GCC Insights: Qatar may soon become gas capital of the world

Within the next few years, gas is likely to replace oil as the main source of treasury income in Qatar. This is attributed to the continued development of gas related projects.

Qatar is pursuing comprehensive growth of its gas sector. The development focuses on liquefied natural gas (LNG), gas-to-liquids (GTL) and piping gas to regional places.

In the last few weeks, state-owned Qatar Petroleum (QP) signed agreements worth a hefty $17 billion, almost the size of Qatar's GDP.

Thus far, the LNG business has registered the highest success. Current capacity stands at around 14.6 5 million tonnes per annum (mtpa), exported to clients in Asia, mainly Japan and South Korea.

But output is set to rise to nearly 26 mtpa by 2006 to entertain orders to India, Spain and Taiwan, and still significantly higher based on recent accords with major American firms. If the pace of expansion continues, Qatar could overtake Indonesia as the largest supplier of LNG in the world as early as 2007.

In October, QP and ExxonMobile signed a $12 billion pact, the single largest to date, for exporting 15.6 mtpa of LNG to the US for 25 years commencing in 2008.

Earlier in July, ConocoPhillips signed an initial agreement with QP for the supply of 7.5 mtpa of LNG to the US starting from 2009.

The $5 billion project involves setting up facilities in Qatar and the US, with ConocoPhillips buying and reselling gas in the home market.

As for GTL, Royal/Dutch Shell signed agreements with QP in October for the construction of a gas-to-liquids facility at a cost of $5 billion.

The 140,000 barrels per day plant, the largest GTL in the world, will be commissioned in 2010. This marks the second interest in the environment-friendly synthetic fuels.

Oryx GTL, a $900 million joint venture between QP and Sasol of South Africa, will start producing 34,000 barrels per day output in late 2005.

Concerning exporting gas through pipelines to fellow GCC states, Qatar plans to export around 2,000 million cubic feet per day to the UAE by late 2006 though a $3.5 billion project with Abu Dhabi-based Dolphin Energy.

Additional plans call for exporting gas to Kuwait, Bahrain and possibly Oman.

Hard facts

Qatar controls 14.8 per cent of the proven natural gas reserves in the world after Iran and Russia, which own 15.5 per cent and 30.7 per cent, respectively. But Qatar's North Field is the single largest reservoir of non-associated gas in the world.

Majority-state owned Qatar Liquefied Gas Co (QatarGas) and Ras Laffan Qatar Liquefied Gas Co (RasGas) are the two gas-producing firms. Owners had set up RasGas 2 and QatarGas 2 and 3 firms to entertain a rise in production.

Ras Laffan Industrial City, north of Doha, which includes a port and an industrial area, serves as home to QatarGas and RasGas. QP and its partners are expected to invest some $24 billion over the coming five years in gas projects.

Investments in the gas sector have helped Qatar attain excellent credit ratings. In July, Standard & Poors raised Qatar's sovereign credit rating to A+ from A- reflecting sustained strength of the economy. Qatar's real GDP grew by 2 per cent last year but projected to rise to 4.6 per cent this year and still higher next year. Moody's has extended an A3 rating to Qatar's foreign currency position.

At $26,871, Qatar already has the highest per capita income in the Middle East. Yet progress in the gas sector will serve to solidify the country's advantages.

The writer is assistant professor, College of Business Adminstration, University of Bahrain