Qatar “best economy” in Gulf region

Nadine Hawa for CNBC, October 2008

According to the World Economic Forum’s 2008 Global Competitiveness report (GCR), out of 134 countries worldwide, Qatar’s economy ranks at 26, climbing 5 places from its 31st position last year.

With a GDP expecting to grow by 18% in 2008 to reach $106 billion dollars in 2009, Qatar’s economy mainly thrives on the back of its oil and gas sector.

Before the discovery of oil in 1939, Qatar’s economy relied on fishing and pearling. However, after Japan introduced cultured pearls onto world markets in the 1930s, Qatar’s pearling industry stumbled.

Oil was discovered in Qatar in the late 1930’s, but development of its oil industry only kick started a decade later, in 1949.

According to the OPEC (Organization of Oil Producing Countries) Qatar holds 15.2 billion barrels of proven oil reserves, ranking it at number 4 among the six countries that make up the GCC. However, Oil fields are projected to be depleted by 2023.

On the other hand, large natural gas reserves have been located off Qatar’s northeast coast, with proven reserves exceeding 910 trillion cubic feet, making it the third largest gas holder in the world and accounting for about 15% of the world total. Russia comes in first place with 1700 TCF (or 27% of the worlds total), and Iran ranks second with 971 TCF.

Slowly but surely, Qatar transitioned its economy from oil driven to gas driven. It took the second element of its energy sector and turned it into its main one, doing so primarily through substantial foreign investment in the development of its gas fields.

Qatargas was the country’s first and major liquefied natural gas (LNG) company established in 1984. The company is a joint venture involving Qatar Petroleum, ExxonMobil, Total, Mitsui, and Marubeni.

In 2005, gas overtook oil as the leading source of export earnings. In 2007 Qatar became the world’s top LNG exporter after it first began exporting liquefied gas to Japan in 1996 through its Qatargas project.

Today, Qatar’s oil and gas industry accounts for more than 70% of the country’s total revenue and about 85% of export earnings. In 2008 the sector contributed 78.6% of GDP.

The country continues to inject large amounts of capital into the exploration and production of natural gas. According to the Qatari ministry of Economy, nearly $100 billion should be invested by the end of this decade, of which $15 billion will be invested in LNG expansion schemes.

As more liquefied natural gas output comes onstream (77 mmtpa by 2011), and as oil prices remain at higher levels, the Gulf country’s economy is expected to remain on a robust growth path.

Qatar National Bank (QNB), the Gulf country’s largest lender, recently stated that its economy would continue to be driven by its natural gas sector and related industries, which have helped build Qatar’s budget and trade surpluses, and which have propelled this small Gulf country towards big growth.