It is estimated of this $33bn needed, 80% will be in equity and 20% in debt. With projects from the Asian Games in 2006 to the $2.6bn Ras Laffan aluminium smelter to the $1bn Education City, Qatar has a host of project finance on top of the LNG and civil works in progress.
Speaking at the fifth Doha Conference on Natural Gas at the beginning of March, where a number of gas initiatives were announced, Qatargas chief executive Faisal Al Suwaidi said: “Through our new ventures – Qatargas II, Qatargas III, refinery and other facilities – we will be able to increase our annual LNG capacity to over 33m tons and considerably decrease unit costs. Our aim has always been to utilise the most modern technologies to maintain the company’s leading position in the LNG industry.”
These long-term agreements to supply LNG to markets such as the UK, France and the US, along with various agreements with major oil companies such as Total, ExxonMobil and Shell, provide added assurance of Qatar’s long-term revenues. They also clearly demonstrate the huge growth capacity of the economy and the huge wealth that will flow into Qatar in the years ahead.
More than any other indicator, the table of expected LNG exports best represents the country’s huge economic potential. With 2012 forecast exports of 77.2m tons a year, over four times estimates for 2004 exports (2003 exports were 14.4m tons), Qatar is at the beginning of a huge growth spurt. And the country still has plenty of oil as well as gas.
Qatar’s crude oil production increased by 2.2% to average 730,000 barrels a day during the first half of 2004 and, with increasing prices, oil will continue to provide strong revenues along with the growth from gas.
According to QNB, preliminary estimates from the Planning Council show Qatar’s GDP growth continuing at an impressive rate of 20.5% in 2004 to reach QR103.6bn. Qatar’s GDP has more than doubled since 1999 when it was QR45.1bn and the role of the oil and gas sector has also increased, accounting for an estimated 62% of GDP in 2004 at QR64.4bn. With increasing prices and production, the economy looks set to maintain a strong growth rate.
At present, oil export revenues exceed gas exports but that is likely to change quickly as gas exports increase dramatically. In 2003, petroleum and related products amounted to QR27.4bn with gas at QR17bn but it is anticipated that, at the current pace, LNG export earnings could match those of oil by 2006. In 2003 LNG exports reached 14.4m tons with Japan receiving 6.8m tons, followed by Korea with 5.8m tons, Spain with 1.5m tons and the US with 0.3m tons.
Qatar’s recent rapid growth has catapulted it into being one of the richest countries in the world in terms of GDP per capita. While the population in the 2004 census jumped to 744,000, more than double that of 1986, Qatar is still relatively small in population terms compared with neighbouring Saudi Arabia with a population of over 20 million. Therefore, as the economy has expanded, GDP per capita has reached record heights, rising from $31,897 in 2003 to $36,476 in 2004. At expected growth rates, Qatar is likely to have the highest GDP per capita worldwide in the not too distant future.
QATAR FINANCIAL CENTRE
Mohammad bin Ahmed bin Jassim Al-Thani, the Qatar Minister of Economy & Commerce, explains to The Banker the motivation and strategy behind the development of the Qatar Financial Centre.
Q What is the driving force behind the concept of the Qatar Financial Centre and why will major international institutions want to establish here?
A First, the business is here. The world’s major companies are signing major deals here. We have big infrastructure projects and major developments going on. Also, we think that if we bring in a centre with very high standards and a reliable monetary and regulatory system people will be interested to use it.
I am not saying other centres are not at the same level but this centre will be run totally independently and it will have its own integrity and it will have to earn it from the names that are going to be in it and the freedom the law has given them. We still think there are services that are not yet available and we still believe the Middle East has more potential. We want to innovate, not so much in the short term but in the longer run; we are very positive about the centre’s success.
Q With Bahrain established for over 20 years and Dubai well advanced, is there room for another financial centre in the region?
A Again we are thinking to the medium-to-long-term future.There is a significant and growing volume of local financing needs in Qatar and the Gulf, and we are seeking to develop a world-class environment in which international financial institutions, related professional service firms and corporate headquarters can establish a strong and lasting presence. We want partners who wish to become key influencers over the longer term. As real value-generating opportunities arise, appropriate skills and a mature business infrastructure will follow – along with the liquidity we see in more mature markets.
Q What will be the main focus of the new centre; will it be investment banking?
A It will be mostly project finance, wealth management and structured finance. It will also be a business centre where people can create vehicles for their investments. Project finance and private banking appear to have the greatest potential for the QFC. The value of project finance is driven by the large capital investment within Qatar and (to a lesser extent) the growth in the GCC region in general. Project finance can take many forms, and the potential for Islamic bond issuance is particularly promising.
Q What will be the relationship between the QFC and the Doha Securities Market, will the centre eventually control the DSM?
A At the moment this is not yet envisaged but if such control is going to complement the centre then we will study that. We are opening the DSM (in April) to 25% investment from expatriates – this is where the centre is surprisingly interesting. There is a lot of interest from the outside world, not only the region but the outside world – the fund managers and the big names are all inquiring and are visiting.
I am not saying definitely that the QFC is going to include the DSM. We are going to look at it, if there is complementarity we will study it. Initially the QFC will not include the DSM but in the future it could be a complementary part, we will have to study it and see how the centre evolves.
Q Some big institutions such as HSBC and BNP Paribas are already present in Qatar, on what basis will they be able and will want to enter the QFC?
A HSBC on the ground here has the retail banking business and it abides by the Central Bank of Qatar law. If they want to do retail business then they have to go through the central bank but if they want to do corporate and other banking (related to the QFC) then that is acceptable. There is no problem between the QFC and the central bank.
Q Does the central bank have authority over the QFC?
A If you read the law it is very clear that the central bank has no authority over the QFC.
Q In February it was announced that Philip Thorpe, until last year the CEO of the Dubai Financial Services Authority, will be the Chairman and CEO of the Qatar Financial Centre Regulatory Authority (QFCRA). How do you see this move?
A I am delighted to welcome Mr Thorpe as a key member of the new QFC team. Mr Thorpe’s extensive regulatory expertise and his strong international reputation will benefit the QFC and underpins our determination to offer an environment where international best practices prevail. We firmly believe that the QFC regulatory structure, coupled with minimal cost, will encourage financial institutions and multinational corporations to set up in the QFC. We aim to create progressive partnerships whereby we enable firms to operate profitably in our vibrant economy and this, in turn, will benefit Qatar.
Q What is the government’s overall strategy for this project?
A I hope we can be as reliable as possible, that is the key to success, reliability and transparency and delivering on things we promise to do. We are careful, we don’t want to promise things and not deliver them. I’d rather leave it to the team when they are in place to say what they can do.
