Qatar’s plans to accelerate the Hamad Port expansion project by bringing it forward to 2020 from an initial target date of 2030 will support the country’s non-hydrocarbon growth over the next several years, Moody’s Investor Service has said in an update.
On completion, the Hamad Port will be one of the largest deep-water seaports in the world with a capacity of 12mn twenty-foot equivalent units (TEUs), Moody’s said.
“However, these plans are likely to be delayed due to the effects of the coronavirus pandemic,” Moody’s said.
In the medium term, Moody’s expects Qatar’s overall growth to accelerate during 2022-2024 because of the country’s hosting of the FIFA World Cup in 2022 and the investment spending on the expansion of LNG output capacity.
During the course of 2023-27, QP is targeting to increase its LNG production capacity to 110mn to 126mn tonnes per year from 77.5mn tpy.
“We expect real hydrocarbon output to remain flat in 2020, after an unexpected decline of 1.9% in 2019, whereas we are assuming that the non-hydrocarbon sector contracts 1%, after growing 1.1% in 2019. “Nevertheless, the risks to these growth projections are skewed to the downside. We expect the hydrocarbon sector to remain a drag on growth until at least 2025, when we expect the new LNG trains to start coming on stream,” Moody’s said.
Moody’s has reduced its year-average assumptions for the Brent crude benchmark oil price to $40-$45 a barrel in 2020 and $50-$55 in 2021, a 33% and 17% decline from the 2019 average, respectively.
“The impact of lower prices will take time to filter through in Qatar as the hydrocarbon exports are mainly liquefied natural gas (LNG) sold on long-term contracts with pricing that follows oil prices with a three to six month lag. For Qatar, this means that the bulk of the fiscal impact of lower oil prices will materialise during the second half of 2020 and in 2021,” Moody’s said.
“We expect that lower oil prices will reduce government revenue by about 5% of GDP in 2020 and another 2% of GDP in 2021. We in turn expect Qatar to post a fiscal deficit of 1.6% of GDP in 2020, which will widen to 4.1% of GDP in 2021, compared to a surplus of 1% of GDP 2019.
“This forecast assumes that the decline in oil prices will be partly offset by lower overseas spending by Qatar Petroleum, which will allow the national oil and gas company to transfer more revenue to the budget. The forecast also assumes that during 2020 the government will delay some nonessential capital spending, up to 2.5% of GDP, in order to limit fiscal deterioration,” Moody’s said.