Global credit rating agency Fitch has upgraded the outlook on Qatar's long term foreign currency issuer default rating (IDR) to "positive" from "stable" and affirmed the IDR at 'AA-'.
The revision of the outlook reflects Fitch's expectation that the debt-to-GDP (gross domestic product) will remain in line with or below the 'AA' peer median, while Qatar's external balance sheet will strengthen from an already strong level.
The additional LNG (liquefied natural gas) export capacity that will be brought online as a result of the North Field expansion will bring down Qatar's already low fiscal breakeven hydrocarbon price, it said.
Qatar's 'AA-' ratings are supported by large sovereign net foreign assets, one of the world's highest ratios of GDP per capita and a flexible public finance structure.
Qatar's general government budget surplus is estimated at about 10% of GDP in 2023 (2022: 13% of GDP), including estimated investment income on Qatar Investment Authority (QIA) external assets, and about 8% without.
Oil and gas revenue is assumed to fall by 14% as the Brent oil price will average $85/bbl in 2023 (2022: 98.6).
However, the end of 2022 Football World Cup outlays, less spending on large projects and restrained current spending trends will allow Qatar to maintain budget surpluses until 2025, despite lower hydrocarbon prices.
"We project the first phase of the North Field expansion to start supporting fiscal revenue fully from 2026 and second phase in 2027, assuming no construction delays, and to bring down Qatar's fiscal breakeven oil price below $50 from around $57-58 in 2023-24, excluding estimated QIA investment income," it said.
The government is likely to find new spending outlays aimed at diversifying the economy, but "we expect Qatar to retain surpluses under our long-term oil price forecast of $53 at 2025 prices."
QatarEnergy plans to expand LNG production capacity from 77mn tonnes per year (mtpa) to 110mtpa by end-2025 and to 126mtpa by end-2027.
"We assume that QatarEnergy will cover $12.5bn of core project costs out of its 2021 bond issuance and a similar amount from its cash flow, spread until 2028, on top of contributions by partners," it said.
The energy behemoth will also cover a significant share of the costs of the ancillary projects associated with the expansion. It owns 70% of the Golden Pass LNG project (16mtpa) in Texas which will start production in 2024, bringing new revenue to the budget through QatarEnergy dividends.
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