x Abu Dhabi, UAETuesday 23 January 2018

Challenges ahead as guard changes in Qatar

Many analysts expect Sheikh Tamim, the new emir of Qatar, to usher in a new generation of leaders, youthful like him.

A Qatari national decorates his car with images of Sheikh Tamim, who took over as the country's ruler yesterday, and his father Sheikh Hamad. Mohammed Dabbous /Reuters
A Qatari national decorates his car with images of Sheikh Tamim, who took over as the country's ruler yesterday, and his father Sheikh Hamad. Mohammed Dabbous /Reuters

Drive out of Doha - past the five-star hotels and the power lines charting your path through the desert - and you will find yourself face to face with a forest of steel pipes, the arteries transporting gas and wealth to the emirate.

This is Ras Laffan, the industrial city.

The energy empire built during Sheikh Hamad bin Khalifa Al Thani's 18 years as emir has fuelled a rise in GDP from US$29 billion to nearly $200bn and given Qatar the means to be a global player in art, sports and politics.

His son, Sheikh Tamim, who took over as the country's ruler yesterday, is to lead a nation blessed with a population as small as its reserves are plentiful: 117,401 barrels of oil for every citizen as well as the world's biggest gasfield.

But a shift in the source of new global supplies from East to West, driven by the rapid growth of North American shale gas, may eventually alter that equation.

"Qatar will still find some countries willing to take some Qatari gas, although the prices might go down a bit," said Ehsan Ul-Haq, a senior market consultant with KBC Energy Economics. "The golden days might be gone."

The coming years are critical for Qatar to reposition itself with customers - for example, if the United States becomes an important gas supplier to Japan - and recalibrate its production targets, possibly lifting its eight-year-old moratorium on new projects in the North Field.

Many analysts expect Sheikh Tamim to usher in a new generation of leaders, youthful like him.

They will need to grapple not only with competition from North America and other shale developers, but also take advantage of an expected shift in transportation fuel from oil to gas by 2040.

"So the next 20 to 30 years are likely to be very important in terms of shifting," said Mr Ul-Haq. "I think new blood is good - if this new blood is apt."

Getting its long-term energy strategy in order is central to gaining access to credit to fund ambitious projects such as the 2022 Fifa World Cup and the Doha Metro.

Qatar's government bonds, which have fallen out of favour among investors because of rising inflation and expectations of smaller stimulus measures from the US Federal Reserve, stabilised yesterday after a rout earlier this month.

Yields on Qatar's 10-year sukuk have risen 81 basis points since the Fed first discussed slowing the pace of bond purchases last month, declining 1 basis point to 3.832 per cent in midday trading yesterday.

Bond yields move in the opposite direction from price.

Standard & Poor's, the credit rating agency, said its AA rating for Qatar was unaffected by the change of power, adding that it did not foresee a change in government policy.

 

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