Qatar has accumulated substantial debt, but it also possesses substantial gas reserves. In fact, the world's third-largest accumulation of non-associated gas, after Russia and Iran, lies ensconced in the country's North Field. The bonanza puts it in an advantageous position to see off its debts in quicker time than most nations not as blessed would have been able to. Doha had plunged into a frenzy of energy-sector development, both upstream and downstream, over the past six years that saw debt ballooning to $13.1 billion, 89 per cent of the GDP. And now, it's payback time as exports of LNG begin replenishing the coffers. The petrochemical companies are also playing a revenue-building role that has raised Doha's economic profile.

During the past three years there has been real progress in adding value to energy assets. Qatar Fertiliser Company (Qafco) is poised to become the world's biggest single-site fertiliser plant. German company Krupp Uhde has the contract to build its fourth expansion project designed to bring annual production capacity to 2 million tonnes of ammonia, 50 per cent up, and 2.8 million tonnes of urea, a 65 per cent increase. The expansion includes the building of a formaldehyde plant.

Qatar Chemicals Company (Q-Chem) is on track to deliver ethylene, polyethylene and 1-hexene in the fourth quarter of 2003. Qatar Vinyl Company (QVC), which came on stream earlier this year, produces ethylene dichloride, caustic soda and vinyl chloride monomer, while Qatar Plastic Products Company (QPPC), inaugurated last year, is transforming polymer into industrial packaging products. Qatar Petrochemicals Company (Qapco), maker of ethylene, low-density polyethylene and sulphur, saw profits surge 14.2 per cent to $117 million, last year. Qapco is studying the possibility of increasing ethylene production and is fuelling progress in other ventures particularly QVC, with which it has integrated facilities.

Doha is keen to put in place a marketing network that will guarantee income from LNG. It also envisages a strong industrial base dominated by petrochemical industries. The economy thus strengthened will be in a position to generate consumption power that should in turn spawn a spectrum of other industries. The surge in oil prices last year could not have come at a better time. For the first time in 15 years, Qatar saw a surplus in the 1999-2000 budget and while it understandably had to allocate funds for vital infrastructure projects in fields including education and healthcare, it does not look like it will loosen its purse strings too much, its attention concentrated on areas that will bring dividends of the kind one associates with big industrial ventures. The vision is clearly to dent the debt and help reinvestment in expansions and new projects.

International rating firms have understood the mood prevailing in Doha with the US' Standard and Poor's upgrading its long-term foreign currency ratings on Qatar to BBB+ from BBB, which has encouraged Doha to intensify efforts to develop its gas reserves believed to be in excess of 500 trillion cubic feet (tcf).

Qatar Liquefied Natural Gas Company (Qatargas), the country's first LNG venture, plans to modify production capacity to 9.2 million tonnes per year (tpy) by 2003 from a current six million tpy, the vision including the creation of a fourth train.

The second LNG venture Ras Laffan LNG Company (RasGas), whose current capacity is 6.4 million tpy, seeks to augment capacity to 15 million tpy. The two projects had sales of 10.4 million tonnes last year, earning the country $2.5 billion or 27.7 per cent of the total export income and this year they expect to export 12.6 million tonnes thanks to agreements already concluded. Qatar earned an additional $1 billion from condensates (ultra light oil) and other products extracted during gas production. The country's aspiration is to export 30 million tpy of LNG by 2007, making the gas sector the principal source of revenue. Currently, the only foreseeable hitch could be a shortage of tankers designed to carry LNG. Qatargas officials have said more consignments could have been sold on the spot market if tankers had been available.

Significantly, a commercial agreement on the Dolphin project signed with the UAE Offsets Group (UOG) will facilitate natural gas exports to Abu Dhabi and Dubai and eventually to Oman and Pakistan. Gas demand in both the UAE and Oman is expected to double in the next decade. Qatari gas could be crucial to the Gulf region, which is seeing demand rising at 6.5 per cent per year. The region has substantial gas reserves of its own, some 975tcf but, save for Qatar, most are in the form of associated gas linked with oil production and thus not free for independent exploitation.

According to the Dolphin plans, a 217-mile offshore pipeline will carry 2 billion cubic feet per day of gas from Ras Laffan in Qatar to Taweelah in Abu Dhabi and Jebel Ali in Dubai. The project will be carried out by Dolphin Energy Ltd, in which UOG currently owns 75.5 per cent of the stake and TotalFinaElf 24.5 per cent. Long-term Dolphin plans include a westward pipeline to export gas to Kuwait.

Qatar is Opec's smallest oil producer with annual production of 756,000 barrels per day (bpd), but the plans are to hike capacity to 1 million bpd within the next few years in a two-stage operation. The first will see a hike of 170,000bpd in 2002 and the second an increase of 80,000bpd. Most of the capacity boost is likely to occur in the Al Shaheen field operated by Denmark's Maersk Oil.

While Doha feverishly pursues ventures in oil, LNG and petrochemicals and has encouraged foreign participation in exploiting its upstream and downstream oil and gas sectors, it is creating the legal framework to attract more direct foreign investment and technology. For the first time, the state has allowed foreign investors to fully own projects in select sectors and lease land for up to 50 years, but not to own it. Foreigners, who hitherto had been allowed a maximum stake of 49 per cent in projects, can now aspire to fully own companies dealing in agriculture, industry, health, education and tourism. Doha has awoken to its pristine desert charms and is facilitating the expansion of the hotel sector. An initiative to draw more tourists to the country is being spearheaded by Qatar Airways in association with a committee formed by the state to develop tourism. Foreigners will still have to keep away from banking, insurance, commercial agencies and real estate. Memories of 1997-99 when weaker oil prices prevailed, government spending was cut, unemployment increased and liquidity dried up are still fresh. While prospects for heightened revenues from energy-related development clearly exist, Qatar is maintaining caution in spending so that any advantage gained due to good prices will not be frittered away and debt volume is reduced. In steps seen as unusual for the Gulf region, it abolished the Ministry of Electricity and Water (MEW) last year and this year scrapped the Transport and Telecommunications Ministry, paving the way for eventual privatisation. The MEW's responsibilities were handed over to the Qatar General Electricity and Water Corporation and the Qatar Electricity and Water Company, both independent firms that are expected to operate on a commercial basis. The dissolution of the ministry is part of the government's plans to do away with revenue-stealing subsidies. In another customer-driven move, Qatar Airways and Qatar Telecom, which is partially private, were directed to run the airport and the telecommunications services respectively. Nevertheless, the surplus generated in the 2000-01 budget has encouraged the government to increase capital spending on local projects by 57 per cent to $868 billion in the 2001-02 budget. The government has made it clear it will generally keep a tight rein on spending saying its top priorities are to strengthen reserves and pay off external debts.

The next few years could dictate whether Doha can splurge on infrastructure projects it still cannot afford to undertake. The fundamentals are in place and it looks like that will happen.