Qatar’s income to hit record high

A surge in crude prices will ally with higher gas exports to boost Qatar’s hydrocarbon export earnings to a record high in 2011 and the surge will sharply widen its fiscal surplus and boost the economy, a key Saudi bank has said.

Crude oil exports and natural gas liquids alone will fetch the world’s third largest gas power nearly $53 billion while revenue from the sale of liquefied natural gas (LNG) will top $30 billion, the Saudi American Bank Group (SAMBA) said.

“Overall we expect that LNG exports will grow to over $30 billion this year, taking Qatar’s total export earnings to a projected $90 billion,” SAMBA said.

It will be Qatar’s highest income in current prices since the country began exporting oil and gas several decades ago.

SAMBA said the surge would be a result of a sharp rise in crude prices and the completion of Qatar’s LNG projects, taking the country’s total output capacity to nearly 77 million tonnes per year, the highest in the world.

“A combination of increased production and higher prices will ensure that Qatar’s earnings from hydrocarbon exports continue to grow strongly,” it said.

It noted that oil prices have been volatile in recent weeks but on average $99 through May 9 remain over 20 percent higher compared with 2010.

NGL prices have followed a similar trend, the report said, adding that while Qatar’s oil output has not increased significantly, NGL output has, and average combined output of the two has increased 7.5 percent in the first quarter.

It said Qatar earned $38 billion from oil, NGL and refined petroleum product exports in 2010 and expected the income to reach $53 billion this year.

LNG export earnings are estimated to have reached $21 billion in 2010 and will grow again on the back of increased volumes reflecting the completion of the last of the mega-trains, the report said.

According to the report, projecting earnings for LNG is less straightforward as there is no one reference price.

Spot gas prices remain relatively weak at $4.2/mbtu but much of Qatar’s LNG is sold on long-term contracts, often linked to oil prices.

“LNG prices also vary widely throughout the world. Available data on Japanese LNG prices show a strong rebound to $14/mbtu so far this year from a low of $8/mbtu in 2009 and an all time high of $16/mbtu in late 2008,” SAMBA said. “With Qatar expecting to increase exports to Japan this year, this bodes well for earnings. Overall we expect that LNG exports will grow to over $30 billion this year, taking Qatar’s total export earnings to a projected $90 billion.”

The report said the surge in the Gulf country’s revenue would widen its fiscal surplus despite an expected rise in spending.

It noted that Qatar’s latest state budget for fiscal 2011-2012 was based on a conservative oil price of around $55 a barrel.

“As in the past we expect both revenues and expenditures will exceed the announced budget as will the surplus. This we project at $13.3 billion (8 percent of GDP) based on revenues of $55.billion and expenditures of $41.2 billion.”
Its figures showed revenue could reach $54.5 billion while spending could be around $41.2 billion, creating a surplus of about $13.3 billion.

Higher income will also allow Qatar to maintain its position as one of the fastest growing economies in the world, with its real GDP expected to gallop by nearly 20 per cent while there will be even higher growth in current prices.

Available estimates suggest that real GDP grew by around 16 percent in 2010, while nominal GDP leaped by nearly 30 percent to reach $116 billion.

“The principal driver of nominal growth was the rebound in the hydrocarbons sector which rose 57.7 percent in according to official data, driven by higher prices and production,” SAMBA said.

“Looking ahead we would expect strong performances in most sectors this year and next as public infrastructure spending accelerates and the hydrocarbons sector posts further output gains. Real GDP is expected to grow by over 20 percent in 2011 as the remaining large gas related projects come on stream, before slowing to six percent in 2012.”

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