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Qatar Coming to Grips with New Realities of Global Energy Markets 23, November 2015

Posted by thegulfblog.com in LNG, Qatar.
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Qatari Liquefied Natural Gas (LNG) carri

The following article was written for and published by the Arab Gulf States Institute Washington (AGSIW). The precis can be found below and the full article can be downloaded from AGSIW (for free) following this link.

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Qatar has long dominated the market for liquefied natural gas (LNG), an increasingly popular energy source that can be transported great distances, is widely regarded as being cleaner than coal, and fills increasingly important parts of states’ energy mixes. In recent decades, surging demand and relatively limited supply has created a climate for Qatar to exploit its huge gas resources and consequent economies of scale to bestride the market.

In fact, Qatar dominates the LNG market far more than Saudi Arabia dominates the oil market. But this period of dominance is coming to an end. Demand in China that underpinned the industry’s growth is dipping and not being replaced. Across the world from Australia to the United States, to Israel, to Mozambique, large discoveries have been made and high prices encouraged hundreds of millions of dollars of investment in LNG infrastructure. Even with the fall of the oil and LNG prices, which challenges many new suppliers and their costly outlay to establish the necessary LNG infrastructure, Qatar’s dominant position supplying a third of the world’s LNG will be over by the end of the decade.

Though Qatar’s budget revenue fell 40 percent from July 2014 to July 2015, the state began cutting back in 2013 when a new administration led by Emir Tamim bin Hamad al-Thani took power. These cuts were partly driven by a savvy medium-term view of the bearishness of the energy markets. But the new leadership was also making political statements, cutting back on some of the more expensive pet projects of its predecessors such as the Qatar Foundation, which oversees foreign universities in Doha’s “Education City.” The new administration needs to ensure that it does not hamstring the Qatar Foundation – a central engine of the state’s push to diversify away from its hydrocarbon-dominated economy – as Qatar’s dependency on the oil and gas industry remains profound. Yet even with the reliance on oil and gas and the impending end of its dominance in the LNG field, Qatar’s population remains small and its energy supply role prodigious. Qatar will easily be able to manage fiscally if its ambitions remain more limited than before, as the current administration suggests through its more limited policy ambitions.

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Budget cuts in Qatar bite 9, March 2015

Posted by thegulfblog.com in Qatar.
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Qatar flag from the water

That most ministries in Qatar are facing significant budget cuts is relatively old news. The bean-counters in Qatar were expecting a dip in the oil price and a rise in their infrastructure-driven expenditure since at least early-2014. Consequently, budget paring-back was always a central priority of the new administration. I’ve always believed that the new lot, on the first day in power in mid-2013, skipped merrily into the Diwan, had a look at the books and were somewhat horrified by what they saw – namely unchallenged expenditure.

Qatar is a young state with an emerging bureaucracy. Spending has seldom been managed in what would be considered in a modern state a methodical, measured manner. Instead, the sense was of ministers doing their best, of course, but splurging cash left, right, and centre according to their best guesses as to what the Emir wanted. Don’t forget that under the Prime Ministership of Hamad Bin Jassim al-Thani (2007-2013), Qatar scarcely operated with a Prime Minister given how many hats he wore: also Foreign Minister (1992-2013), also chief of the Sovereign Wealth Fund (QIA), also Chairman of the national airline, and also Qatar’s dominant businessman.

So the new administration set about rectifying the fiscal situation, driven by a belief that income would plateau somewhat. But now that the oil price has dropped off the proverbial cliff, things seem to be even stricter.

But, as so often in Qatar, decisions are being made that just make little sense. A British science programme aimed solely at low-achieving Qatari male-only schools – in other words, an aim that could not possibly be more on target for the QF’s basic goal and even a goal that has become yet more important for the new administration – was scrapped. And how much is QF going to make by kicking out (albeit temporarily) students from their dorms? The self-defeating logic of Qatar never ceases to amaze.