Gas Exports May Soon Give Qatar World's Highest Per Capita GDP

by Richard H. Curtiss

On Jan. 1, 1997, the State of Qatar will make its first shipment of liquified natural gas (LNG) to Japan. The gas will come from Qatar's North Field, the largest single deposit of natural gas in the world. That shipment from Qatar's Ras Laffan Liquefied Natural Gas Company (Rasgas) will represent the first return from the North Field on what eventually will be a $10 billion Qatari government investment in gas extraction, liquefaction and shipping.

This gigantic project, funded largely by Qatar's daily petroleum production of 378,000 barrels, will not begin making a profit for Qatar on its enormous investment before the year 2004. Not too long after that, however, Qatar, with a resident population that does not exceed 600,000 people—of whom only 20 percent are Qatari nationals—may have the highest per capital gross domestic product in the world.

Petroleum preceded gas as Qatar's major export. Oil was discovered in the Dukhan field, on Qatar's West Coast, in 1939 and by 1940 its wells were producing 4,000 barrels per day. The Dukhan field consists of three oil-bearing strata layered between limestone formations, with a natural gas reservoir underlying all three petroleum layers. The outbreak of World War II halted further development until 1947, and exports did not begin until 1949 under the auspices of the Iraq Petroleum Company (IPC), which was owned by a consortium of British, French and U.S. companies.

In 1952 the Shell company of Qatar, a subsidiary of Royal Dutch Shell, made additional offshore discoveries in the vicinity of the island of Halul, some 50 miles east of Doha. Since then, four separate offshore oil fields have been discovered in that region. Qatar's combined offshore and on-shore petroleum reserves were estimated in 1990 at 4.5 billion barrels, providing 32 years of production at 1989 levels.

Since 1949, when Qatar's total population was estimated at a low of 16,000 people, petroleum revenues have attracted a steady flow of expatriate workers from all over the world to the low-lying peninsula jutting into the Arabian/Persian Gulf from the Arabian peninsula. The profits also funded a network of schools and hospitals, scholarships for Qataris to foreign universities, an infrastructure of roads and municipal services, and a lavish program of building ever newer, and larger, residences.

Initial Qatari gas production was of gas associated with its petroleum. In the early 1970s Qatar was flaring about 80 percent of the 16.8 million cubic meters of natural gas produced daily in association with petroleum liftings. By 1979 the proportion of onshore gas flared had dropped to less than 5 percent. This dramatic progress was accompanied by setbacks, however, including a massive explosion in 1977 at the plant producing associated gas from the Dukhan field that killed six people and caused half a billion dollars in damage.

The Qatari government celebrated 20 years of independence on Sept. 3, 1991 with inauguration of Phase One of the North Field development project. By the end of that month it was pumping 23 million cubic meters of gas per day from 16 wells, more than meeting, with its other sources, a domestic demand of 71 million cubic meters per day.

Now the Qatar Liquified Gas Company (Qatargas), owned 65 percent by Qatar General Petroleum Corporation (QGPC), 10 percent each by the U.S.-owned Mobil and the French-owned Total, and 7.5 per cent each by two Japanese investment companies, has divided its production into three "trains," so called because each has its own network of equipment, pipelines, and storage facilities. Output from the first two trains will be purchased by Chubu Electric Power Company in Japan, with seven Japanese power utilities planning to take output from the third train in 1998.

In addition to the Qatargas project, a second smaller one is the Ras Laffan Liquefied Natural Gas Company (Rasgas). It is a joint venture between the government-owned Rasgas, which holds 70 percent, and Mobil, with 30 percent. South Korea already has signed up for gas from this project and Rasgas is negotiating for additional purchases by South Korea along with purchases by Turkey, Thailand and Taiwan.

The split within Qatar's ruling family has left the former emir, Sheikh Khalifa, with what amounts to the nation's financial reserves, and his successor and son, Sheikh Hamad, with the responsibility of negotiating loans to complete the gas liquification projects. It is a serious problem that could slow completion, and certainly points to some lean years for the Qatari government. But, so long as the political situation stabilizes, Qatar's equity for the loans lies under its land and water.

Tiny Qatar's proven gas reserves are well over 300,000 billion cubic feet, with potential reserves of more than double that figure. Only Russia and Iran have greater proven reserves than Qatar, which has about 5 percent of the proven gas reserves in the world. Meanwhile, although Qatar is producing at least the 378,000 barrels per day of petroleum it is permitted in accordance with its OPEC quota, it has a capacity of 415,000 b/d. It has boosted production to its full capacity in emergencies such as the one-year cutoff of Iraqi and Kuwaiti production that followed Saddam Hussain's invasion of Kuwait in August 1990. It may be tempted to do so again to solve its present financial liquidity crisis.

Qatar also has invested its petroleum revenues in a number of major economic enterprises. The three largest are the Qatar Fertilizer Company (Qafco), which exports primarily to China and India; Qatar Steel Company (Qasco), which meets Qatari needs for steel reinforcing rods for construction and exports much of its surplus to neighboring Saudi Arabia; and the last to be founded, Qatar Petrochemical Company (Qapco). In various stages of implementation are plans for a half-billion-dollar petrochemical project and an aluminum smelter that can produce 240,000 tons a year using North Field gas.

Two smaller but long-established industries are the Qatar Flour Mills Company, founded in 1969, which processes 700 tons per day of flour and bran from wheat and the Qatar National Cement Company, jointly owned by the government and private investors, which was established in 1965 and produced 327,000 tons of cement in 1990. Its production varies with market demand.

Qatar is a Vermont sized-country, both in population and area, that until the mid-20th century seemed singularly devoid of natural resources. Since even its underground supplies of potable water were extremely limited, most of the nomads who grazed their flocks across its low-lying desert landscape left Qatar in the summer for year-round oases and, literally, greener pastures in Saudi Arabia. Sometimes, when winter rains were scarce, they stayed away for years at a time.

Similarly, the pearl divers and fishermen in Qatar's small coastal towns participated in a mass exodus in the early 1930s when the bottom dropped out of the pearl market because of Japanese cultivation of artificial pearls.

Now with expatriate workers attracted by the jobs produced by Qatar's oil- and gas-fueled industrial boom, the population has exploded. A census of March 16, 1986 counted a population of 369,079, with 84 percent concentrated in Doha and its adjacent suburb of Al Rayan.

The current resident population is estimated by the Qatari government at between 540,000 and 600,000. In addition to the 20 percent of these residents who are Qataris, approximately 35 percent are Asians (mainly from India, Pakistan, Bangladesh, and the Philippines); 25 percent are other Arabs; 16 percent are Iranians; and the remaining 4 percent are from other parts of the world. Among the Qatari nationals, the government estimates that 95 percent are Sunni Muslims and the remainder Shi'i Muslims.

Barring political instability, therefore, the outlook for this small country, which is so rich in underground resources is exceedingly bright. With potentially the highest per capita GNP in the world, Qataris have far too much to lose not to settle their differences, within the ruling family, with their GCC neighbors, and with nearby Iran and Iraq, peacefully and promptly.