Rise in LNG production to boost Qatar's income in next two years

A surge in liquefied natural gas (LNG) production will sharply boost Qatar's income in the next two years and this will largely widen its fiscal surplus, a key Saudi bank said yesterday.

Qatar will also be among a few countries to record high real GDP growth this year despite the steep decline in oil prices compared with 2008 and a cut in its crude output in line with an Opec's collective agreement to trim supplies to bolster prices, the Saudi Arabian Monetary Agency (Samba) said in a new study.

Samba said it was sticking to its previous projections that Qatar's real gross domestic product would swell by about 9.4 per cent in 2009 and accelerate to 18.1 per cent in 2010 before slowing to 13.3 per cent in 2011.

"Boosted by rising LNG and NGL output and recovering oil prices, government revenues are projected to surge to an average of more than $50 billion (Dh183.5bn) a year," the study said.

"This will push the fiscal surplus from an estimated two per cent of GDP in 2009/2010 to 7.4 per cent in 2011/2012, despite large projected increases in capital spending directed mainly at construction and infrastructure," it said.

Samba estimated Qatar's total oil and gas export earnings at about $44.2bn in 2009 and nearly $64.3bn in 2010. In 2011, the income is projected to climb to its highest level of about $80.8bn, the study said.

Qatar, the world's third- largest gas power after Russia and Iran, has not announced its 2010-2011 budget as the current fiscal year ends on March 31.

Its present 2009-2010 budget assumed spending at QR94.5bn (Dh95.38bn) and revenues at QR88.7 billion, leaving a nominal deficit of QR5.8bn.

Samba gave no figures on the actual surplus in the 2009-2010 budget but at two per cent, it is estimated at around QR7.2 billion for a GDP of QR362bn.

Official figures showed Qatar's LNG exports stood at 30 million tonnes in 2008 and are expected to soar to 54 million tonnes in 2009 with the installation of new production trains.

About 20.7 million tonnes were produced by government-controlled Rasgas while the rest were pumped by Qatargas, another key LNG producer owned by the government and foreign partners.

By 2012, Rasgas will be producing nearly 36.2 million tonnes while Qatargas's output will reach 41 million tonnes per year.

Qatar launched such projects in early 1990s to tap its mammoth offshore North Field, which straddles nearly 6,000 square kilometers of Qatari and Iranian water in the Gulf and is believed to be the world's largest single reservoir of non-associated gas, with estimated reserves of 902 trillion cubic feet.

According to Qatari National Bank, LNG sales fetched Qatar nearly QR58.8bn in 2008, far higher than the 2004 LNG income of QR19.8bn. The earnings are projected to sharply grow in the coming years after all the projects are completed and Qatar becomes the world's dominant LNG supplier.

"Bolstered by rising production of LNG and associated natural gas liquids (NGL), the Qatari economy has been able to ride out the global economic storm during 2009 and post real growth," Samba said.

"GDP growth is estimated at 9.4 percent in 2009. A further acceleration to 18 percent and 13 percent is projected for 2010-2011, respectively, as new LNG trains come on stream and the government's robust counter-cyclical fiscal policy continues to boost economic activity."

The report said that with increasing revenue flows from hydrocarbon exports and immediate access to around $10bn in funds raised through sovereign bond issues during 2009, the government is "well placed" to advance its development and diversification agenda during 2010-2011. "Spending on infrastructure, construction and public wages is likely to rise rapidly, stimulating robust growth in the non-hydrocarbons sector," it said.

"The current account balance is expected to record a similar trend with surpluses rising back to over 20 per cent of GDP in 2010-2011. This will help boost official reserves and other external assets, including those held by the Qatar Investment Authority, ensuring that Qatar maintains a substantial net external creditor position despite recent increases in external debt."

Turning to inflation, which hit a record high of 15.2 per cent in 2008, Samba said the situation would be reversed in 2009 as the Gulf Opec producer is expected to record an average annual deflation of four per cent. It said the turnaround had been triggered mainly by a sharp drop in rents, which reflects a downturn in the real estate sector.

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