Endless Opportunities.

Endless opportunities within Qatar’s ever-growing economy

Crude oil prices continue to rise. Goldman Sachs has now predicted that oil prices will touch $140 per barrel over the next few months. Crude oil price increase has been exacerbated by the Ukraine - Russia war. In addition, the European Union has imposed sanctions on Russian oil imports into the EU. These sanctions will stop around 90% of Russian oil imports into EU countries by the end of 2022. These sanctions only cover oil imported into EU through the sea route. It does not cover oil that comes into EU through a pipeline.

This ban effectively constrains the global crude oil supply. With this effective reduction in supply, crude oil prices are set to rise further. But this is not the only reason why the crude oil price is rising. The more important reason is that during two years of COVID-induced lockdowns and restrictions, the Organization for Petroleum Exporting Countries (OPEC) cut down its production and supply of oil. Now that demand for oil has returned back to pre-COVID levels, OPEC has said that it will gradually increase production and supply to pre-COVID levels.?

The past two years also reduced investments in the expansion of refining capacity. Crude oil needs to be refined before it can be used as gasoline, petrol, or diesel in vehicles. This shortage of refining capacity is also causing crude oil price increases in many parts of the world, including the United States.?

Countries that enter into contracts with Russia to purchase its oil will be able to get a lower price for themselves. The price of Russian oil, known as the Urals benchmark, is much less than the price of Brent crude oil or West Texas Intermediate oil. The Urals benchmark is currently trading at $34 per barrel less than Brent crude. So if the current price of Brent Crude is around $120 per barrel, Russian oil is coming at around $86 per barrel. Payment for oil purchased from Russia cannot be made in dollars because of US sanctions on Russia. So payment for this Russian oil will have to be made in Rubels or by other means. India is one major country that is taking advantage of the cheaper Russian oil, amidst rising prices all around.

Qatar’s energy sector

Qatar’s production of liquified natural gas (LNG) has dropped this year despite a surge of requests from European countries to secure Doha as an energy supplier as they move away from dependence on its top supplier, Russia.

The decrease in the Gulf country’s LNG production is partially due to several liquefaction trains being unavailable due to scheduled maintenance,?Bloomberg ?reported.

According to ship-tracking data compiled by Bloomberg, Doha exported less than 35 million tonnes of LNG between January and May, which is down from last year’s 36 million tonnes.

Although Qatar’s exporting capacity does not level up to last year’s output, it generates more sales income. This is because most of Doha’s long-term contracts are linked to oil prices, which were about 60% higher in the first five months of this year, compared with 2021.

According to a report by the?World Bank ?in April, Qatar’s gross domestic product is estimated to increase to 4.9% in 2022 due to its boosted hydrocarbon exports of 10%.

Qatar will likely witness an expansion in its hydrocarbon dependence as its North Field projects begin production. The multi-billion plan is the largest of its kind and seeks to boost Qatar’s annual LNG production capacity from 77 million metric tonnes to 126 million tonnes by 2027.

The unforeseen economic ramifications of the Russian-Ukrainian War onto the world have particularly had a ‘positive’ effect on Qatar’s economy.

“The effects of the war in Ukraine on the commodity markets and its associated economic sanctions are positive, on balance, for Qatar’s economy, the largest exporter of Liquid Natural Gas in the world,” the World Bank’s GCC Economic Update report stated.

?Qatar’s stance on LNG supply to Europe

During Amir Sheikh Tamim bin Hamad Al Thani’s visit to the UK in late May, a Memorandum of Understanding was signed between Qatar Energy and the Department for Business, Energy and Industrial Strategy. The agreement aims to strengthen energy cooperation between Qatar and the UK.

The move is seen as a means of expanding cooperation in energy security, renewable energy, and decarbonization.

Regarding Qatar’s role in potentially alleviating LNG supply concerns, Qatar’s Energy Minister Saad Sherida Al Kaabi, on 24 May?noted : “Unfortunately, it’s a bit painful because it will take time and the Ukraine issue amplifies the price,” he said.

“But we’re absolutely ready to help. The UK is a very important country for us in Europe, and we will definitely do our best.”

Qatar has the world’s third-biggest proven natural gas reserves and is now one of the biggest fuel providers to the UK, shipping it in vast LNG tankers to Britain’s three LNG terminals.

During Sheikh Tamim’s visit to Berlin in May, the two countries agreed to expand their energy cooperation in a newly signed declaration. The agreement focuses on the LNG and hydrogen trade. It also entails arranging a Qatari-German working group that will meet regularly to develop the trade of LNG and hydrogen.

Speaking to German news outlet?Handelsblatt , Qatar’s Foreign Minister Sheikh Mohammed bin Abdulrahman Al Thani said his country hopes to start sending gas from the US Golden Pass LNG plant in Texas, in which Qatar Energy holds a 70% stake, to Berlin in 2024.

Qatar’s overall economy

The stable and resilient economy of Qatar has been growing at a fast rate. The country’s high per capita income, vast hydrocarbon reserves, and substantial economic fundamentals support its strong credit profile.?

Qatar’s economy is expected to witness growth this year and is forecast to be the fastest-growing in the GCC in 2023 and 2024 according to the latest report of the World Bank.

The real Gross Domestic Product (GDP) is projected to grow by 4.9 percent in 2022, followed by 4.5 percent and 4.4 percent respectively in 2023 and 2024 the report added.

The World Bank’s latest Global Economic Prospects report for June has increased Qatar’s projected GDP growth for 2022 to 4.9 percent and additionally reaffirmed its forecast that Qatar’s economy will be the fastest-growing in the GCC in 2023 and?2024.?

The output in the Middle East and North Africa (MENA) region is expected to expand by 5.3 percent in 2022—0.9 percentage point above previous projections, in part reflecting higher oil prices. This would be the region’s fastest growth in a decade. The economic recovery in MENA slowed briefly at the turn of the year as Omicron outbreaks sapped growth momentum. New confirmed cases of COVID-19 have since abated with broad-based declines across all economies.?

With a forecast that oil price will touch $140 per barrel over the next few months, exacerbated by Ukraine - Russia war and the European Union sanctions on Russian oil imports into EU, the effects on the commodity markets and its associated economic sanctions are positive, on balance, for Qatar’s economy, the largest exporter of Liquid Natural Gas in the world. In turn, Qatar’s economy is expected to be the fastest-growing in the GCC in 2023 and 2024 as per the latest report of the World Bank; Estithmar Holding sees endless opportunities to be an active partner in the nation’s economic diversification in line with the 2030 National Vision.?