Profile: Qatargas 2 CEO

“It is not greed, it is economics. It is supply-demand balance. I mean, yes, I guess you can call it greed but we call it economics!” Faisal Al Suwaidi, CEO of Qatargas, is amused by accusations of greed over his company’s deal last year with PetroChina. Commentators claimed at the time that the company was aggressive in its price negotiations for the agreement to supply the economic powerhouse with liquefied natural gas (LNG) for the coming 25 years.

But even with the latest deal, Qatargas cannot even contemplate fulfilling all of China’s LNG demands: “There is still more demand but unfortunately we will not be able to satisfy all of China’s demand from one company. This is a fast-growing sector, especially for the hot economies of the world. China and India will have to import large quantities of gas.”

There are two main reasons: “Firstly, they need to introduce this as part of their energy mix. Secondly, if they are to meet their Kyoto commitment, they will need to rely more on natural gas to reduce their emissions. For us, this is a new market.”

It is not so much the producers as the markets that are driving the industry. As oil prices charted a volatile course in 2008, and the issue of climate change grown in prominence, LNG has grown in popularity.

“This is a pretty clean type of energy,” Al Suwaidi confirms: “I think people who’d like to meet their Kyoto targets will need to use gas as part of their energy mix. It’s also more efficient than burning oil.”

It is cheaper (per thermal unit) than oil too. So why isn’t the whole world switching its energy requirements to LNG? Al Suwaidi is pragmatic: “I think that you will need all types of fuel to satisfy world demand in the future. I’m not sure that it’s a question of competition anymore; it’s a question of collaborating and making sure that we produce enough energy types to satisfy demand. It’s more about working together.”

The fact that governments the world over are making it a key feature in their energy plans is evidence enough that nations have to look in different places to meet their energy demands.

In America, for example, 23% of the energy demand is catered for by natural gas. This proportional figure is likely to stay the same but the total national energy consumption is projected to rise by 17% over the coming decade – LNG companies are primed to gain, especially key suppliers such as Qatargas.

Established in 1984, the organisation is now one of the world’s biggest suppliers of LNG. Already shipping the product to Japan, Spain, and most recently to the UK, the company is undergoing rapid expansion to incorporate the more estranged markets of Europe.

By 2010, it will be exporting 42 million tonnes per annum to markets in three continents, up from the 10 million tonnes that it shipped last year.

“Growth rate in LNG is highest among all the energy types,” says the Qatargas CEO. Precise figures are hard to determine but some reports have suggested that the LNG market is growing in excess of three times faster than the traditional oil and gas markets.

At the Doha Conference on Natural Gas in 2008, Al Suwaidi estimated that LNG consumption will continue to rise by 10% a year for the next decade.

Everyone wants a piece of the action: India, China, South Korea and Japan are powering demand in the Asia-Pacific region (where usage is currently highest) but the American and European markets are hot on their heels.

Until recently, the markets of Europe and the US could not have been considered by Middle Eastern suppliers. With large gas fields distributed worldwide, consumers used to simply source their LNG ‘locally’.

Al Suwaidi explains how the market has evolved in recent years: “The main production areas or reserves are in Russia, Qatar, Iran and Canada. Until recently this was a regional business – the country would send gas next door to another country, or somewhere in the region. But, thanks mainly to Qatar and its partners’ efforts, we have globalised [the market].”

Innovations in the processing and transportation of LNG  have brought the price per unit for distant countries down to affordable levels. Qatargas is carefully positioning itself at the forefront of these developments.

“We pushed up trench capacity and [the capacity of our] LNG ships from 135 cubic metres to around 265 cubic metres,” says Al Suwaidi. “This has helped us to think of Europe as a base market as opposed to an opportunity market.”

Going global

He is committed to the distant markets, eyeing a long-term profitability. This has meant splitting supplies between the three key areas of America, Europe and Asia.

“We know in the future there will be more demand and higher prices in Europe or the US so we’ve decided to distribute our production between three consuming continents and this will help us to win in the longer-term. We’re probably losing in the shorter-term but we take the longer-term stance.”

But just how long-term a stance can you take when you’re dealing with a finite resource? Al Suwaidi doesn’t see any immediate need to diversify out of the LNG business.

“We know there is plenty of reserve there. It’s not a question of reserves. It is still at 900 TCF [trillion cubic feet – two TCF is defined by the American Bureau of Standards as a giant field].”Although the ‘Peak’ theorists bang their drum more loudly than ever, it remains the case that every last drop of oil and breath of gas remain vital strategic commodities, both in an economic and practical sense. To make sure that the profit and energy of the Qatar field is properly harnessed, the organisation took a moratorium on further development of the North Field in 2005 amid fears that too fast an expansion could jeopardise the future of the supply.

“You could ruin the field in 10 years or you could properly manage it and the reserves will be there for the next 100 years. That is why QP brought a moratorium to take time out and study the field and make the right decision,” says Al Suwaidi.

The bigger picture is exactly what the shrewd CEO concerns himself with. “I tend to think of the longer-term plans as opposed to the day-to-day and I involve people in my decision-making,” he says.

“We have a clear direction that we share with the people of QatarGas and based on that we prepare our 10-year business plan. This gets reviewed and updated at least twice a year and by management groups.”

The company’s communications policy particularly stands out in the environment of the Middle East, which has traditionally been more opaque than that of the West, particularly regarding energy resources.

Transparency is of vital importance to Al Suwaidi. “I think this is very important for Qatargas or any other company in the world,” he says.

And it is an aspect of business that he thinks is improving in the Gulf: “This is something that you just cannot escape,” he emphasises. “To be competitive in today’s environment, you need to be more transparent. It’s good for the company and the shareholders.”

If any employee is uncertain about the company line, he himself will answer their queries. “We have a CEO scheme whereby anyone in the company can drop me an email and ask about the policies and future plans for Qatargas.”

In a company of more than 2000 people, this is no mean feat. But he plays it down saying, “I only get maybe four or five emails a week.”

He has found that he is best served by a well-informed staff, allowing him to adopt a laissez-faire management style: “I don’t run from office to office to shout at people and give them to-dos. This is not a [viable] management style anymore; you need to manage people and at the same time give them maximum empowerment, maximum freedom. Basically I hire good people and then I get out of their way!”

It’s easy to imagine that managing the expectations of all the stakeholders remains the most difficult part of his job.

“We have more shareholders in Qatargas than the other LNG companies in the world. Besides that, we have 54 nationalities in our employment. So the most challenging thing is managing the expectations of so many shareholders and so many employees of different backgrounds. But saying that, it’s very interesting and fulfilling work,” beams the CEO.