Qatar - The Rapid Rise from the Natural Pearl to the Oil and Gas Pearl on the Arab Gulf
Thursday, September 13th, 2007
by Bernd-Dieter Fridrich
journalist specializing in business,
tourism and environmental protection
(AEJ / FIJET / TELI / UBJET)
The predominantly flat, semi-arid desert state of Qatar began oil production at the end of the 1940s – up to that point, it was just a poor producer of pearls like many of its neighbors. As a member of OPEC, founded on September 14, 1960, in Baghdad, the state of Qatar, with its immense oil and natural gas reserves, is today one of the richest countries on earth. Under the ruling family, Al-Thani, and according to the expressed wish of the head of state, Emir Sheikh Hamad bin Khalifa Al-Thani, the Emirate was democratically restructured, step by step, in order to gain more trust domestically and abroad – the best prerequisites for economic prosperity and lucrative investments in the country on the Arabian Gulf with a total area of only 11,437 square kilometers and an estimated 900,000 inhabitants (2006) with a majority of foreigners. The population is composed of about 175,000 Qatari and around 710,000 guest workers, predominantly from the Islamic nations of Pakistan, Bangladesh and Sudan, but also from Hindu states like India and Nepal. Due to a lack of reliable statistics, the figures fluctuate up to 15% in both directions.
Qatar, in the northeast of the Arab Peninsula, was already inhabited during the Stone Age by hunters and gathers. Most of the people left the area long before the Common Era because the region became increasingly dry. To better understand the geographic location, two figures – it stretches from north to south about 175 kilometers, from east to west on average about 65 kilometers. Apart from sporadic trading settlements on the coast after the begin of Islamization in 628 B.C., the land was almost exclusively inhabited by Bedouins. Since the Dilmun Culture around 3200 B.C., which was based on Bahrain and exhibited trade relations as far away as India, its only ”wealth” consisted of the trade in natural pearls, which extensively collapsed after 1930 due to the beginning of cheap Japanese cultured pearls. This led to a severe economic crisis that drove the Qatari to mass emigration. The first discovery of oil must have seemed like a gift from heaven.
Oil became its economic mainstay at about the same time that Great Britain declared Qatar’s independence on September 1, 1971, and the associated rejection by Qatar – and Bahrain, by the way – of joining the United Arab Emirates. The Sheikhs of Qatar now took the title of emir. In the ”fateful year” of 1971, the largest natural gas field on earth was discovered in the so-called North Gas Field (380,000 billion cubic feet of reserve). With its take-over of the oil business in 1972, Qatar became the first small oil producing country on the Gulf that controlled 100% of its oil production. Through the rising oil prices on the world market, the country became ever richer. The proven raw oil reserves are quoted at 15.2 billion barrels (1 barrel = 159 liter). With an average daily production of almost 1 million b/d (barrels per day) in 2005, the oil reserves should last for another 63 years. The Gulf Cooperation Council (GCC), a regional sub-group of the Arab League in the region on the Arab Gulf, was founded on the 26th of May 1981 with the goal of coordinating the foreign, security and oil policies of the six GCC member states, Bahrain, Qatar, Kuwait, Oman, Saudi Arabia and the United Arab Emirates – a significant pact for Qatar.
Strengths and Weaknesses
To the plus points belong a secure oil supply, enormous natural gas reserves with corresponding parallel industries, a modern infrastructure (1,107 kilometers of roads as well as an international airport in the capital Doha with a passenger turnover of 2.95 million annually) and a constant budget surplus. Among the weaknesses are a dependency on well-trained foreign workers, the general fluctuation of the price of oil and the import of the essential raw materials. One of the main problems of the country is a lack of fresh water reserves. Therefore large industrial complexes desalinate sea water, which, on top of that, is often contaminated by oil, to make it usable. Food has to be completely imported, from France, Great Britain, Germany and Japan, for example.
Though Qatar has only the third smallest oil reserve among the OPEC states, its huge natural gas reserves, according to estimates up to now, is the third largest in the world, including the world’s largest gas field not associated with oil reserves. The Emir is doing his best to diversify the economy in the long run and promote the development of non-oil related industries. Nevertheless, the search for oil sources close to the coast continues unabated.
