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Impact of Shale Gas on the Global Energy Market

Chapter 1 – Introduction

1.1: Introduction

In the recent times, “The Shale Gas Revolution” is the most talked subjecting the global energy market and is one of the most significant issues in the oil industry. This revolution will not only affect the gas market in the coming years, but it will also have repercussions on the entire energy mix of the world. Shale gas is the form of natural gas which is found within shale. Shale is a kind of impervious sedimentary rock within which this gas is found. Till date this source of energy did not play a huge role in the overall energy market in the world (Nash, 2010). The main reason behind this is that it is very difficult to extract shale gas from the rocks. Further, this process is costly also; therefore, earlier companies were not able to afford its extraction. Since 2000, thanks to technological innovations, its extraction has increased rapidly and it has become a main component of the natural gas market within the United States (Nash, 2010). Shale gas contributed twenty per cent in the production of natural gas in 2010 in United States and the figure is expected to increase day by day (Review of emerging resources: U.S. Shale Gas and Shale Oil Plant, 2011). This source of energy is available in plenty in many parts of the world especially in the United States, China, Algeria, South Africa, Australia, Brazil and many other places (Rao, 2012). With the advancement in the technology, several equipments and processes have been developed that have made the extraction of this form of energy economically viable (although differing geological conditions may lead to qualify this statement). Integrating the availability of shale gas with economic feasibility reflects that in coming years, shale gas will be the one of the main components of the Liquefied Natural Gas (LNG) market across all over the globe (Rao, 2012).

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            The present work focuses on development of the shale gas in various parts of the world and its impact on the existing and traditional resources, countries and companies which are the leaders in the business of oil and natural gas. This revolution will not only affect the oil market in the coming years, but it will also have repercussions on the entire energy mix of the world. This work also evaluates the strategies Qatar Petroleum needs to develop to adapt to this new environment.

1.2: Aim and Research Questions

Aim

The main aim of present study is

  • To study present scenario of Shale Gas market
  • To assess the impact of development of Shale Gas on GCC countries, Qatar Petroleum and others global players strategies

More specifically, the researcher will try to assess the following:

  • What will be the impact of development of US shale gas on the petro-chemical sectors?
  • Will the development of Shale Gas in the US impact Qatar’s competitive position as an LNG exporter and as a Petrochemical manufacturer?

1.3: Framework Analysis

Research Type:The present work is qualitative in nature as the research is explorative in design and researcher has collected data as per the available literature and through interview (Haimes, 2002).

Data Collection:In the present work both primary and secondary data are used by the researcher. The primary data is collected by conducting interviews of twenty five managers of strategy department of the companies operating in the oil and natural gas industry (Miles and Huberman, 1994). For this purpose a structured questionnaire is prepared by the researcher and accordingly the responses provided by the respondents are recorded (Gill and Johnson, 2002). The questionnaire consists of both open and close ended questions. On the other hand, the secondary data is collected by the researcher from various journals and organisations such as the US Federal Energy Regulatory Commissions (FERC) and the US Government’s Energy Information Administration (EIA). In addition to this, the researcher also referred various books, newspapers, online articles, etc (Gill and Johnson, 2002).

Sampling:In the present work the researcher has adopted judgemental non probabilistic sampling technique. The researcher has selected 25 managers of the strategic department of different companies which are operating in the field of oil and natural gas. Through these respondents researcher will be able to collected most appropriate data (Golafshani, 2003).

Data Analysis:In the present case qualitative tool is used for analyzing the accumulated data. The researcher has employed thematic analysis to plot different themes. On the basis of these themes the researcher will reach to certain outcomes (Babbie, 2010).

1.4: Significance of the work

            The present work focuses on the development of shale gas around the world, the study will be helpful for the companies such as QP to form different strategies so that they get least affected. Qatar is the major leader of natural gas exporter for the European regions through LNG, but with the development of shale gas in this part of the world, reliance of European nation will decrease on the Qatar for energy resource, this could badly impact the economy of the country.

1.5: Limitations of the Research

Research is not an easy task. During the journey, the researcher has to face several challenges. Although, the researcher gave diverse attention on all the parameters, but it is impossible to keep the research limitation free (Ethridge, 2004). Here are some of the major limitations faced by the researcher during this study:

  • Since the area of research was not very common, the researcher found it very difficult to collect ample of information. Although, researcher tried his best to accumulate as much data as possible, but availability of data was one of the major limitation of this study (Ethridge, 2004).
  • Another limitation for this work was availability of time. Limited time was available to the researcher to conduct the entire researcher process. Thus, in order to complete the work in the given timeframe there may be possibility that some of the data may be skipped by the researcher.
  • Since the research has focused on few countries and companies, it is difficult to generalise the outcomes achieved by this work (Ethridge, 2004).
  • Managing reliability and validity could be problematic issue for researcher as the researcher has to complete the work in limited financial resources.

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Chapter 2 – The Development of Shale Gas in USA

2.1: Introduction

Since 2000, there has been substantial change in field of global energy market, with the significant change in preferred global energy sources. International Energy agency published the special report “The World Energy Outlook 2011” stating that world is moving towards “Golden age of gas”. This topic has gained much more attention with the emergence of shale gas revolution in US. This further has raised concerns about the stability of gas and energy market globally (Ho, 2013). This section of dissertation attempts to explore the projected impacts of shale gas revolution on global energy demand and supply. It also highlights on future repercussions of shale gas on economies of Qatar, which primarily rely on export of energy resources for their income.

2.2: Evolution of Shale Gas Market

Although this source of energy is available in different parts of the world, still United State has made significant development in this field. Earlier, for many years United Stated was dependent on other countries for requirement of natural gas and therefore, has to import large quantity of natural gas from other nations. However, after the development in the field of extraction of shale gas, it is expected that United State will become an exporter of the shale gas. This is because of available of shale gas in plenty in this region and expansion of shale gas production (Ho, 2013). As per the report published by IEA, by 2035, around seventy per cent of the gas supply in the United State is expected to be consisting of unconventional gas which will include shale gas, coal-bed methane and tight gas. If this happens, then the United State will emerge as energy self sufficient by 2035. The two chart below shows map of major shale gas estimated resources in the world and energy self sufficiency of different nations by 2035 respectively (Ho, 2013).

Since there is large reservoir of shale gas in the United State, it is definitely going to impact the United State market and overall gas demand and supply. Primarily, if we have a look at the consumption pattern of energy, demand of oil primarily generates from the transportation sector, while the demand of natural gas is mainly from the commercial and residential sector. Apart from this, natural gas is also demanded by power generation sector and industrial sector (Ruhl, 2014). As per the recent research study conducted by US Energy Information Administration, China is considered as the largest shale gas reserve with 1100 tcm i.e. trillion cubic meters. This is followed by Argentina with 802 trillion cubic meters, United States with 665 tcm and at last Canada with more than 500 tcm (EIA, 2010).

The evolution of shale gas is considered to be a serious energy issue for Russia. For years, Russia has remained the main gas supplier to many developed and developing countries in the world. Further, international energy community is having a positive outlook on rapid development in the field of shale gas extraction and production in North America. This shows that there is ample of availability of natural gas which will help in diversifying the energy mix, will reduce emission of gases and will contribute in the energy security. But this rapid development will undermine Russian leadership in the global gas market (Ruhl, 2014). Rise in unconventional shale gas production in the countries like United State, China and European region could result as nightmare for the Russia in respect to energy scenario. The United State is producing shale gas since 2009, and in addition to this, China and several other European Nation may also come up as producer of the shale gas to meet their energy requirements (Mathiesen, 2014). The main strategic repercussion of this will be that, Russia, which is the largest producer of natural gas, will lose its attractiveness as a gas exporter. This will not only weaken its strategy related to foreign policy tool, but simultaneously the country will experience decline in its export revenue which significantly supports its national budget. As the United State has increased its production of shale gas and has decreased the import of natural gas, this along with United State’s ability to sell the gas at spot price will result in larger availability of natural gas for the European Nations. Although European nations will need to pay almost 50 per cent more to replace Russia with USA, but in the long run it will be beneficial for them as it will reduce their reliance on Russia (Shiryaevskaya and Strzelecki, 2014). Presently, 10 per cent of Russia’s GDP comes from gas and if the Europena nations switch to US vendors for fuel, the country will have to face some serious repercussions (Decker, 2013).

