Qatar is endowed with major hydrocarbon reserves, especially in relation to the size of its population. Nearly all of its gas reserves are contained in an offshore gas field called the North Field which is the largest, single natural gas deposit in the world. Combining Qatar’s reserves of gas, crude oil and condensates equated to 172 billion barrels of oil equivalent making it the world’s largest LNG exporter and the world’s richest country in terms of GDP per capita. Qatar invested heavily in liquefied natural gas (LNG) in the early 1990s. The sector experienced rapid growth, particularly through continued investment in the first decade of the 2000s. Qatar has pioneered investments in LNG production with western partners and, as a result has become the world’s top LNG exporter and the second largest gas exporter (after Russia if pipeline exports are included).
In 2005, the authorities imposed a moratorium on further development in the North Field. The hydrocarbon phase of development then plateaued in 2011 with the completion of most projects. Since 2011, the priority has been rising investment into the non-hydrocarbon sector in order to build the infrastructure needed to realize Qatar’s National Vision (QNV 2030), which aims to transform Qatar into a knowledge-based economy by 2030. To that end, Qatar is using its significant hydrocarbon surpluses to undertake a major program of infrastructure investments. Project spending, needed for the long-term development of the country and also to meet the deadlines ahead of the FIFA World Cup in 2022, has attracted a large influx of expatriate workers. Taken together, investment spending and population growth have boosted domestic demand and growth in the non-hydrocarbon sector allowing the economy to steadily diversify away from oil and gas. Qatar is expected to continue to grow via attracting, developing and retaining talent. The announcement last year that the moratorium on North Field development will be lifted with LNG output to rise by 30% by 2024 will also rekindle the expansion of the hydrocarbon sector driving another new phase of Qatar’s development.
From 2019 onwards, the decision to increase LNG output by 30% by 2024 will increasingly drive Qatar’s next development phase as the current multi-year wave of infrastructure spending begins to flatten out in terms of growth contribution. The 30% increase will boost Qatar’s LNG capacity from 77 million tonnes currently to 100 million tonnes by 2024. This increase in capacity will require huge investments both onshore and offshore including the construction of three new LNG trains to process the gas. Beyond the direct impact on non-hydrocarbon GDP, this new investment phase, which should begin in earnest from 2020 onwards, will generate substantial multiplier effects on the wider economy, lifting demand for goods and services and driving the country’s development in line with the Qatar National Vision 2030.
Qatar’s decision to lift the moratorium came as a surprise to markets. After 12 years with little word on when it would likely be lifted, many had begun to assume that it could remain in place indefinitely. However, the decision to lift the moratorium in 2017 has helped cement Qatar’s position as the leading global LNG exporter. It will also help to boost growth and national income when production comes on stream, probably just after the World Cup in 2022.
Now is a good time for Qatar to step back into the market to deter new investments elsewhere given its comparative advantages. First, Qatar already has existing infrastructure and LNG facilities that could help keep costs down. The total cost of new production is estimated to be USD2-5 per mbtu, below the level at which other potential new projects are viable. Second, as the world’s largest producer, Qatar already has the reputation for reliability and the relationships to agree long-term supply agreements with importers.