Economy

1. Oil

Despite efforts to diversify, the Oil and Gas sector is still very much the back-bone of the Qatari economy. Oil was discovered in 1939 and commercial exploitation started 10 years later with the onshore Dukhan field. State owned QP was established in 1974 to oversee all aspects of the sector. Since 1995, some US $30 billion has been invested in Oil & Gas development.

Foreign oil companies have been encouraged to invest in the oil exploration under production-sharing agreements (EPSA’s). The onshore Dukhan field, located along the west coast of the peninsula, is Qatar’s largest producing oilfield. QP also operates the offshore field Bul Hanine and Maydan Mahzam. A number of foreign oil companies operate elsewhere on the basis of EPSA agreements Id al-Shargi (Occidental Petroleum) from the North Dome and from the South Dome, Al-Shaheen (Maersk Oil), Al-Rayyan (Anadarko), and Al-Khalij (Total).

The country’s two primary export streams are Dukhan and Marine blend. Despite the country’s significant oil production and reserves, oil accounts for less than 15% of domestic energy consumption.

Qatar exports almost all of its oil production to Asia, with Japan by far its largest customer followed by Singapore, South Korea, Thailand & Taiwan. In the first ten months of 2003, net oil exports totaled 898,055 barrels per day (bbl/d). During this period, Qatar produced 928,055 bbl/d of liquids, up from 840,110 bbl/d in 2002. The reversal of the previous downward trend was the result of ending production cuts undertaken in coordination with OPEC, which had begun in January 2002.

2. Natural Gas

With proven reserves of 900 TCF (trillion cubic feet), Qatar’s natural gas reserves rank third in size behind Russia and Iran. Most of Qatar’s natural gas is located in the offshore North Field, which is the largest known non-associated natural gas field in the world. The Qatari government believes that the country’s economic future lies in developing this vast natural gas potential. Currently, Qatar has two liquefied natural gas (LNG) exporters: Qatar LNG Company (QatarGas), a joint venture between QP, Total, ExxonMobil, Mitsui and Marubeni, and Ras Laffan LNG Company (RasGas) with QP and ExxonMobil as its principal shareholders and Japanese and Korean investors having smaller shareholdings and RasGas-2 which was established in 2001 to supply LNG to India. QatarGas exports principally to Japan, whereas the main export for RasGas LNG is South Korea. Long term agreements have been signed to sell and supply LNG to Italy and Spain. Both QatarGas and RasGas are adding new facilities to their LNG plants and as a result Qatar hopes to increase exports to 30 million tones by 2008. Qatar’s strategy includes exports by pipeline to neighboring states. The Dolphin Project will build an integrated pipeline grid for Qatar, the UAE & Oman. A similar project involving Kuwait & Bahrain is also under consideration. An other dimension to the LNG strategy involves the development of gas-to-liquids (GTL) projects, promoting the use of super-clean fuels.

3. Electricity

Qatar currently has an electric generation capacity of 1,864 megawatts (MW), and produces 9.3 billion kilowatt-hours of electricity per year. Most of the country’s power plants are from natural gas-fired turbines, run in tandem with water desalination process.

In May 2000, the Qatari government took a major step towards partial privatization of its power sector. Assets owned by the Ministry of Electricity and Water (MEW) were transferred to the Qatar General Electricity and Water Corporation (QEWC), now called KAHRAMAA. KAHRAMAA is 57% controlled by local investors and 43% controlled by the government. KAHRAMAA has been granted the responsibility of owning, managing and operating the Ras Abu Fontas-B power & desalination complex, currently with a capacity of 610mw; 30 million gallons a day. KAHRAMAA also holds a 25% stake in the Ras Laffan Electricity Company, which is developing the country’s first independent water and power project (IWPP) on a build and operate basis. In its first phase the $700 million IWPP project will have a generation capacity of 750mw and a water desalination capability of 40 million gallons a day.

The residential sector accounts for about 80% of Qatar’s electricity consumption, but this share is likely to decline somewhat as power demand associated with LNG export terminals increases. In response to financial pressures, the Qatari government announced in 1999 that it would limit the provision of free electricity to Qatari-citizen households, with payment required for consumption above a set threshold.

4. Manufacturing

Natural gas is being used as a feedstock for Qatar’s burgeoning petrochemicals industry. A number of major projects are now producing value-added products for both domestic consumption and export. The Qatar Petrochemical Company (QAPCO), a joint venture between QP, Elf Atochem of France and Enichem of Italty, produces ethylene, low density polyethylene (LDPE) and sulphur. It is currently the largest producer of LDPE in the Middle East. The Qatar Fertilizer Company (QAFCO), a joint venture between QP and Norsk Hydro of Norway, manufactures ammonia and urea, and is the largest producer of fertilizers in the Middle East. The Qatar Fuel Additives Company (QAFAC) is a joint venture involving Canadian and Taiwanese concerns, alongside QP, manufacturing methanol. Other projects currently being developed include the Qatar Vinyl Company (QVC), the Qatar Chemical Company (Q-Chem), a joint venture between QP and Phillips Petroleum, methanol and HDPE/LDPE plants in Ras Laffan, and a toluene diisocyanate unit in Mesaieed.

The Qatar Steel Company (QASCO) has been a pioneer in the Gulf region in the use of natural gas in the conversion of iron ore into sponge ore, of which 90% is exported. Qatar also has significant cement, flour and consumer goods manufacturing concerns.

While the bulk of the country’s heavy industry has developed as state owned enterprises or as joint ventures in which the State is a major shareholder, the government is actively encouraging the private sector to invest in the development of light industry. Some 20% of the shares in the Qatar Manufacturing Company (QIMCO) are held by the government, while 80% are quoted on the Doha Securities Market to encourage private participation in small and medium-sized industrial projects undertaken by the company. Preferential financing for small and medium sized industrial enterprises is also available through the Qatar Industrial Development Bank.

Back