Oil & Gas

Qatar North Field expansion impact to be felt from 2026

November 10, 2023, 9:36 AM

Production to rise 30%
GDP slowing to 2% this year
LNG demand to peak in mid 2030s

Qatar’s economic growth will get a boost from the increase in gas production at the North Field Expansion (NFE) project, but the impact will not be felt until 2026, according to experts.

S&P Global Ratings said in a report this week it expects economic activity in Qatar to slow to 2 percent this year. That is down from close to 5 percent in 2022 when it was given a boost from the construction boom ahead of the Fifa World Cup 2022.

Qatar’s liquefied natural gas (LNG) production is projected to remain flat until 2025. It should increase by 30 percent over 2026-2027, as the country lifts its moratorium on further development at the North Field.

It anticipates growing competition from other LNG producers such as Australia and the US.

By 2027, the government plans to boost Qatar’s LNG production capacity by 64 percent to 126 million tons per year (mtpa).

Qatar derives about 90 percent of its exports and 40 percent of its GDP from the hydrocarbon sector.

Hydrocarbons make up 80 percent of government revenue. High oil prices and rising gas production should continue to support rising revenue projections.

The report said that strong fiscal and external net asset positions will remain core rating strengths.

According to the credit rating agency, Qatar’s current account will average a surplus of about 20 percent of GDP annually over 2023-2026.

But this heavy dependence on hydrocarbons makes the country’s credit profile vulnerable to volatility in oil prices, to which most of its long-term gas contracts are linked.

The demand for LNG is forecasted to peak in the mid-2030s, with an increasing part of renewables in the global energy mix. But Qatar’s competitive position should remain relatively strong even after the end of the decade, S&P noted.

“We expect Qatar to remain one of the largest global exporters of LNG. The country is a low-cost supplier.”.

The state-owned company QatarEnergy, which handles all the country’s hydrocarbon activity, has secured LNG sales by signing several long-term agreements with its joint venture partners. These amount to up to 18 mtpa for terms, an increase of about 38 percent.

The contracts signed for 15 and 27 years include those with China National Petroleum Corp. and China Petrochemical Corporation (Sinopec) for 4 mtpa each. Shell and TotalEnergies have deals for up to 3.5 mtpa each. ConocoPhillips for up to 2 mtpa and Eni for up to 1 mtpa.

According to the report, capital spending should be lower than in previous years, as some major infrastructure projects, such as Doha’s metro and tram system, have been completed.

The agency forecasts government spending to remain flat at about 25 percent of GDP over 2023-2026. This is slightly lower than in the five years to 2020, where expenditure averaged about 35 percent of GDP.

S&P sees government spending on capital projects declining to around 6 percent of GDP by 2026.

Government investment is forecasted to decrease to about QAR60 billion, or 6 percent of GDP by 2026, compared with a peak of about QAR103 billion, or 19 percent of GDP in 2016.