2.3: Present Scenario of Shale Gas in US

US are the biggest natural gas consumer all over the world. Gas is responsible for twenty five percent of primary energy demand in US, with total annual consumption of gas of 700 billion cubic meters (Huntington, 2007). The major sectors using natural gas include power plants, residential and industries. United States has played dominant role in unconventional gas reserves production such as coal-bed methane, tight gas and shale gas. Share of shale gas with total gas production has increased from 9 percent in 2007 to over forty percent in 2012 in US (Huntington, 2007).

Unique circumstances and an organized framework allowed the development shale gas production technology (such as hydraulic fracturing and horizontal drilling) in US and thus have lead to shale gas boom in the country. One of the primary reasons for sudden increase in shale gas production in US has been upward trend in prices of natural gas during an initial period after 2002 (Gaward and Bugarski, 2013). In addition to this, the success of development of Shale gas in US is mainly attributed to varied factors including favourable geographical conditions and expertise, availability of efficient industry service along with development of new technologies and tax exemption (Gaward and Bugarski, 2013). For more than century, United States has acquired considerable experience as well as technology in drilling in order to extract primary resources of energy such as natural gas and oil. This in turn has given the country a head start when exploring rocks that contain shale gas. In America, Shale gas resources are usually situated in relatively shallow layers and in less populated areas. Therefore, pollution and other environmental concerns do not act as barrier in production of Shale gas in US, like in many parts of Europe (Ho, 2013).

Several specialized companies in US own technologies such as hydraulic fracturing and horizontal drilling that aid in liberating shale gas. Alternate tax reduction offered by the 1980 Crude Oil Windfall Profit Tax Act on production of unconventional gas is also one of the most important success factors of shale gas revolution in US (Gaward and Bugarski, 2013). The tax reduction was about 3USD per BTU of oil barrel. These factors have made production of shale gas economically viable. Subsequently, the rise in supply of shale gas has lead to sharp drop in gas prices in US (EIA, 2010). Additionally, extensive network of pipeline for natural gas existed in US before shale gas became the key gas resource. As well, open access to natural gas pipeline made it possible to produce, store and transport large quantity of shale gas. Apart from that, shale gas production has evolved at rapid pace is due to the fact that in United States, any minerals found below ground particularly belong to surface landowner (EIA, 2010). Therefore, they directly receive monetary benefits, in form of royalties from shale gas production. Many small-scale business corporations have availed the opportunity to immediately close deals with surface landowners for shale gas production (Hoda and Dahlan, n.d). This means that large share of shale gas production in United States is covered by small-scale oil and natural gas companies. Another reason that contributed to boom in shale gas production is the high importance given to fuel independence in US energy policies. Shale gas production has reduced dependence of US on fuel imports and thus has been strongly promoted by policy makers (EIA, 2010).

Shale gas production in US has boomed during last few years. In 2010, total shale gas production amounted to more than 5 tcm. Furthermore, according to Energy Information Agency, this number will get tripled by 2035 (Boersma and Johnson, 2012). Louisiana and Texas have been at forefront of production of shale gas, while production is continuously rising in other states such as Oklahoma, Pennsylvania, Wyoming and Arkansas. As a result, wellhead natural gas prices in US have dropped since 2008 (Boersma and Johnson, 2012). Throughout the past half decade, the substantial increase in shale gas production in United States has led to national self-sufficiency and enabled the country to export gas to Mexico and Canada.

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2.4: Shale gas production and United States Petrochemical industry

The petrochemical industry has witnessed remarkable breakthrough during the last- century; these discoveries include nylon, PVC plastic, polystyrene and synthetic rubber. 46 percent of gas is directly consumed by refining and chemical industry (Rao, 2012). Ethylene and other intermediaries such as butadiene, propylene and benzene are considered as essential component for manufacturing chemical related products. The production of these components is based on two types of feedstock namely naphtha and NGL or Natural Gas Liquids such as propane, ethane and butane (Rao, 2012). Shale gas mainly composes NGL (Ethane and Propane) and Natural gas (Methane). This implies that shale gas revolution tends to have great impact on chemical industry through plummeting prices of key feedstock, particularly ethane, for petrochemical industry.

Traditionally, the petrochemical industry of US relied on naphtha which is produced from oil, in order to produce ethylene, benzene and propylene. This process involved huge amount of financial resources as well as time. The US chemical industry experienced a real challenge in long run due to high production costs (Hoda and Dahlan, n.d). In that period, companies such as Dow chemical were planning to shift their operations and future investment toward the Middle East. However, soon after the shale gas revolution, the situation changed completely. First of all, the prices of natural gas were affected soon after the boom; the prices went down to 68 percent (Hoda and Dahlan, n.d).

It can be inferred from above figure that prices of natural gas in US are considered as one of the lowest all around the world by 2012. The natural gas prices in US were $3 per million BTUs; nevertheless, prices in Saudi Arabia are still lower at $0.75 per million BTUs (Mansour, n.d). But still the fact is that United States is back from years of extremely high prices (Mansour, n.d).

Earlier, petrochemical industry of US was not so much dependent on NGLs as a feedstock in order to produce propylene and ethylene due to high natural gas prices, but it has changed dramatically after boom in shale gas production. This increased the available amount of Natural Gas Liquids as propane and ethane, which further pushed the impact of shale gas to dominate   high natural gas prices and its effects on US petrochemical industry (Ruhl, 2013). The global competitive scenario for petrochemical industry has been reshaped due to lower prices of feedstock and natural gas resulted for shale gas production boom.

Moreover, the increased amount of ethane and other feedstock drove the American gas market to seek new ways to optimally use it. In 2005, the production of the key intermediate (ethylene) for petrochemical industry was primarily depended on Natural Gas Liquids from unconventional gas by 65 percent, NGLs from Naphtha by 32 percent and shale gas by 3 percent (Nash, 2010). The increased shale gas production led to rise in the share of NGLs from shale gas reached to 19 percent in 2010. The percentage of shale gas as feedstock in ethylene production is expected to reach 28 percent by 2015 (Nash, 2010).

The competitive marketplace for global petrochemical industry has been restructured due to drop in prices of natural gas and development of feedstock from exploration of shale gas. The new and relatively lower prices of natural gas pushed the US petrochemical industry total production cost to some extent lower levels than that in Europe, Chine and Latin America (Pirog and Ratner, 2012). The prices of gas in Europe are three to four times higher in comparison to US. For instance, price of natural gas in Europe in 2012 was $11.47 per MBTU whereas in case of US it was only $2.75 per MBTU (Gandolphe, 2013). As a result US gas market has acquired competitive advantage over many international gas markets in production of petrochemicals. In accordance with that, many petrochemical companies all around the world started to operate few of their projects in US market so as to take advantage from boom of shale gas production (Pirog and Ratner, 2012). As well, Energy Information Agency predicts that US marker will have 14 new projects to manufacture propane, ethane and other intermediates with a capacity of more than 10 million metric tons per annum. For instance, BASF, one of the world’s largest chemical companies is investing hugely in American market mainly due to higher natural gas prices in European countries (Mcgregor, 2012).

Shale Gas revolution and US petrochemical industry:

Threat of new entrants: The threat of new entrant is minimal in case of petrochemical industry as this is capital intensive business and one has to invest lot of upfront fee in the form of purchasing equipments, license fee, etc. Secondly, running this kind of industry requires lot of technical expertise. Thus, threat of new entrant is minimal.

Internal Rivalry: There are many players in the US petrochemical industry; therefore there is intense competition among the players. But, since prices of petrochemicals are market driven, price competition is less.

Buyer Power: The negotiation power of buyers is high as there has been shift from petrochemical to shale gas. Now buyers have alternative available with them so they can switch to the other alternatives.

Supplier Power: There are many suppliers available in the market as a result of which supplier power is low in the petrochemical industry.

Threat of Substitutes: With the drop in gas price and exploration of shale gas, there is higher threat of substitute in the market.   

The above figure shows a comparison between leading chemical companies of world in 2002 and 2011 on the basis of revenue.  It can be inferred from the figure that the revenues of US chemical companies were among the highest than other global companies. The profits of Dow chemical reached to €46 billion from €29 billion in 2002 and hence ranked the company fourth largest in the world. In addition to this, revenue of ExxonMobil grew to similar pace and reached to €50 billion and further ranked it world’s third largest company based on revenue (EIA, 2010).

