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Qatar: Gas-fired growth, sustained economic development

Friday, 01 April 2011 23:40

Thanks in large part to the number of hydrocarbons expansion projects that have taken place over the past few years, Qatar is expected to see sustained economic growth for the foreseeable future. According to an economic bulletin released by Saudi Arabia’s Samba Financial Group in late March, the country could see GDP growth in excess of 19% by the end of 2011. Similarly, nominal GDP is forecast to grow by 22.4%, from $122.3bn at the end of 2010 to $149.7bn by the end of 2011. These gains can be attributed primarily to the country’s rapidly expanding energy sector, which saw growth of nearly 36% in the third quarter of 2010, due to increased production and rising oil prices. Global Arab Network reports according to OBG.

In late 2010 Qatar wrapped up a two-year expansion project that resulted in liquefied natural gas (LNG) production and export capacity jumping to 77m tonnes. With various expansion plans in the pipeline, the firm is expected to hold on to this title for some time to come. Qatargas benefits from the country’s huge deposits of natural gas, which are estimated at around 910.5trn cu ft, or 15% of the global total.

On 23 March Qatar’s newest energy project, the Pearl gas-to-liquids (GTL) plant, located in Ras Laffan Industrial City in the north-east, began operations. The $19bn project, which was developed as a joint venture between Qatar Petroleum and Royal Dutch Shell, will eventually produce 1.6bn cu ft of LNG per day, including 120,000 barrels per day of condensates and natural gas liquids and 140,000 barrels per day of other products, such as lubricants, oils and chemical feedstock. The plant is expected to be fully operational by the end of 2012.

Despite these recent successes, the energy sector faces a number of challenges in the coming years. Speaking at the Doha Energy Forum in the capital in early March 2011, Mohammed Saleh Al Sada, the minister of energy and industrial affairs and the chairman of Qatar Petroleum, told local press, “Ahead of us is a challenging era for world energy producers and consumers.”

The government is well aware that Qatar, like other major energy exporters around the world, will eventually run out of hydrocarbons, although in Qatar’s case this is not expected to happen for nearly a century, according to some estimates. Regardless, the state is working to diversify away from reliance on the energy sector. The income the country derives from oil and LNG is being used to stimulate growth in a wide range of other sectors, including information and communications technology, health, education and the real estate market. With this in mind, the government is investing heavily in new technology in the energy sector and working to maximise production at existing facilities, to take advantage of its resources and maintain economic expansion.

The recent nuclear crisis in Japan has resulted in increased criticism of nuclear power around the world. On 23 March US energy firm ConocoPhillips said that as governments reconsider nuclear options, LNG was expected to become increasingly popular. The company, which in conjunction with Qatargas operates a large-scale LNG project at Ras Laffan, maintained that hydrocarbons – and increasingly LNG – will remain the primary source of energy for the foreseeable future, meeting as much as 80% of world demand in 2035, for example.

With increased anxiety about nuclear power and carbon emissions in markets around the world, Qatar is well situated to benefit from rising international energy demand, which is expected to see double-digit growth in the coming decades. Natural gas burns clean and safe, and remains relatively cheap compared to other options, though this is expected to change as demand continues to grow. Since the nuclear crisis in Japan began on March 11, natural gas prices have already gone up by around 10% in the EU and the US. This bodes well for Qatar’s energy sector and the broader economy.

Global Arab Network

This article is published in partnership with Oxford Business Group

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Last Updated on Friday, 01 April 2011 23:50

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