Is gas the achilles heel of the Qatar economic miracle?
Posted on 22 March 2009 with no comments from readers
The IMF has recently forecast that the global economic slump will pass Qatar by in 2009, leaving the tiny Gulf state as the world’s fastest growing economy. But an over-reliance on hydrocarbon revenues in general and gas in particular could yet prove its undoing.
New official data showed third quarter economic growth at 7.8 per cent, down from a 60 per cent jump in the third quarter. GDP in the fourth quarter fall by 23 per cent against the third quarter to $29 billion.
According to MEED magazine Qatar Petroleum and ExxonMobil have just shelved their $5 billion Barzan gas field joint venture for up to 12 months, although design changes should still meet that the original delivery schedule is met.
Problems ahead?
Are the wheels beginning to fall off the Qatar economic miracle? That would be the wrong conclusion to reach.
Figures show a 63 per cent expansion of the gas sector’s revenues to $8.7 billion for 2008, albeit oil revenues fell by 48 per cent to $3.6 billion. For 2009 gas production will be seriously ramped up with two giant gas trains coming onstream.
This will double the production of LNG and gas products, and the economic impact will be magnified by the ongoing diversification of the local economy with construction, manufacturing, financial services and ancillary services.
However, even the 29 per cent hike in real GDP forecast by the IMF for 2009 will not match the 44 per cent GDP surge to $101 billion achieved in 2008. It could be that the IMF has to downgrade its forecast if oil and gas prices slip further but then an upward revision is also possible.
Number one
Perhaps when you are listed as the world’s number one economy for economic growth there is always the danger that the potential to fall is evident and rivals will be watching keenly for a false step.
For the moment these fears appear unjustified. Long-term contracts are in place with the UK, US and Japan for gas delivery to support the huge financial investments involved in developing LNG.
Only if key clients from these countries were observed to be trying to wriggle out of these commitments – due to lack of demand in a deep recession perhaps – would gas truly be an achilles heel for the Qatar economy rather than its greatest strength.
no Comments posted by readers:
The answer to the question in the headline – which your article goeson to provide – is “clearly not”. Qatar is the world’s leading exporter of what is increasingly the energy of choice, and will control some 30% of LNG exports by 2010. The key is in Qatar’s fixed long term contracts, as well as the various industries based on by products of the LNG process that will help Qatar diversify its economy longer term.