Qatar's medium term prospects look favourable: IIF

Qatar’s medium-term prospects look "favourable" and its growth will be driven by stronger liquefied natural gas (LNG) production and associated downstream sector, according to the Institute of International Finance (IIF).

"Overall, Qatar’s medium-term prospects look favourable," the US-based economic thinktank said in a research note after its economists' online investor trip to the Gulf Co-operation Council (GCC) last month.

The increased LNG production, along with a strong fiscal and external position, would allow for strong capital accumulation and investment by its SWF or sovereign wealth fund (Qatar Investment Authority or QIA,) it noted.

Non-hydrocarbon growth would also benefit from increasing LNG production, particularly downstream sectors such as petrochemical and fertiliser plants, according to the IIF.

"Qatar is seeking to cement its position as the world’s second-largest gas exporter and the largest exporter of LNG given its massive reserves and surging global demand," it said.

Finding that massive investment in the natural gas sector is underway to expand LNG production; the report said the attendees (in the online meeting) were of the view that Qatar has a global competitive advantage on LNG production and it should be utilised.

Qatar is currently the third largest exporter of LNG (behind the US and Australia), but it is the country with the lowest cost of production, with a cost of production that is nearly 70% cheaper than the closest competitor (the US), the IIF note said.

"This global competitive cost advantage not only allows flexibility and resilience to Qatar amidst geopolitical uncertainty; it also allows it to heavily benefit from the energy transition," it said.

Highlighting that natural gas is the cleanest fossil fuel in terms of carbon dioxide emissions, and is considered a “transition” fuel; it said Qatar’s low cost of production will enable the country to supply an increase in demand from Asia as it transitions to cleaner sources of energy.

"It will also mean that Qatari LNG will be the last to be impacted once greener sources of energy become more scalable and affordable," it said, adding Qatar’s strategic location allows it to supply LNG to two large markets: Europe and Asia.

Finding that Qatar could achieve consistently strong growth until at least 2030; the report said growth will come from both the hydrocarbon and non-hydrocarbon sectors.

In the lead-up to the 2022 World Cup (from around 2012-22) GDP growth was primarily led by non-hydrocarbon sector, as the country invested heavily on infrastructure.

At the same time, hydrocarbon production, while strong, remained relatively flat during this period. In 2017, Qatar lifted a moratorium on further development of the North Field, a massive offshore natural-gas field that holds the majority of the country’s natural gas reserves.

The North Field Expansion project is split into three phases and aims to increase total LNG production by 85% by 2030, from 77mn metric tonnes per annum (Mtpa) in 2023 to 142Mtpa by 2030.