’s trading relationships and foreign relations and offers potential for research and innovation in new sectors. The energy transition presents Qatar with an opportunity to build on its existing capacity, technical expertise, and market presence to venture into the renewable sector. As a result, Qatar’s principal exports could progressively factor in renewable energy to make it a more attractive and cleaner export product. Also, investing resources in research and innovation in the renewable sector and engaging in joint projects globally in the renewables sector opens up new opportunities for economic growth and diversification within the energy sector. In the final analysis, it is through adapting to this change that Qatar’s energy sector will be able to be more sustainable by diversifying into emerging areas that have the potential to maximize relevancy and profitability.Footnote 1