The government is looking to lure about 1.5 million tourists into the country by 2010 with a new image campaign – beaches yet untouched, duty-free shops and modern hotels. Whether this will really draw a flood of foreign tourists in the face of the multitude of like offers from all around the world appears questionable to this writer. Two imposing bridge structures are meant to reduce the dependency on the bordering Saudi Arabia in the medium-term. The so-called ”Friendship Bridge,” with a length of 45 kilometers, is supposed to connect Qatar with the island state of Bahrain. A second bridge is meant to create a link to the United Arab Emirates.
Absolute highlights with a direct or indirect effect on the economic environment, on the other hand, are free education from grammar school through to the university. Moreover, the government finances studies abroad. The founding of ”Education City” and the further development of the University of Qatar in cooperation with various foreign universities demonstrates a further direction promising success in the education sector. Furthermore, the government guarantees every graduate a job.
Health services are free for Qatari. The hospitals have Western standards of care. The government also pays for necessary treatment abroad. Therapeutic care, electricity and the cost-intensive produced desalinated water is free also to the citizens of the other five GCC states.
Public services are free. With a high per capital income (GNP 2005: 38,125 euros), the state levies no income tax on Qataris. State credit at preferential rates promotes home construction.
Top position in international gas business
In recent years Qatar has worked to gain a worldwide leading role in processing natural gas. The dominating state concern in the combined oil and gas business is ”Qatar Petroleum” (QP). Old established merchant families own the most important energy company groups. A law was passed in October 2000 in Doha that allows foreigners 100% ownership of companies in sectors like tourism, agriculture, health and education. Especially important are the businesses in the centre of the gas industry, such as ”Ras Laffan Industrial City,” located north of the capital Doha, which has the largest gas liquefaction plant in the world and its own harbor. This enables an economically profitable shipping of the gas. The major buyers at the moment are GCC states. The demand for natural gas is rising worldwide. The government will have invested among other things 50 billion US dollars by 2012 in order to produce the highest daily yield in the world. The Qatar currency is the Qatar Riyal (QR), equally 100 dirham, and tied to the US dollar (1 US $ = 3.64 QR)
The exploitation of the gas reserves in the North Field will have considerable effect on the Qatar economy as a whole. Gas’s share in the revenue chain will rise tremendously and provide above normal state income, dependent, however, on the future world market price. Industries based on gas like petrochemicals, refinery products and plastics are gaining in importance. But not much will happen without increased private investment and also above all the creation of qualified job positions. Here the demand on the government is especially great. Qatar has developed to the center of a gas-cooperative net in the Gulf region already today, The United Arab Emirates and Oman will be supplied by natural gas through the Dolphin Project. Gas deliveries to the USA are planned.
Further industries are the major and heavy industries with bases in Mesaid and Ras Laffan. The Emir’s ambitious industrialization program includes the export of lucrative refined products in the petrochemical sector with great expansion in the capacity of the area of fertilizers, for example. A new ammonia plant (Qatar Fertilizer Company 4) reaches a daily production of 2,000 tons (50 % increase). The new urea production plant shows a daily capacity of 3,200 tons (+ 65 %). Qatar has thus advanced to become the world’s largest producer of chemical fertilizers. Moreover, the government has recently increasingly backed agriculture and fishing in order to gain some independence from imports. Along side packaged goods containers, primarily liquid gas (LNG) is loaded in the harbor of Ras Laffan; gas to liquid (GTL) is also being produced since 2007. The number one trans-shipment centre for bulk commodities and packaged goods is Mesaid. A new, small port facility on the bay of Doha has also made the shipping of packaged goods and containers possible. Al-Chaur (north of Doha) and Al-Wakr (south of the capital) have until now been primarily fishing ports with little coastal shipping service, while Ar-Ruwais on the north coast of the country is purely a fishing port. Worth mention is an ambitious building project, a 400 hectare artificial island named The Pearl. This new island is located around 20 kilometers north of the international airport near Doha, which has already made very positive headlines a number of times because of its premium terminal. Qatar Airways offers the first class passengers pure wellness. The construction of a new airport has begun to handle 50 million passengers annually – the value of the building contract is five billion US dollars. The airport is supposed to take up operations in 2015.