Establishing an international energy exchange in Qatar for hydrocarbon and gas trading
May 11 2021 05:23 PM
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Saad al-Kuwari
Saad al-Kuwari

By Saad al-Kuwari

* A trading platform for national and international companies to trade energy transactions

* An international energy exchange will boost Qatar's role in the gas and petrochemicals industry in the future

 

The study of establishing an international energy exchange specialising in the trade of liquefied natural gas (LNG) and liquefied petroleum gas (LPG) since Qatar is at the forefront in gas production and largest export of gas.

The trade platform can include petroleum products and derivatives such as petrochemical, fertilisers and aluminium at later stage.

This trade platform becomes a strategic and economic rational, objective and cornerstone in diversifying and enhancing revenues in this vital economic sector.

The establishment of an energy exchange through a trading platform linked to a system of governance, transparency and a robust financial system.

The trading of these hydrocarbon products through that platform will attract international investors, traders and brokers in the Qatar energy exchange.

Usually, this exchange works to define a pricing mechanism and a specific quantity based on specific time, whether from gas or petroleum derivatives, petrochemical or condensate or fertiliser. It has become imperative to have this "platform" for buying and selling operations through digital trading to expand the buying and selling circle and create quantitative, liquidity and cash flow in the energy market.

The presence of this exchange in Qatar, being the largest producer and exporter in the world of liquefied natural gas, liquefied petroleum gas, GTL and petrochemical products for years to come, this enhances Qatar's role in the gas and petrochemicals industry and the conversion of gas to liquids in the future, and supports the local national economy with hydrocarbon resources.

Qatar Petroleum announced a while ago about the establishment of an LNG trading company, which is a good step to qualify for the establishment of this stock exchange, and add to this company the trade of petroleum derivatives and liquefied petroleum gas, and this will confirm the key role of Qatar in the trade of gas and oil.

Moreover, adding petrochemical derivatives, fertiliser and metallurgical products in the energy market.

This will have an added economic value if the listing and trading are done through this exchange and create a strategic partnership with major international oil companies, banks and related institutions to establish them in Qatar.

The Middle East region possesses more than 60% of the world’s proven reserves of oil and more than 40% of the global reserves of gas.

Despite this, it lacks the existence of a single exchange or structure specialised in the commercial exchange of energy products of various types and products, as there is an oil exchange

Qatar possess the capabilities in terms of production, storage capacity, strategic location and ports.

It is possible to study this issue and co-ordinate between the energy sector, energy banks, financial regulatory agencies and investment agencies.

Qatar has the third largest natural gas reserves in the world and it aspires to maintain its ranking as the largest exporter of gas in the world and products for converting gas (LNG) into liquids, liquefied petroleum gas (LPG), naphtha and petroleum condensate.

This exchange will carry out immediate and future trading of gas and its derivatives, and oil and its derivatives in Qatar, the Arabian Gulf, the Middle East, Asia and Europe, as it provides a transparent and financial trading environment that is subject to tight laws.

It is possible to attract a group of leading global financial institutions and energy trading companies including Goldman Sachs, Morgan Stanley, JP Morgan, Vitol, Glencore, Shell Group, BP Group, Concord Energy and other leading global companies in the field of energy, on shares of the Qatar Stock Exchange.

It would depend on this exchange if it was established entirely on electronic devices, and its contracts are traded through the electronic trading platform of the Chicago Commodity Exchange (CME Globex), the largest electronic trading platform in the world, which allows trading the widest range of options and futures products traded on any exchange energy.

The cost of producing Qatari gas is very low and thus it will still be able to achieve good returns even if oil prices fall below the level of $25 per barrel, and studies indicate that the cost of producing Qatari gas is the lowest in the world at an equivalent price of only about $4 per million British thermal units.

The price of natural gas futures is currently at the Asian level about $6.8 per million British thermal units, noting that the break-even price is the average cost that achieves a balance between revenues and expenditures, and any increase over the break-even price is considered a net gain. Gas pricing is linked to oil prices, which supports this exchange and encourages investors to trade on it.

 

*Saad Abdulla al-Kuwari is an expert in oil and gas and is exploring the future of energy.



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