As per the study conducted by the American Chemistry Council, the rise in supply of ethane by 25 percent is the consequence of the boom in production of shale gas. Further, the study concluded that this revolution is going have following impacts on US gas and energy market:

  • It will create approximately 400,000 new job opportunities in related industries and chemical industries (EIA, 2010).
  • Increase chemical production of US by $32.8 billion
  • Increase in revenue from local, state and federal tax by $43.9 billion per annum over 10 years
  • Increase economic output of United States by $132.4 billion (EIA, 2010).

 

Chapter 3 - Impact of Us Shale Gas Production on Qatar

3.1 Overview of petroleum industry of GCC economies

Petrochemical industry came into existence in 1976 when the first company named Saudi Basic Industries Corporation (SABIC) was founded in Saudi Arabia. After three years, Qatar established QAPCO i.e. Qatar Petrochemical Company to produce Ethylene as well as polyethylene. Following the same track, Bahrain also commenced its first company GPIC (Gulf Petrochemical Industries Company) to manufacture methanol. Soon after, other Gulf countries including Oman, Kuwait also joined and established their petrochemical industries (Abdullah, 2013).

At that time, these industries were heavily progressed as well as highly developed. Petrochemical companies of GCC are ranked as first globally in production capacity of mono-ethylene glycol, while ranked third in methanol production capacity (Gaward and Bugarski, 2013).

Production of petrochemical products has shown notable growth from 2007 to 2011 globally, more specifically in GCC countries. These countries ranked highest in capacity growth rate for propylene, polypropylene, ethylene and urea during the period from 2007 to 2011. In the beginning of 2011, the macroeconomic indicators in GCC economies enhanced substantially, in comparison to 2009 (Gaward and Bugarski, 2013). Recent economic policies and procedures adopted by government improved the economic activities within these countries. Moreover, revenues generated from oil and gas production played crucial role in boosting and strengthening GCC economies through government spending (Boersma and Johnson, 2012). During 2011, large part of gross domestic product of these countries came from oil and gas industry, while manufacturing sector other than oil sector contributed to only 8.9 percent to nation GDP. The petrochemicals and oil refining contributes 1.5% and 2.1 percent respectively to regional GDP. Subsequent to new projects being developed and commissioned, the petrochemical sector experienced a growth of 3 percent to 17 percent from 2007 to 2011 (Ho, 2013).

Undoubtedly, petrochemical sector is of paramount importance to Gulf countries because of three key reasons. Firstly, this industry contributes heavily in economic growth of gulf regions and hence is the key to maintain economic growth and development (Boersma and Johnson, 2012). Indeed, feedstock is developing and at the moment Ethane production is limited to few countries, therefore exploring more alternatives such as methanol or gas and converting them to olefins or liquids enables Gulf regions to gain competitive edge over global petrochemical players (Indeo, 2014). Thus, making GCC countries more competitive and enabling them to sustain in feedstock market for long period. This further makes GCC regions able to maintain a sustainable growth.

The second important reason behind the significance of petrochemical industry in GCC regions is that the industry was initially developed in order to add the value to certain product streams with low value, arising out of refining of crude oil and processing of natural gas. These products are relatively less affected by fluctuations in oil and gas prices (Indeo, 2014). The share of petrochemical industries in manufacturing sector in these regions has reached to 17 percent in 2011 from 13.9 percent in 2007 (Abdullah, 2013). The manufacturing sector holds for 15 percent share in GDP of GCC countries, however, it may seem to small share, but its significance is backed to employment creation and as a driver of economic growth. The share of exports of non-oil petrochemicals increased to 128.6 mt that further enhanced revenues of GCC countries and increased it to more than $105 billion by 2011. A high prices of petrochemical products increased exporting volume by 6 percent and value by 33 percent (Hoda and Dahlan, n.d). This in turn directly contributes to financial aspects of regions and hence led to optimal economic growth.

Third important reason is that GCC regions are aware about the impact of increasing unemployment rates on overall economy and hence understand the need of creating employment opportunities for local people. Petrochemical sector is contributing substantially in meeting the needs of unemployed people of GCC countries by providing adequate job opportunities (Hoda and Dahlan, n.d). Manufacturing sector is not labour-intensive sector, mainly due to the fact that large number of operations relies on machines (Ruhl, 2014). Nevertheless, manufacturing of downstream petrochemical products represents itself as labour intensive field as transforming chemicals into final products requires considerable number of skilled and competent labour. The petrochemical sector of GCC witnessed significant increase in employment rates. In 2010, Saudi Arabia has largest share of workforce in petrochemical industry in Gulf regions (Hoda and Dahlan, n.d). This sector provides employment opportunities in varied areas such as sales and marketing, Research and development and distribution.

Recent analysis undertaken by GPCA (Gulf Petrochemicals and Chemical Association) revealed that annual employment growth in petrochemical industry is increasing at fast pace than any other manufacturing sector (Boersma and Johnson, 2012). Certain studies have concluded that every 1 million dollar invested in ethylene crackers generates one job, while every million dollar invested in transforming ethylene into styrene and further converting it into rubber can generate up to 20 job opportunities. Attributing to this, it can be rightly said that petrochemical industry is one of the most important sector for GCC countries as it contributes heavily in economic growth and development of these economies (Boersma and Johnson, 2012). Therefore this sector is considered to of paramount importance for GCC countries and for their future growth.

3.2: Impact of Shale gas production boom on GCC economies

Oil and gas companies in GCC countries are well aware about the exploration of shale gas boom in United States, but varied opinions are being voiced by experts regarding the phenomenon. In addition, several studies have been conducted examining the impact of shale gas revolution on global gas markets, especially GCC countries. Some studies conclude that increase in shale gas production in US has affected the business of petrochemical companies but not seriously threatened (Boersma and Johnson, 2012). While on other hand, few studies reveal some key risk factors that could have significant negative impact on GCC regions and their oil, gas and chemical operations. Below discussed are some critical risk factors that influence gas and oil businesses of GCC countries.

LNGs Export: Ethane is the common by-product in many gas fields which can be extracted at higher rate if production of methane is high. While the oil and gas companies in US are exploiting shale gas technologies and are attempting to reduce their NGL and natural gas costs, other countries such as Middle East are not favoured. GCC regions, and particularly Saudi Arabia and Qatar are facing different oil and gas related risks such as risk related to obsolete technology, lack of skilled local workforce, deficiency of foreign expertise, limited reserves, credit risk, etc. (Jacobs, 2011). These risks have capability of driving the regional ethane shortage that may lead to underutilisation of production assets. With the cheap ethane in United States, the cost advantage of GCC nations has significantly shrunk as compared to US. Earlier a ton of ethane was cheaper in GCC in comparison to US. However, at the end of 2012, a ton of ethane in US cost $400, whereas in Middle East it cost $600 a ton. This clearly shows GCC's cost advantage has been shrunk (US Shale Gas Threat Worries Gulf Exporters, 2013).

Qatar planned to export large volume of LNGs to United States as well as to eastern Asia and therefore developed LNG export terminals and constructed large vessels to carry out the operations (Jacobs, 2011). But after the Shale gas revolution in US and the growing self sufficiency of US to produce methane, Qatar was compelled to change the export plans. This in turn greatly impacted the region. However, Qatar developed new export plans that aimed at increasing export amounts to Asia, mainly in Japan and China, where increasing demand are considered high enough to consume the additional LNGs supplies (Shale gas poses major threat to Qatar’s LNG exports, 2013).

