Qatar economy

Bloomberg article yesterday:

ROME and DOHA -- On a March morning in Qatar's Ras Laffan Industrial City on the Persian Gulf, a red flame shoots into the haze from a 650-foot stack. The burst of fire is burning off excess fuel as workers rush to finish equipment that will help the nation, already the world's biggest exporter of liquefied natural gas, more than double output in the next two years.

An hour away in Doha, amid the skyscrapers turning this desert capital into a modern metropolis, Sheik Hamad bin Jassim bin Jaber al-Thani will invest as much as $20-billion (U.S.) a year from the gas bonanza.

Mr. al-Thani, Qatar's prime minister and foreign minister, wears a third hat: chief executive officer of the Qatar Investment Authority, which was founded in 2005. A latecomer among nations with sovereign wealth funds, Qatar formed the QIA to preserve its oil and gas wealth.

Last year, the Connecticut-sized emirate earned more from LNG than oil for the first time. That milestone followed a 15-year, $120-billion spending binge by the country on its gas, petrochemical and other industries. Gross domestic product has surged to $101-billion, or $101,000 for each of the one million men, women and children on the thumb-shaped peninsula - among the highest per-capita GDPs in the world.

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"Qatar is on the verge of being transformed," says Thierry Bros, a gas companies analyst at Paris-based Société Générale SA. "It's a small amount of people with a tremendous amount of wealth."

Now, as Ras Laffan's 140,000 workers race to multiply Qatar's riches, Mr. al-Thani is navigating investments overseas and at home. He bet QIA money on international banks just as the credit crisis forced many to take government handouts.

On Oct. 31, he raised the QIA's 6.4 per cent stake in Barclays PLC to as much as 12.7 per cent, propping up the U.K.'s third-biggest bank after it had rejected money from Prime Minister Gordon Brown. Since then, Barclays stock has jumped 40 per cent through May 11. The QIA's original stake, purchased in July, 2008, had tumbled as much as 82 per cent by January. It's now up 1.8 per cent.

QIA assets, which peaked at about $75-billion in June, 2008, dropped to about $50-billion at the end of March, according to estimates by RGE Monitor in New York. Qatar's estimated $35.6-billion in 2008 LNG exports spared the fund from a worse decline.

"They got burned," says Rachel Ziemba at RGE Monitor. "There was a lot of money to manage quickly and get it invested."

Mr. al-Thani is deploying as much as $5.3-billion of QIA cash on shares of Qatari banks hammered in the global rout. In March, his government agreed to buy the investment portfolios of seven local banks traded on the Doha Securities Market.

"Qatar is facing a lot of difficulties," says Laurent Lavigne du Cadet, who was CEO of Qatar's biggest investment bank, Amwal, from September, 2007, through the end of 2008. "The reasonable approach for the prime minister of Qatar would be to look after its own needs and be less on the international market."

Mr. al-Thani's most lucrative domestic project is Ras Laffan. Once the new LNG facilities are in full swing, Qatar will produce 77 million tonnes a year, generating $292-billion from exports over five years, the International Monetary Fund forecasts.

That will make Mr. al-Thani, who turns 50 this year, steward of a growing pile of cash at a time when funds tied to fossil fuel wealth have blown up. Norway's Government Pension Fund-Global bled a record 633 billion kroner ($90.5-billion) last year, wiping out all of the gains since that nation began investing its oil revenue 12 years ago.

"The key challenge will come as the wall of money hits Qatar in the next three to five years," says Kapil Chadda, head of global banking at HSBC Qatar, the Doha-based unit of HSBC Holdings Plc.

Lavigne du Cadet expects Hamad to invest inside Qatar this year, though he doesn't rule out another headline-grabbing deal such as Barclays.

"Qatar wants to play a role and is positioning itself to be a go-between for the Western world," he says.

Mr. al-Thani may get his power-broker mantle once the new gas money starts flooding in, says Simon Maughan, a banking analyst at MF Global Securities Ltd. in London.

For now, Mr. Maughan doesn't expect big companies to come hat in hand for Qatar's cash. Governments are bailing out banks, and larger businesses can sell bonds, he says. Companies shut out from lending may court the sheik, he says.

The QIA will be eager to try something new, he says.

***

The numbers

38 billion

Cubic metres of liquefied natural gas exported in 2007 by Qatar, the No. 1 exporter of LNG.

106 billion

Cubic metres of LNG Qatar expects to produce by 2010, more than the U.K. consumes in one year.

$35.6-billion

Estimated value of Qatar's 2008 LNG exports.

$101,000

Per capita gross domestic product for each of the one million men, women and children in Qatar - among the highest per-capita GDPs in the world.

Bloomberg