In a huge media event held on December 13 at Ras Laffan Industrial City, Qatar celebrated achieving the desired level of 77 million tons per annum of liquefied natural gas (LNG) production capacity, the highest level in the world, accounting for 28 percent of total global output. At the beginning of the event, HH Sheikh Haman bin Khalifa Al Thani, the Emir of Qatar, cited the efforts of the Deputy Prime Minister and Minister of Energy and Industry Abdullah al-Attiyah over the past two decades in achieving this production level, praising the industrious minister and his team. LNG production plays a key role in the Qatari oil industry. While crude oil production capacity in Qatar amounts to approximately 900 thousand barrels per day, Qatar's overall production of oil, condensates, liquid petroleum, and natural gas is estimated at 4.5 million barrels per day of oil equivalent. Naturally, the primary reason behind this high level of petroleum production is the production of LNG and LNG liquid derivatives. But it took Qatar a long time to develop its production of gas. Although the giant offshore North Field, which contains around 900 trillion cubic feet of confirmed gas reserves, was discovered in 1971, the first batch of LNG supplies was not shipped until October 1996, to the CHUBU Japanese electric company. It was not simple for Qatar to establish an LNG industry in the beginning. First of all, Qatar had to gain the confidence of the markets by having its leadership adopt a clear and transparent strategy to develop this costly and sophisticated industry, and to adhere to the agreements it has signed without amendments or changes, and of course without any halts or delays in supplies. And indeed, this has been the case for the past two decades. Nor was it easy for Qatar to win the confidence of the purchasing companies, the majority of which being major Japanese electric companies, due to the lack of experience in the country in running a complex industry of this kind, and also because electric companies are unwilling to risk any interruptions in supplies and any ensuing power cuts in major cities. Qatar thus responded to the urgent need for expertise in the construction of LNG plants by collaborating with major petroleum companies in its two primary projects, which are QatarGas and RasGas. As a result of this collaboration, 14 production trains were built, seven trains in each project. Thanks to these developments, QatarGas currently exports LNG to 23 countries in four continents. What also helped Qatar in the development of its LNG industry are the increases in oil prices, the baseline for determining gas prices. Owing to these increases, natural gas was possible to produce more economically than before. In addition, the worldwide drive for environmental preservation has led to greater use of gas, an environmentally friendly fuel, while the majority of new power plants adopted gas; this is not to mention the use of natural gas in petrochemical plants and the metallurgical and aluminum industries. However, the global gas industry, like other commodities industries, currently faces immense challenges, which include short-term ones and others that are cyclical. Yet, it happens that multiple challenges are extant almost simultaneously at present, such as those of decreased consumption, especially in the United States and as a result of the global financial crisis, and the extensive commercial production of shale gas in the United States. As a result, large supplies of natural gas have become available in the United States, transforming this country from a natural gas importer to a natural gas exporter (the first shipment of American LNG was exported to Britain in late November 2010). These developments coincided with the enormous increase in Qatar's LNG production capacity. These changes led to lower natural gas prices in the United States. They also led to the rearrangement of Qatar's export priorities: Instead of focusing on the huge market in the United States, the focus shifted once again to the growing market in Asia, fueled by sustained economic development in the continent. Moreover, Qatari companies have recently managed to increase LNG exports to both China and India; this in addition to ongoing negotiations with other Asian nations with the aim of encouraging them to import Qatari gas. These, of course, are not the only changes affecting the LNG industry. For instance, LNG contracts have shifted from being long term contracts that are fixed over 25 years without any changes in quantities and prices, increasingly towards spot contracts over two or three years that also take into account changes in supplies and prices over these relatively short periods of time. Despite these fundamental transformations, the LNG industry has managed to cope with the new situation. The industry is helped in this by increased demand for natural gas worldwide (worldwide annual consumption of gas is the highest among all energy sources.) This is because natural gas is more environmentally friendly than other types of fuel. *. Mr. Khadduri is an energy expert