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Oil production: In Saudi Arabia, large amount of gas are produced as associated gas in production of oil. As by-products, gases such as ethane are produced in quantity depending on oil volumes produced. This implies that any impediment in oil production may limit the supply of ethane and other associate gases. The shale boom in United States has declined the need for importing light oil by US. Upstream GCC companies understand this and further argue that they can still export heavy crude oil to American market. Presently, booming shale production in US and higher demand in Asian region has changed the equation and now light oil command much smaller premium over heavy oil. Now the market of light crude oil is oversupplied and on the other hand, demand of heavy crude oil is increasing day by day. All these reasons are in favour of GCC (Shale gas poses major threat to Qatar’s LNG exports, 2013). However, it seems to be uncertain as Canada gas copious resources of crude oil and can partly supply to US with cost efficient heavy crude.  In addition to revolutionary increase in US shale gas production, Iraq has increased its oil production from 110 MMtons/year in 2009 to around 170 MMtons/year in 2013 (Ruhl, 2014). Furthermore, the potential political changes in Iran which might lead to sanctions deregulations thereby enable the country to export large oil volumes to international markets and thereby driving global oil prices down. This in turn has directly compelled GCC countries to limit their oil production (Shale gas poses major threat to Qatar’s LNG exports, 2013).

Repercussion for chemical companies: GCC countries, particularly Saudi Arabia and Qatar, are affected by above mentioned gas and oil risk factors in different way (Exporting the American Renaissance: Global impacts of LNG exports from US,2012). Shale gas developments in US have stimulated development of new technologies such as on-purpose propane dehydrogenation; heavy outlay in additives as well as co-monomers capacities has augmented ethylene downstream position of US in comparison to GCC regions (Exporting the American Renaissance: Global impacts of LNG exports from US,2012). 

At present downstream GCC companies experience a serious impact from US shale gas boom. In longer term, these countries will most likely to sustain their position as low cost producer. Albeit, downstream players of GCC countries still have favourable conditions for raw material which enable them to operate their businesses optimally (Exporting the American Renaissance: Global impacts of LNG exports from US,2012).

3.3: Overview of Qatar and its competitive position in world energy market

Four decades ago, Qatar was the laggard of petroleum sector, as compared with Kuwait, United Arab Emirates, Saudi Arabia and other Persian Gulf neighbours. It’s economic and business transformation took place in 1971, when Shell explored Qatar’s North field, which is considered as the largest gas reservoir (Qatar, n.d). Fewer initiatives were taken to develop the field until the region accomplished its first Liquefied Natural gas plant at Ras Laffan in year 1996 in association with ExxonMobil. During the next fifteen years, 14 LNG production and liquefaction plant were constructed. All these plants were built in joint association with Western petroleum companies. These plants have the capacity to produce more than 75 million tons of LNG every year which confirms Qatar’s position as leading producer of LNG in world with largest production capacity (Qatar, n.d). Revenues earned from exports of gas have provided Qatar the highest per capita gross domestic product in the world.

In early 1990s, Shell Company left Qatar in the course of low oil prices and came back in 2002. It invested $21 billion in developing new LNG facility in Ras Laffan and another plant named “Pearl”, which is regarded as largest GTL (Gas-to-liquid) plant in world. This facility produces 140,000 barrels of liquid fuels from natural gas in a day (Ibrahim and Harrigan, 2012). This much amount of fuel is normally produced in an oil refinery, including base oil for making motor oils for automobiles and kerosene, which is used for producing jet fuel (Ibrahim and Harrigan, 2012).

The natural gas in Qatar encompasses considerable share of world total supply of gas. As per the study of Oil and Gas Journal (2011), natural gas reserves in Qatar were estimated to be approximately 896 tcf. This means that region posses 14 percent of total natural gas reserves and thus acquire the position of third largest reserves in world, after Russia and Iran (Ibrahim and Harrigan, 2012). The major part of natural gas reserves in Qatar is located in massive offshore North Field. Its reservoir is the world’s largest non-associated gas field, with reserves of over 900 tcf as estimated in 2009. Qatar government has invested huge amount of financial resources for the development of natural gas, specifically for export as LNG. In 2006, region reportedly overrode Indonesia to become the world’s largest LNG exporter (Ibrahim and Harrigan, 2012). In year 2009, the state produced 3.25 tcf of natural gas, which was three times more than volume produced in 2000.

However the growth in natural gas production supports the increasing demand of domestic industry and its gas-to-liquids projects, the massive amount of increase is headed towards Liquefied Natural gas exports. In order to attain this, the region had to discover new grounds and consider risks (Qatar plays a strategic LNG game, 2014). Qatar’s global strategy was based on three main pillars: developing and owning an integrated LNG supply model so as to add value, optimally capitalize economies of scale and new technologies to minimize costs, and to create an image as flexible and reliable LNG supplier (Qatar plays a strategic LNG game, 2014).

This model is distinctive, it not only handles the gas reserves but it also attempts to develop production as well as liquefaction facility. In addition to this, this model also give due emphasis to develop shipping and receiving terminals. This aids in bridging the gap between reservoir and customer destination and thereby ensures flexible, reliable and cost effective supplies (Jacobs, 2011).

Qatar Petroleum plays vital role in natural gas sector of Qatar. It directs the upstream natural gas production along with downstream and midstream. Qatar focuses on developments of natural gas towards the large scale projects related to LNG exports, along with the promotion of industries that use natural gas as feedstock (Jacobs, 2011). For this reason, ExxonMobil, Total and Shell are involved by Qatar in developing integrated mega-projects. The main reason of involving these global oil companies is that they have adequate experience in the field and are technologically sound. The LNG sector of region is primarily dominated by Qatargas and RasGas. Qatargas conglomerate include Qatar Petroleum, ExxonMobil, Total, Marubeni, Mitsui, Shell and ConocoPhillips, while RasGas is 70 percent owned by Qatar Petroleum and rest by ExxonMobil (Critchlow, 2014). These LNG consortiums manage all natural gas transportation from upstream to downstream.

SWOT Analysis of Qatar Petroleum:

Becoming a global competitive exporter of LNG is easier said that attained. In case of Qatar, geographical conditions were never appeared to be the issue. Not being in close proximity with any major consuming market was the major barrier that out region at disadvantage. However, Qatar was not so far from any consumer market, which in turn engendered some attractive opportunities to Qatar so as to become supplier with international reach (Critchlow, 2014).

Early contacts with Japan’s potential buyers, who were seeking for competitive as well as reliable long-run supply sources, bought in light that Qatar’s competitive advantages in gas were not enough and thus will not serve any commitment to development of LNG and political stability (Critchlow, 2014). Therefore, in order to effectively cater the needs of market of Japan and also to attain a reliable negotiating position in market, it is necessary for Qatar to have steadfast infrastructure, strong financial conditions, as well as highly experienced industry players and management (Young, 2013). Varied challenges were faced by Qatar while attaining the position of globally competitive LNG supplier as well as to pursue other options for gas exports.

The key challenge for Qatar is to keep serving Asian and European markets. Current strategy of Qatar is to keep supplying spot markets of Europe as a transitional step towards markets of Asia. The basic idea behind this strategy is that, if Qatar keeps serving Europe, it can then pursue to strive for higher gas prices in Asian market. Another major challenge witnessed by Qatar is the growing competition (Young, 2013). Other countries are threatening its dominance on LNG markets. Availing the opportunities of production from new technologies such as Hydraulic fracturing, companies of United States like Cheniere Energy Inc. and ConocoPhillips, Dominion Resources Inc., Richmond, and Sempra Energy are seeking approval from US Energy Department for establishing 37 new LNG export projects (Young, 2013). US producers have signed supply contracts with Asian LNG consumers including Korea Gas Corp., Tokyo Electric Power Co. and GAIL India Ltd, thus consistantly expanding their market size. According to Bloomberg Industries data, Mozambique, Tanzania and Russia are also planning to construct their new plant for exporting LNG (Tuttle, 2014). According to Sikorski, a coal, gas and carbon analyst at Energy Aspects Ltd. London, the international market is going to weaken and it has huge impact on Qatar. The analyst asserts that pressure on Qataris will further rise through the rest of decade. Spot prices of LNG in northeast Asia, where Qatar supplied more than 60 percent of its Liquefied Natural gas in 2012, may fall below $12 million BTU by 2016 as new suppliers enter into the market (Tuttle, 2014). Qatar has recently witnessed weaken market share, additionally, GDP growth rate is estimated to slow to an average of 6 percent in coming five years.

Qatar enjoys long term contracts linked to the price of oil. However, the contract structure is facing pressure as customers, encouraged by alternative supplies, is looking to end oil indexation and is seeking shorter and more flexible arrangements.

