LNG to fire up surplus in Qatar budget

Qatar will bask in another budget surplus in the current fiscal year because of a steady increase in its liquefied natural gas (LNG) production and higher-than-expected oil prices, according to a Saudi bank.

LNG output by the Gulf country, the world's third-largest gas power, surpassed crude oil production in the second half of 2009 for the first time since it launched mega gas projects in mid 1990s, the Saudi American Bank Group (Samba) said in a brief note on Qatar's economy in its March bulletin,

Samba expects the fiscal surplus at QR9.2 billion (Dh9.2bn) in the 2009-2010 budget and QR9.4bn in the next fiscal year, which starts on April 1.

"The transfer of large investment income earned by public enterprises in 2008 should substantially boost fiscal revenues in the 2009/2010 fiscal year.

"In addition, oil prices are now expected to average $70 for 2009/2010, considerably higher than the $45 assumption used in the budget," it said.

"This should contain the decline in government hydrocarbon revenues during the year, and we now expect the fiscal surplus will hold at close to 11 per cent of GDP, despite a strong increase in spending."

Turning to the next fiscal year, the report expects another expansionary budget, which it said would target promotion and completion of major infrastructure projects, and would be based on a conservative oil price assumption of $50-55.

"As in previous years, both revenue and expenditures are likely to exceed those budgeted, and we project another budget surplus of around eight per cent of GDP, with increasing hydrocarbon revenues being offset by a temporary dip in investment income from public enterprises, and another boost in spending," it said.

Citing official data, the report said Qatar's oil production fell by 9.5 per cent to average 765,000 bpd in 2009, slightly above its current 730,000 bpd quota.

But it said that production has been creeping up in recent months and was running at 800,000 bpd in December and January.

"While still weak, oil market fundamentals make a formal increase in Opec quotas unlikely in the near term, Qatar is expected to raise its production capacity to more than one million bpd as work is completed on boosting capacity at the Al Shaheen field to more than 500,000 bpd from around 240,000 bpd currently," it said.

Qatar sits at more than 25 trillion cubic metres of natural gas.