Liquefied natural gas (LNG) bids fair to overtake oil as Qatar’s main driver of the economy some time in the future considering the growing world demand for the product and the state’s ability to accomplish substantial supplies from its vast natural gas reserves.
Although LNG is still an energy product, Qataris describe its exploitation as diversification of their state’s oil-rich economy. Diversification has been the key word for Qatari policy-makers, and Doha has paid much attention to utilising the country’s vast energy resources to fuel development in fields such as petrochemicals, fertilisers and steel.
But it is LNG that is the magic wand with which Qatar can strike it rich. Already wealthy in terms of its small population, the Gulf state is set to become wealthier with the assurance of secure LNG supplies for many years. The country exported 15 million tonnes of the product in 2002, a figure it plans to raise to 63.5 million tonnes by 2010. Earnings from LNG sales were $2.5 billion last year, but as much as $25 billion will have to be invested to raise exports to the targeted level. Qatar’s LNG is now shipped mainly to Japan and South Korea. India’s gigantic market beckons, and the US could also become a major buyer. In recent moves, Qatargas signed heads of agreement with Conoco Philips for supplying 7.5 million tonnes per year (tpy) to the US market and with Exxon Mobil for shipping 15 million tpy to the UK. But while ample natural gas exists for LNG production, transportation issues have come to the fore.
It is here that Qatar Shipping (Q Ship) has stepped in to partner the big names in shipping in the purchase of vessels for LNG charters. The company raised the funds for equity participation in six vessels through a rights issue of shares and is excited over the ventures. Said a senior Q Ship official: “LNG transportation is fast emerging as a lifeline to the energy business. This is an exciting business opportunity and over the past two years Q Ship has evolved from a regional shipowner in Qatar to one of the largest LNG transportation enterprises in the world.” And to be a worthy player in the game, Q Ship is developing an independent LNG ship management capability involving the transfer of technology. That initiative will be critical when Q Ship participates in more consortiums in the future.
According to the Arab Monetary Fund (AMF), Qatar’s will be the best-performing economy in the Arab world this year, its GDP projected to grow 8.6 per cent compared with 4.6 per cent last year. Exports of oil, gas and other products will likely reach $13 billion in 2003 compared with $11 billion in 2002. The AMF also estimated that Qatar’s debt would reach $16.1 billion this year, but Qataris know that most of it is to fund LNG projects that will anyway pay huge dividends in the years to come.
Earlier this year, the Qatari government formed a new outfit, Industries of Qatar (IQ), to give the general public share participation in some of its prized companies.
IQ, in which Qatar Petroleum holds 85 per cent shares, with the remainder held by the public, has taken over the majority stakes held by QP in Qatar Petrochemical Company (Qapco), Qatar Fertiliser Company (Qafco) and Qafac while it controls all the shares in Qatar Steel Company (Qasco).
Both Qapco and Qafco have ambitious expansion projects in progress, although they suffered a drop in net profits. Qafco saw record production for both ammonia and urea, and reported mixed fortunes in exports. Qapco had lower production of ethylene and polyethylene, while sulphur output rose.
Qapco is also involved in projects in Q-Chem II to make high-density polyethylene (HDPE) and normal alpha olefin (NAO). It has strong participation in another venture linked to Q-Chem II to build an ethane cracker unit with a capacity of 1.3 million tpy of ethylene.
The expansion at Qatar Fertiliser will make it one of the premier plants of its kind in the world. Described as Qafco-4, the complex already having undergone three previous expansions, it will create additional capacity for 3,500 tonnes per day of ammonia and 2,000 tonnes per day of urea, enough to bring annual production to 2 million tonnes of ammonia and 2.8 million tonnes of urea. This will represent a 50 per cent boost in ammonia production and 65 per cent in urea. German multinational engineering company Krupp Uhde is building a unit each for ammonia and urea. Qatar Fertiliser has also completed building a urea formaldehyde plant as part of Qafco-4.
Qatar Steel is constructing a 300,000tpy rebar and wire rod mill and installing an electric arc furnace package. The expansion, when completed in 2005, will raise its steel production from 1 million tpy to 1.5 million tpy.
The expansion at Qatar Steel comes at an opportune moment when steel demand is growing in the Gulf with the UAE itself recording a demand of 1.4 million tonnes last year from 1.3 milion tonnes. Local capacity is inadequate, just 400,000 tonnes coming out of the mills.