 Apart from US, Australia is also constructing production and liquefaction facilities that will be more than triple of its yearly LNG producing capacity (Shale gas poses major threat to Qatar’s LNG exports, 2013). The current exporters of gas are well aware about the changing scenario of world. US shale gas production enabled the country to produce gas by cracking shale deposits (Henderson, 2012) and thus enabled it to compete with regions, from where it was earlier importing the gas.

3.4: Impact of US shale gas production on Qatar: Joint venture (Qatar Petroleum and ExxonMobil)

According to Energy Information Agency, large reserves of shale gas can be found all across the world, most notably in Argentina, China, South Africa and few parts of Europe. It has been estimated that China could be largest producer of shale gas, with a potential of producing more than 1200 trillion cubic feet (Shale gas poses major threat to Qatar’s LNG exports, 2013). However, it is possible only when geographical conditions, adequate availability of water, necessary infrastructure as well as correspondence with regulation required by business case validate its extraction (Mathiesen, 2014).

Increased domestic US shale gas production has dramatically turned the largest consumer of natural gas into world’s biggest exporter. Consequently, this has impacted international gas market to relatively great extent.

Talking about the Qatar market, US shale has production has impacted the oil and gas companies in the region. Earlier Qatar was the major supplier of ethane to the US, but with the shale gas boom, it is forecasted that US will become self sufficient in ethane production by 2020. This will significantly affect the Qatar's export plan. Until recent years, Qatar was considered as largest exporter of LNG or Liquefied Natural gas in the world. In addition, the country also exports crude oil and other petroleum products to all the major nations in world (Shale gas poses major threat to Qatar’s LNG exports, 2013).

Qatar exports most of petroleum products from 3 major export terminals; Halul Island, Umm Said and Ras Laffan. According to Annual Statistical Bulletin 2013 of OPEC, Qatar exported more than 580, 000 bbl/d of crude oil and 460,000 bbl/d of refined petroleum in year 2012 (Shale gas poses major threat to Qatar’s LNG exports, 2013). With estimated reserves of 25.2 billion barrels of crude oil, the country holds ninth largest reserves in OPEC and thirteenth largest in world. Crude oil of Qatar and lease condensate production ranks nineteenth in the world, with most of its production sent overseas as export (Exporting the American Renaissance: Global impacts of LNG exports from US, 2012).

The notable growth of shale gas production in US has varied repercussions; it has radically changed the scenario of import-export gas flow. With the shale gas boom, the prices of natural gas collapsed in US market (US shale gas expansion pushes QP and Sabic to go global, 2012). US market is gradually capitalizing drop in gas prices by exporting LNG to regions (Asia and Europe) through Oregon LNG export terminal. This terminal will export the equivalent of 1.25 billion cubic feet of natural gas each day for 20 years. This has certainly affected the global energy market and its key players to great extent (Gallucci, 2014).

Considering the sudden change in global energy market, QP (Qatar Petroleum) announced its joint venture with ExxonMobil in order to explore unconventional gas reserves in North America and to export Liquefied natural gas from US (Exporting the American Renaissance: Global impacts of LNG exports from US, 2012). The joint venture is named as Golden Pass Products. Created with 70 percent QP working interest, this project was developed as LNG import terminal. With this terminal, Qatar secured its LNG export to United States, however, soon with the development of shale gas production, the supply side and potential demand side change dramatically (US shale gas expansion pushes QP and Sabic to go global, 2012). Qatar Petroleum and Exxon Mobile, with the joint venture, intended to utilize over production of shale gas in US to supply Asia Pacific and European markets. In these markets, the gas prices are 3 to 10 higher as compared to US (Young, 2013).

The joint venture of QP and ExxonMobil applied for an export permit from Port Arthur, Texas, USA. They submitted plans to US authorities to convert its import terminal at Sabrina Pass, Texas into an export facility of 15.6 mtpa in order to recover some of the loss. Qatar Petroleum is seeking final approval from US Energy Department so as to add an export terminal to prevailing import facility (US shale gas expansion pushes QP and Sabic to go global, 2012). QPI accounts for 70 percent share in joint venture with ExxonMobil i.e. “Houston-based Golden Pass Products LLC”. In addition to this, the foreign investment unit of sovereign wealth fund named “Qatar Holding LLC” has acquired shares in RDSA i.e. Royal Dutch Shell Plc and Total SA, both of these companies operate LNG plants all over the world (Exporting the American Renaissance: Global impacts of LNG exports from US, 2012). Recently, Qatar has accomplished a major expansion plan that involves 8 new trains and increasing region’s export capacity by five times since 2003. This supports the region in strengthening its position in global energy market (Qatar plays a strategic LNG game, 2014).

Government of Qatar has put a moratorium on further developments in North Fields so that it can seek new ways to maintain level of outputs. As well, it has suspended construction of new facility for LNG production.

3.5: Strategies to address the challenges from Shale gas boom

Qatar has become the largest LNG producer and exporter in the world. This is remarkable achievement, especially when the region has gone from producing no Liquefied Natural gas to having developed capacity of producing more than 70 million tonnes each year. As for future, Qatar should focus on ensuring optimal operations of existing plants capacity as well as to accomplish every major project that are already under construction (Critchlow, 2014).

As mentioned above, a moratorium was put on further development projects on North Field in 2005. Therefore, production forecasts for Qatar on North Field are limited to projects permitted under moratorium. A detailed study should also be conducted on North Field in order to assess the reservoir and further to ensure that finite resources are utilized optimally and effectively in future (Critchlow, 2014). These studies will help in identifying new long term production opportunities.

Gas prices are not constant and are affected by varied uncontrollable factors. The main factors include the declining demand due to economic downturn, surge in LNG capacity globally, as well as unexpected shale gas production boom. Given that prices of gas are under pressure in certain regions, especially Europe, mainly because of Shale gas production in US, Qatar’s oil and gas businesses are highly impacted by these factors (Jacobs, 2011). Nevertheless, Qatar is fortunate that it has mix of flexible supply contracts and secured long term supply contracts. This flexibility enables the region to divert volumes so as to capitalize market opportunities effectively (Jacobs, 2011). Attributing to this fact, it can be inferred that development of shale gas production in United States will not harm Qatar’s current and potential investment strategies. Global gas demanding has been consistently growing; due to flexibility, Qatar is able to re-plan its LNG marketing and exports to meet increasing demands in Asia and elsewhere. This in turn enables Qatar to build a reputation as flexible and reliable partner and supplier (Jacobs, 2011).

At present, Qatar exports LNG to more than 21 countries outside Middle East. Taking into account the growing demand of gas by Gulf countries, Qatar should also consider providing gas to such countries. Nevertheless, being an important gas supplier to markets of America, Europe and Asia, Qatar has already spent heavily in supplying gas to Gulf regions via its flagship pipeline projects. United Kingdom along with Japan, South Korea and India are deemed to be the major customers of Qatar’s LNG, thus the region has also invested heavily in LNG and petrochemical businesses of UK (Tuttle, 2014). In recent times, a long term contract has been made with UK to supply with 3 million tonnes of LNG per annum. Centrica has signed a $7 billion deal with Qatar to import LNG for the next 4 and half years (Vukmanovic, 2013). This can be seen as essential opportunity for Qatar to contribute hugely in UK’s energy sector. Thus, it should avail various investment opportunities in United Kingdom, particularly in petrochemical and LNG business. Qatar should also consider attracting British companies to invest in Oil-rich sheikhdom (Critchlow, 2014).

QP is always interested in bulk selling and transporting LNG to United Kingdom. This can be considered as strength of Qatar as major producer of gas. QPI is the main vehicle for global activities; it makes all the commercial investment in the worldwide energy sector. The corporation aims at acquiring resources through exploration and production projects. It also involves in strategic partnerships and business investment in the petrochemical, power, gas and LNG plants all over the world. This has further helped Qatar in making the global reach (US shale gas expansion pushes QP and Sabic to go global, 2012).  In order to meet the global needs, the company should create team of marketing professionals which will help understanding and serving markets more effectively. As well, to maintain its position as world’s supplier of LNG, QP needs to channel its promotional and marketing strategy towards emerging markets such as Asia (Critchlow, 2014).

