The diversification of Qatar's economy away from traditional reliance on crude oil is gathering momentum with new initiatives to expand capacities of petrochemical industries and investments in LNG. Potential is also seen in LPG and the gas-to-liquids (GTL) concept with Qatar aiming to be the first in the world to install a world-scale GTL plant to produce ultra-clean, middle-distillate products such as diesel and naphtha, the demand for which is increasing worldwide.
Recent months have seen the finalisation of important projects in which giant Qatar Petroleum signed deals worth more than $2 billion with foreign firms to build petrochemical plants. Chem II, which is a follow up of the still under-construction Chem I, will produce 350,000 tonnes per year (tpy) of high-density polyethylene (HDP) and normal alpha olefins. Chevron Phillips Chemical, a joint venture between Chevron Texaco and Philips Petroleum, has a 49 per cent stake in the $1.1 billion Chem II project with QP taking the rest of the share.
In another deal, Qatar will have a world-scale linear low-density polyethylene plant with an output capacity of 450,000 tonnes. The $550 million plant will be put up by Qatofin, in which Qatar Petrochemicals Company will hold 63 per cent of the shareholding with Atofina taking 36 per cent and QP 1 per cent. Atofina is a unit of TotalFinaElf. Qatofin will be participating in a $450 million 1.3 million tpy ethane cracker project that will have Q-Chem II taking the main 53.31 per cent stake. Qatofin will hold a 45.9 per cent share with QP accounting for the remainder.
"These projects present a unique opportunity for QP to expand and diversify its petrochemical industry base by adding value to its North Field gas," said Oil Minister Abdullah bin Hamad Al Attiyah at the signing of the deals. The North Field has triggered a wave of excitement following a recent announcement by the minister that Qatar has at least 900 trillion cubic feet (tcf) of gas reserves, three times the known level in the mid-1990s. "Therefore large-scale developments will take place now," the minister is reported to have remarked. He spoke of a "whole gas basket" including LNG, LPG and GTL and other gas-based products as being available for exploitation in local and international markets.
Moody's Investors Service, which raised Qatar's foreign currency country ratings for bonds and deposits, noted that LNG's contribution to the Qatari GDP was expected to rise steadily and catch up with crude oil revenues, probably by 2005. Several long-term supply agreements have been signed including ones for shipping LNG to the Gulf states, India and Italy.
Large-scale investments have left Qatar with total direct government debt at $9 billion or 56 per cent of GDP at the end of the fiscal year 2001 with total external debt put at $12.3 billion or 76 per cent of GDP, according to reports. But, as the ratings agency observes, the borrowings are directly linked in most cases to the projected export earnings of the various enterprises.
One of the export earners, Qatar Fertiliser Company (Qafco), owned 75 per cent by Qatar Petroleum and 25 per cent by Norsk Hydro, is constructing facilities for a phase 4 expansion.
Qatar has taken important steps to brighten the economic outlook including implementation of a privatisation programme that has notably embraced the telecom and electricity sectors.
The International Monetary Fund described Qatar's economy as healthy, observing that its strategy of economic diversification had paid dividends in recent years and boosted growth to "impressive" levels. While pointing out that the Qatari economy grew 7.2 per cent in 2001 against a stronger 11.6 per cent growth in the previous year, the Washington-based lender was quick to state that the 2001 growth happened despite adverse conditions from the global economic slowdown.
An important agent of diversification is the state-owned Qatar Industrial Development Bank, which is promoting a Qatari-German collaboration for manufacturing medical devices in Qatar. In another pioneering role, QIIDB has promoted an acrylic sweater knitwear factory project in collaboration with a Korean company. A significant feature of the project is that most staff will be women.
Recently, the bank signed a MoU with the Italian bank Mediobanca for financing joint Qatari-Italian projects based in Doha. QIDB has staged road shows in Europe and has said several Italian companies showed interest in participating in the venture.
