Qatar to steam ahead despite crisis as GCC states slow down

Qatar's economy will steam ahead in 2009 when performance in most other regional oil producers will tumble and the global financial crisis is pushing many other economies into a deep abyss.

The gross domestic product of the tiny Gulf Opec producer leapt by more than 19 per cent in real terms last year and independent estimates showed growth could still be as high as 10 per cent this year.

The reason for such a strong performance at a time when other economies are jolted by the global crisis is that Qatar is set to almost double its production of liquefied natural gas to more than 60 million tonnes in 2009 before output peaks at 77m tonnes by end-2011. "Qatar's economy is still very strong despite the global financial distress…it will remain strong as it is a real economy which enjoys many advantages and points of strength," said Abdullah bin Hamad Al Attiyya, Qatar's Deputy Premier and Minister of Energy and Industry.

"Qatar currently produces nearly 31m tonnes of LNG and output is expected to rise by a further 46m tonnes to reach 77m tonnes to maintain its position as the world's largest LNG exporter."

HIGH GROWTH

Forecasts by the Saudi American Bank Group (Samba) showed Qatar's real GDP shot up by nearly 19.6 per cent in 2008 and is projected to soar by about 19 per cent this year before easing to five per cent in 2010.

Growth is predicted to remain high this year despite a sharp decline in oil prices and Qatar's crude output compared with 2008.

But the decline will likely be more than offset by the surge in LNG production as was the case in the fourth quarter of 2008, when the Gulf country's crude oil sector dived by more than 50 per cent while the gas sector slipped by less than 10 per cent due to a drop in condensates prices.

The rapid growth in Qatar's LNG output turned the gas sector into the biggest component of the GDP in 2008 after it overtook the oil sector for the first time. Figures by Qatar's Statistics Authority showed the gas sector's share of the GDP hit a record high of QR120 billion (Dh121.2bn) compared with QR100.2bn for the crude sector.

"Notwithstanding the solid macro fundamentals of the region's major hydrocarbons exporters, such as Saudi Arabia, Kuwait and the UAE, we believe Qatar will outperform other GCC states in terms of structural resilience and growth momentum in 2009," the Manama-based Gulf Finance House said in a study about GCC economies this week.

"Our bullish view on Qatar is supported by the fact that during 2009, Qatar will double its LNG export capacity to nearly 61.9 million tonnes or more. The increase will be driven by the addition of four additional LNG trains, each with a capacity of 7.8 million tonnes… on an oil equivalent basis and adding exports of condensates, Qatar will vie with established GCC producers, such as UAE and Kuwait, in terms of hydrocarbons export volumes by 2010."

According to Samba, real GCC growth is projected to fall sharply from 6.5 per cent in 2008 to 0.5 per cent in 2009, with a pick up possible in 2010 assuming the global economy and oil prices recover.

Much of this will reflect the decline in dominant oil sector, while non-hydrocarbon sectors should continue to post positive growth.
"Qatar in contrast is expected to continue to grow strongly as scheduled new LNG gas production and export facilities come on line," Samba said.

Q4 dECLINE

Official figures released last week showed Qatar's nominal economy dived by more than 23 per cent in the fourth quarter of 2008 but ended the year higher by a staggering 44 per cent because of a surge in gas exports.

From QR108.3bn in the third quarter, the Gulf country's nominal GDP shrank to QR83.2bn in the last quarter, a decline of nearly 23.2 per cent. But the GDP jumped by about 44 per cent through 2008 to peak at QR372.4bn compared with QR258.6bn in 2006, according to Qatar's government statistics authority.

"Qatar's medium-term outlook is positive. Real GDP growth is projected to surge in 2009, as the production of LNG and gas products is expected to almost double with the commissioning by Rasgas of two trains, and construction, manufacturing, financial services, trade and transportation, and communications all projected to grow at a strong pace," the International Monetary Fund said in its recent annual review of Qatar.

LNG pROJECTS

Massive LNG projects have already turned the tiny Opec member into the world's largest LNG exporter after overtaking Indonesia last year. Qatar launched such projects in early 1990s to tap its mammoth offshore North Field, which straddles nearly 6,000 sqkm 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 around 902 trillion cubic feet.

The rapid rise in its GDP has turned Qatar into one of the 10 wealthiest nations, with its per capita income exceeding $70,000 last year.

The government-owned Qatar Petroleum has approved a staggering QR222.7bn for its oil and gas development scheme during 2008-2012.

The oil plan will lift production from its onshore and offshore fields from the current 860,000 bpd, to about1.08 million bpd by the end of 2010.

Oil & gas

Major factors affecting the oil and gas sector were a 55-per cent drop in oil prices in Q4 2008, and a similar decrease for condensates. Oil production was also down for the quarter.

The main reason for the decrease in the fourth quarter was a 31.1 per cent decline in the value of output from the mining and quarrying sector, which is dominated by the oil and gas-related activities.

Offsetting the steady increase in LNG output, the gas sector was affected by the significant drop in condensate prices leading to an overall decrease of 8.3 per cent when compared to the previous quarter.

For the year as a whole, output of the mining and quarrying sector was up 56.8 per cent compared to 2007, with a growing contribution from the LNG industry.

The manufacturing sector dipped sharply in the fourth quarter by 30.4 per cent. Nevertheless, for 2008 as a whole it increased by 32.4 per cent over 2007. Downstream hydro-carbon related activities included in the manufacturing sector were also affected by a significant downturn in prices.

The construction sector grew by an estimated 5.2 per cent comparing the fourth and third quarters of 2008, and by 24.1 per cent on an annual basis.

The electricity, gas and water supply sector declined slightly by 2.3 per cent in Q42008 when compared to Q3, due largely to a normal seasonal decline in demand, but was up by 26.0 per cent on an annual basis.