Apart from that, Qatar should also emphasis on leveraging the challenges that US faces. LNG exports from United States are particularly challenged because their prices. According to gas analyst, Thierry Bros, US prices would not necessarily pursue a long time convention that links Liquefied Natural Gas tariffs to prices of oil. Under the arrangement, in 2013, Japan bought LNG for an average of $16 per million British thermal unit. In the meantime, US gas future traded at an average of $3 per million BTU (Tuttle, 2014). As per the April 2013 report by NERA Economic Consulting, the liquefaction cost, shipping to Asian countries and converting LNG back into gas will incur up to $8 per million British thermal unit to the price of US gas. This means that there is still a bargain for Asian importers. With the United States emerging LNG exports, Japan and other Asian business corporations do not intend to pay oil indexation (Young, 2013). Taking this into consideration, it is important for Qatar to adapt. In context with the pricing mechanism of LNG, long term contracts based on oil indexation are more reliable as well as predictable mechanism for all players in the industry. Therefore Qatar should focus on maintaining stable and reasonable prices that can effectively justify the investment level needed to meet future requirements for natural gas. The Qatar's Natioanl Development Strategy is based on an LNG price of $9.6 MMbtu. Earlier in 2012 it was higher by 40 per cent. The country should try to bring it near to the price of US, that is, around $3 per MMBtu (Asch and et. al., 2014). Investment made at the moment will determine the resources to be available in market in future time (Jacobs, 2011).

With the view to maintain its position as major player in global energy market, Qatar has adopted varied strategies. Its long term hydrocarbon development strategy is leading to new prospects for further development of downstream projects; this includes increasing petrochemical output of Qatar to 20 million tonnes each year by 2020. The region is also investing heavily in mega-expansion projects that aim at adding more value to its natural hydrocarbon wealth (US shale gas expansion pushes QP and Sabic to go global, 2012).

As far as impact of Shale gas revolution is concerned, the flexibility of plan and ability of Qatar has supported the region to successfully respond to changing global gas market. The region has effectively capitalized the rising demand of gas all over the globe. Its flexible LNG marketing strategy has enabled the region to serve the growing gas demand in Asia and other parts of world (US shale gas expansion pushes QP and Sabic to go global, 2012).

At last, it can be concluded that Qatar is effectively capitalizing its experiences and successes as largest producer and supplier of LNG. It is evident that region is making continuous efforts to expand its LNG export business with a view to cover other parts of globe, including USA. Surge in production of gas around the world implies that there are huge opportunities for oil and gas companies in Qatar and other regions (US shale gas expansion pushes QP and Sabic to go global, 2012).

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Chapter 4 - Data Analysis

4.1 Introduction

By means of the data analysis chapter of the dissertation the main outcomes and findings of the research are being presented. Hence, it can be well-attributed that this section of the report holds great importance in order to summarize the varied research outcomes that are being investigated throughout the research. Furthermore, the data analysis chapter also helps in presenting the varied image of the research questions as well as findings. While carrying out the research work there are numerous qualitative as well as quantitative ways through which data analysis can be performed. Examination of data is being considered as the most important fragment of the whole investigation and thus, it is required that it should be carried out meticulously and carefully.

Speaking in simpler terms, the data analysis is being considered as the process, which renders a supportive hands to the researchers to carry out the successful research and at the same time helps in evaluating the accumulated information so as to take more effective and concrete decisions. The researcher is required to take into consideration various steps while analyzing the data. Other than this, this section of the report also reveals out the internal facts of the resultant findings of the study being carried out. Therefore, it can be said that the main objective of the researcher to perform the data analysis is to conscript the final results of the tests. Hence, this chapter of the dissertation holds utmost importance in the whole research study that helps in offering the final results of the study being undertaken.

The main aim of the researcher to carry out evaluation of data is to enlist the final outcomes of the tests. Therefore, it can be stated that this part is considered as the most important part of the investigation that explains the ultimate outcomes of the examination.

Here, in this current research study qualitative tool is used for analysing the accumulated data. The researcher has employed thematic analysis to plot different themes. On the basis of these themes the researcher will reach to certain outcomes. Furthermore, by seeking help from this tool the researcher will determine the hidden inferences behind the various responses of the participants of the study. In the present work both primary and secondary data are used by the researcher. The primary data is collected by conducting interviews of five managers of strategy department of the companies operating in the oil and natural gas industry. For this purpose a structured questionnaire is prepared by the researcher and accordingly the responses provided by the respondents are recorded. The questionnaire consists of both open and close ended questions. On the other hand, the secondary data is collected by the researcher from various journals and organisations such as the US Federal Energy Regulatory Commissions (FERC) and the US Government’s Energy Information Administration (EIA). In addition to this, the researcher also referred various books, newspapers, online articles, etc.

4.2 Responses of the participants

Theme 1: Qatar oil and gas sector is the global leader of liquefied natural gas (LNG)

            When the participants of the survey are being asked about their views in regards with the Qatar oil and gas sector than all of them opined that this sector is being considered as the global leader of liquefied natural gas (LNG). On the other hand, there were some percentages of respondents who were of the view that in order to become competitive as well as to attain a competitive advantage, the oil and gas sector of the Qatar needs to improve their financial conditions and is required to steadfast the infrastructure. Oil and gas sector are the pillars for the Qatar and its major economy is dependent on the performance of its oil and gas industry. If this sector performs well, there will be prosperity in the country. On the other hand, if this sector performs poorly, then the entire economy of the country has to suffer.

            Findings: After analyzing the above responses of the participants, it can be concluded that among all the natural gas exporters, Qatar is the largest natural gas export around the world with an annual capacity of 78 million tonnes, and the main operator of this business is the Qatar Petroleum. Furthermore, the figures show that none of the country stands anyway near to the Qatar in terms of exporting liquefied natural gas (LNG). In contrary to this, there were some people who revealed that Qatar’s competitive advantages in gas were not enough and thus will not serve any commitment to development of LNG and political stability. Therefore, in order to effectively cater the needs of market of Japan and also to attain a reliable negotiating position in market, it is necessary for Qatar to have steadfast infrastructure, strong financial conditions, as well as highly experienced industry players and management. However, from the survey it was concluded that all the 25 managers' agreed that Qatar is the world leader in the Liquefied Natural Gas sector.

Theme 2: Oil production and LNGs export are the critical risk factors that are influencing the oil and gas businesses in Qatar

            When the participants are being enquired that, what according to them are the critical risk factors that will be going to influence the oil and gas businesses in Qatar, than most of the respondents are of the view that it is nothing but LNGs export. On the other corner of the side, there are some people who revealed that it is the production of oil that has impacted or in other words influenced the oil and gas businesses in Qatar. Thus, two main critical factors have been identified by the researcher from this research which affects the oil and gas business of Qatar. Although there are various other factors which do affect its oil and natural gas business, but those factors are considered to be secondary factors by the managers, export of LNG and production of oil in other parts of the world have been considered the primary factors behind the poor performance of the oil and gas sector of Qatar.

            Findings: From the above responses of the people being included in survey it can be concluded that the LNGs export as well as oil production are being considered as the major or critical risk factors that significantly influences the oil and gas businesses in Qatar. Further, it has also being revealed from the investigation that Qatar has planned to export large volume of LNGs to United States as well as to eastern Asia and therefore developed LNG export terminals and constructed large vessels to carry out the operations. However, after the Shale gas revolution in US and the growing self sufficiency of US to produce methane, Qatar was compelled to change the export plans. This in turn greatly impacted the region. Thus, out of 25 managers, 14 managers agreed that it is the LNG export which is more critical for Qatar, while remaining 11 managers said that production of oil is more critical factor in comparison to the LNG export.

Theme 3: Qatar Petroleum plays a vital role in the Qatar’s natural gas industry

            On asking the participants that what role is being played by the Qatar petroleum (QP) in Qatar’s natural gas industry than majority of the respondents said that it plays a vital role. However, there are many people who are against this viewpoint. Few of them are of the view that QP does not play an important role in the Qatar’s natural gas industry. Although Qatar is the major supplier of the oil and gas in the world and Qatar Petroleum is one of the major players in the oil and gas industry of the Qatar, yet in the recent years the government is trying to nullify its reliance on the Qatar Petroleum. Still the company has lot of significance on the economy of the country.

            Findings: On analyzing the above responses, it is quite evident that Qatar petroleum (QP) plays a very significant role in the Qatar’s natural gas industry. It directs the upstream natural gas production along with downstream and midstream. Qatar focuses on developments of natural gas towards the large scale projects related to LNG exports, along with the promotion of industries that use natural gas as feedstock. For this reason, ExxonMobil, Total and Shell are involved by Qatar in developing integrated mega-projects. On the other side, some of the respondents think that it does not play such a vigorous role. The above graph shows that Qatar Petroleum plays significant role as 18 of the 25 respondents stated that QP is important for the economy of the country. On the other hand, 7 of the managers said that with the passage of time, the reliance of Qatar's economy on the QP has been declined.

Theme 4: Development of Shale gas in US is affecting the businesses of petro-chemicals companies in the global energy market

            When the participants being involved in the research study are being enquired that how the development of shale gas in United States impacting the global energy markets than almost eighty percent of them replied that it is through the increased domestic US shale gas production. Because of its development, the petro-chemicals companies of the global energy market are being impacted a lot. However, in contrary to this, there are some partakers who are against this. Most of the participants think that US shale gas play is attracting significant world capital investment in the energy sector. US is set to be a net oil and gas exporter. A few major IOC have deployed their expertise and capital into these plays. Many minors and independents have bent to their shareholder pressure and re-focused their efforts into the L48. With the many geopolitical issues arising in some of the major oil producing countries, US L48 is set to fill the gap. With the environmentalists’ pressure for clean energy, the focus on gas as a source of energy and L48 is likely to be a major source of gas.

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            Findings: By analyzing the response of the participants, it was determined that that increase in shale gas production in US has affected the business of petrochemical companies but not seriously threatened. While on other hand, few studies reveal some key risk factors that could have significant negative impact on global energy market and their oil, gas and chemical operations.

Theme 5: Growing competition challenges the Qatar’s LNG dominance in global markets

            When the respondents of the survey are being enquired that, what are the major challenges that affect the Qatar’s LNGs dominance in the global markets than most of them opined that it is nothing but the growing competition, which is witnessing as a major challenge. On the other side, there were some people who said that the key challenge for Qatar is to keep serving Asian and European markets. Furthermore, the few percentage of participants were of the view that weakening market share and lower rate of GDP in coming five years might pose a greater threat to the Qatar’s LNGs dominance in the global markets. Lower 48 non-conventional, East Africa Gas discoveries and Australia LNG projects are the most obvious competitors for Qatar’s LNG global dominance. However, each of these emerging plays comes with associated risk and challenges as well.

            Findings: From the above responses of the people being included in survey it can be well attributed that the growing competition in the market is being considered as the major challenge for the Qatar’s LNGs dominance in the global markets. Availing the opportunities of production from new technologies such as Hydraulic fracturing, companies of United States like Cheniere Energy Inc. and ConocoPhillips, Dominion Resources Inc., Richmond, and Sempra Energy are seeking approval from US Energy Department for establishing 37 new LNG export projects. In contrast, it was also found out by analyzing the information that slow growth rate of GDP in coming five years might pose as a hindrance in the growth of oil and gas businesses in Qatar. In addition to this, various projects in East Africa and Australia are posing challenges for the country. It is essential for the nation to look into this matter otherwise, the country will lose its clients and this will significantly affect the oil and gas business in Qatar which will directly have its repercussions on the nation as it is oil dependent economy.

Theme 6: US shale gas production is putting the Qatar industry at a disadvantage

            On asking the respondents that, whether the US shale gas production is putting the Qatar industry at a disadvantage then majority of the participants has given a positive opinion towards this. While on the other hand, there were some partakers who showed a negative view and has confronted that it does not puts the Qatar’s industry at a disadvantage.

 

            Findings: After evaluating the above response of the participants, it can be well attributed that the production of the US shale gas is some way or the other putting the oil and gas industry of Qatar at a great disadvantage. Furthermore, it was also explored in the light of low price of ethane in United States and more naphtha-based ethylene in GCC regions, the cost benefit of these regions has significantly shrunk as compared to US. Shale gas developments in US have stimulated development of new technologies such as on-purpose propane dehydrogenation; heavy outlay in additives as well as co-monomers capacities has augmented ethylene downstream position of US in comparison to GCC regions. The above chart shows that out of twenty five participants, twenty three respondents said that yes development of Shale in US has many disadvantages for this Middle East country as its export of oil and natural gas to the American nation will decrease by substantial amount. In addition to this, they also feel that in years to come, this development of shale gas in the United States of America may also sweep away its other clients in other part of the nations. Contrary to this, those respondents who responded no said that the development of shale gas in the United States of America is still in the initial phase and it will not have much impact on the business of oil and gas of Qatar.

Theme 7: Adoption of hydrocarbon development strategy to lead into the new prospects for further development of downstream projects can mitigate the challenges from shale gas boom

            When the participants being involved in the research study are being asked to recommend some strategies that can help in overcoming the challenges that are being put up due to boom in the shale gas, than most of the people have suggested adopting the hydrocarbon development strategy in order to lead into the new prospects for further development of downstream projects. On the other hand, there are some participants, who recommended that Qatar should also provide gas to the home countries. While, there were some, who think that leveraging the challenges that US faces might prove as a successful strategy.

            Findings: After analyzing the opinions of the participants, it can be concluded that Qatar should adopt long-term hydrocarbon development strategy in order to lead to new prospects for further development of downstream projects; this includes increasing petrochemical output of Qatar to 20 million tonnes each year by 2020. The region is also investing heavily in mega-expansion projects that aim at adding more value to its natural hydrocarbon wealth. On contrary to this, also emphasis on leveraging the challenges that US faces. LNG exports from United States are particularly challenged because their prices.

Theme 8: The joint partnership between QP and ExxonMobil has helped Qatar in securing its LNG export to United States

On asking the participants regarding how the joint partnership between the Qatar petroleum and ExxonMobil will impact the Qatar, most of the participants have replied that it will help Qatar in securing its LNG to United States. Contrary to this, some of the respondents have also opined that through this joint partnership, Qatar has accomplished many expansion plans. ExxonMobil is a major producer in the world as well. ExxonMobil is also present in Qatar gas industry for many years. So cooperation with a major energy player will be a vehicle for technology transfer and capability building.

            Findings: From the above responses of the partakers, it can be well concluded that through this joint partnership between the Qatar petroleum and ExxonMobil, Qatar will benefit a lot. In other words it can be said that it will have a positive impact on Qatar. In addition to this, people also revealed that the joint venture is named as Golden Pass Products. Created with 70 percent QP working interest, this project was developed as LNG import terminal. Qatar Petroleum and Exxon Mobile, with the joint venture, intended to utilize over production of shale gas in US to supply Asia Pacific and European markets. In these markets, the gas prices are 3 to 10 higher as compared to US. Whenever any company joins hand with another company of different nation, there is transfer of knowledge, skills, technology and many other tangible and intangible assets. Since both the companies are giants in their respective countries, it will strengthen the Qatar's position in the global energy and gas market. Moreover, it will also result in transfer of knowledge, technology and capacity building.

Theme 9: The growth of the Shale gas in US has radically changed the scenario of import-export gas flow and collapsed the prices of natural gas in the US market

            On asking the participants that how the production of shale gas in US has changed the company’s long term strategy in the context of gas than some of the participants confronted that due to the notable growth of shale gas production in US, the scenario of import-export gas flow has altered radically. On the other hand, some people also said that it was also because of the collapsed prices of the natural gas in the US market. QPI is a young company still at its early stages of shaping short and long term strategy. It cannot be stated that production of shale gas has changed QPI strategy, but as a major focus area, the shale gas plays are considered by all companies. 

            Findings: After analyzing the responses of the participants, it is very clear that the company has changed the long term strategy in the context of gas only because, the prices of natural gas collapsed in US market as well as there has been a radical change in the import export gas flow. Further, the US market optimally capitalized the drop in gas prices by exporting LNG to regions (Asia and Europe). This has certainly affected the global energy market and its key players to great extent. It is because of all the above repercussions the company has changed the long term strategy.

Theme 10: US Shale gas - boon for the Qatar companies

            In response to this question, almost entire batch of participants said that they feel that this development of shale gas is not a challenge or threat for the Qatar oil and gas sector; rather they must take it as an opportunity. It will enable the local companies to evaluate their strengths and weaknesses and thus will bring improvements in them. Companies must check their strategies and situations and must conduct correct due diligence. Even if they find slightest error in their operations or strategies, it is recommended that they must take immediate corrective actions. If this happens, then development off shale gas would not have any major impact on the existing players in the country. On the other hand, if companies ignore this, they will surely have to pay in the years to come as there are possibilities that the United States may magnet the existing clients of the local companies towards itself.

            Finding: From the data collected through the survey of twenty five managers of different companies it was concluded that managers feel that the shale gas boom is not a challenge or threat if handled properly. It should be looked at as an opportunity. The strategy should be to evaluate the situation, carry out proper due diligence and be part of this boom if and when appropriate and feasible.

 

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Chapter 5 - Conclusion and Recommendations

5.1: Conclusion

After conducting the analysis of data being gathered from the primary as well as secondary sources and carrying out the whole research meticulously, it can be well concluded that the research report has provided a deep insights on the development of the shale gas in various parts of the world and its impact on the existing and traditional resources and countries and companies which are the leaders in the business of oil and natural gas. The literature review of the study has majorly focused on the impact of development of shale gas on the overall energy market around the world. Furthermore, it also throws light on its repercussions on major developing and developed countries. In addition to this, it also presents its implications on Qatar and how Qatar can formulate strategies to benefit from it. By reviewing the previous articles and publications of various scholars related to the topic of the study, it was found out that Qatar is the largest natural gas export around the world with an annual capacity of 78 million tonnes, and the main operator of this business is the Qatar Petroleum.

The natural gas in Qatar encompasses considerable share of world total supply of gas. As per the study of Oil and Gas Journal (2011), natural gas reserves in Qatar were estimated to be approximately 896 tcf. This means that region posses 14 percent of total natural gas reserves and thus acquire the position of third largest reserves in world, after Russia and Iran. Qatar government has invested huge amount of financial resources for the development of natural gas, specifically for export as LNG. Qatar Petroleum directs the upstream natural gas production along with downstream and midstream. Qatar focuses on developments of natural gas towards the large scale projects related to LNG exports, along with the promotion of industries that use natural gas as feedstock. For this reason, ExxonMobil, Total and Shell are involved by Qatar in developing integrated mega-projects. The main reason of involving these global oil companies is that they have adequate experience in the field and are technologically sound.

Earlier, for many years United Stated was dependent on other countries for requirement of natural gas and therefore, has to import large quantity of natural gas from other nations. However, after the development in the field of extraction of shale gas, it is expected that United State will become an exporter of the shale gas. This is because of available of shale gas in plenty in this region and expansion of shale gas production. Around seventy per cent of the gas supply in the United State is expected to be consisting of unconventional gas which will include shale gas, coal-bed methane and tight gas. Presently China is considered as the largest shale gas reserve with 1100 tcm i.e. trillion cubic meters. This is followed by Argentina with 802 trillion cubic meters, United States with 665 tcm and at last Canada with more than 500 tcm. United States has played dominant role in unconventional gas reserves production such as coal-bed methane, tight gas and shale gas. Share of shale gas with total gas production has increased from 9 percent in 2007 to over forty percent in 2012 in US.

One of the primary reasons for sudden increase in shale gas production in US has been upward trend in prices of natural gas during an initial period after 2002. In addition to this, the success of development of Shale gas in US is mainly attributed to varied factors including favourable geographical conditions and expertise, availability of efficient industry service along with development of new technologies and tax exemption. Several specialized companies in US own technologies such as hydraulic fracturing and horizontal drilling that aid in liberating shale gas. Alternate tax reduction offered by the 1980 Crude Oil Windfall Profit Tax Act on production of unconventional gas is also one of the most important success factors of shale gas revolution in US. The tax reduction was about 3USD per BTU of oil barrel i.e. 53 cents for each 1000 cubic feet. These factors have made production of shale gas economically viable. Traditionally, the petrochemical industry of US relied on naphtha which is produced from oil, in order to produce ethylene, benzene and propylene. This process involved huge amount of financial resources as well as time. However, soon after the shale gas revolution, the situation changed completely. First of all, the prices of natural gas were affected soon after the boom; the prices went down to 68 percent. It has been found that there are large reserves of shale gas all across the world, most notably in Argentina, China, South Africa and few parts of Europe. It has been estimated that China could be largest producer of shale gas, with a potential of producing more than 1200 trillion cubic feet.

The literary sources reveal that the Qatar’s competitive advantages in gas were not enough and thus, will not serve any commitment to development of LNG and political stability. Therefore, in order to effectively cater the needs of market of Japan and also to attain a reliable negotiating position in market, it is necessary for Qatar to have steadfast infrastructure, strong financial conditions, as well as highly experienced industry players and management.

Coming on to the part of findings of the data analysis, it was quite consistent with what has been explored from the varied literary sources. It was found from the analysis that the growing competition in the market is being considered as the major challenge for the Qatar’s LNGs dominance in the global markets. Availing the opportunities of production from new technologies such as Hydraulic fracturing, companies of United States like Cheniere Energy Inc. and ConocoPhillips, Dominion Resources Inc., Richmond, and Sempra Energy are seeking approval from US Energy Department for establishing 37 new LNG export projects. In addition to this, it was also determined that the production of the US shale gas is some way or the other putting the oil and gas industry of Qatar at a great disadvantage. Moreover, the joint partnership between the Qatar petroleum and ExxonMobilwill has a positive impact on Qatar. By analyzing the response of the participants, it was also found out that that increase in shale gas production in US has affected the business of petrochemical companies but not seriously threatened.

Speaking further in this regards, it is also quite clear from the study that the company has changed the long term strategy in the context of gas only because, the prices of natural gas collapsed in US market as well as there has been a radical change in the import export gas flow. Further, the US market optimally capitalized the drop in gas prices by exporting LNG to regions (Asia and Europe). This has certainly affected the global energy market and its key players to great extent. It is because of all the above repercussions the company has changed the long term strategy.

5.2: Recommendations

For the purpose of overcoming the challenges from the shale gas boom, the following are some of the recommendations:

  • Qatar should focus on ensuring optimal operations of existing plants capacity as well as to accomplish every major project that are already under construction. For this purpose, the company must adopt the latest technology and if required it must eliminate any obsolete machinery or any other technology. 
  • Further, study should also be conducted on North Field in order to assess the reservoir and further to ensure that finite resources are utilized optimally and effectively in future. Natural resources are limited in every nation, thus to gain maximum advantage from those resources it is essential for the country to optimally use its resources so there is minimum wastage. 
  • Qatar should also consider providing gas to home countries. Relying only on foreign clients restricts the profitability of the companies. Thus, they must also focus on local clients.
  • It should also contribute hugely in UK’s energy sector. Although, United State is the major client of the Qatar for the oil and natural gas, yet company must expand and maintain its business in the European nations as these nations can be very good source of revenue for the local companies. Moreover, it can also target several developing companies in Asian and African region which are largely dependent on the other developed nations for fulfilling their energy needs.                 
  • Qatar should also emphasis on leveraging the challenges that US faces. LNG exports from United States are particularly challenged because their prices
  • Finally, it should also focus on maintaining stable and reasonable prices that can effectively justify the investment level needed to meet future requirements for natural gas.

 

Reflective Statement

            Conducting a research is an uphill task as it requires lot of research and knowledge. Further, it also demands lot of coordination between different stages. If there is no sync between different stages, in that case a researcher cannot complete his or her work effectively and on time. By working on this research work I have learned the entire research process that how a research is being conducted. I learned different stages of research process and get to know about various research methodologies and their significance in the research process. The most important stage of a research process is data collection and I personally find this stage as the toughest stages of the entire process. Our findings and conclusion is entirely based on the analysis of the collected data and thus is becomes very important for the researcher to gather adequate data which is reliable and valid. But collecting data is not an easy task as firstly the researcher needs to target the sample among the entire population which can be the best source for the information. Secondly, convincing the respondents is another challenging task as in the present world no one have time for others. From this study I got to know about technique called thematic analysis which is used for data analysis. I learned how themes are formed through accumulated data and then how those themes are interpreted which is very crucial task. Thus, overall it was a great learning experience for me and this will definitely help me in all my future endeavours.     

 

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