Gross Domestic Product (GDP)

The Qatari economy underwent major developments that were positively reflected on the general economic performance. Foremost among these developments are the upsurge in oil prices that gained Qatar high revenues, the sizable increase in gas production and exports and the completion of the giant gas projects of the country. The Gross Domestic Product (GDP) was set at about QR70.8 billion in 2003 against QR.63.6 billion in 2002, growing by 8.8% in 2003 against 0.8% in 2002. This improvement is attributed to the increase of 12.9% in GDP in 2003 compared to 1.9% in 2002 at oil and gas sector, in addition to a 3.2% growth rate at non-oil sectors against 0.6% decline in 2002.

Public Finance

The state budget plays a vital role in the Qatari economy, as public expenditure represents a large share of the total effective demand, which is the main factor in achieving the Government’s economic development goals. Fiscal policy is considered the core of the overall economic policy, which aims to achieve full utilization of economic resources and to raise standards of living in Qatar. Qatar’s strengthening fiscal position has already lead to sovereign ratings upgrades.In July 2003,Standard &

Poor’s (S&P) upgraded Qatar’s long-term foreign currency issuer credit and senior unsecured debt ratings from A- to A+. Qatar’s long-term local currency issuer credit ratings were also upgraded from A to A+. Qatar’s short-term foreign and local currency issuer credit ratings were maintained at A-1. In August 2002, Moody’s Investors Service raised by two notches Qatar’s foreign currency country ceilings for bonds and deposits to A3 from Baa2. Moody’s also upgraded to A3 the ratings of the State of Qatar’s outstanding foreign-currency denominated bonds and its issuer rating for local currency obligations. In September 2002, Capital Intelligence announced that it had raised Qatar’s sovereign long-term rating to A- from BBB+.

The announced 2004/05 State Budget by the Ministry of Finance, revealed another fiscal year of expansion, which will also act as a catalyst in boosting private sector activities. Budget allocations for major public projects increased by 44.3% to reach QR 8,883 million, compared to QR 6,154 million in the previous budget. The budget estimates total revenues at QR 26,192 million, total expenditures at QR 28,352 million, with an overall deficit of QR 2,160 million. Total revenues are budgeted to increase by 21.3% over the preceding budget and total expenditures are budgeted to increase by 21.6%. The 2004/05 Budget is reportedly
based on an oil price assumption of $19.0 p/b, compared to $17.0 p/b in the previous budget estimates. Given an increase of $1 p/b, at a production level of 700,000 bpd, additional export revenues of about QR 900 million would be realised. Therefore, a balanced budget would occur if oil prices averaged $21.5 p/b during the fiscal year 2004/05.
Details of 2004/05 Budget Allocations:

Monetary Policy

The monetary management in Qatar is implemented by Qatar Central Bank (QCB) which was established by Law No. 15 for the year 1993, from what was formerly called the Qatar Monetary Agency (QMA). The main objective of the QCB is to regulate the monetary, credit and banking policies in accordance with the general plans of the State, in order to support the national economy and the stability of the currency. QCB has full powers over the monetary policies of the State, and supervises and controls banks and financial institutions. An effective monetary tool utilized by the QCB is the imposition of minimum reserve requirements for commercial banks. In February 2000, QCB instructed banks to maintain cash reserves equal to 2.75% of total deposits. Another important tool used by the QCB is the loans-to-deposit ratio limit applied to commercial banks, which is set at 95% of the total
deposits base.

Two broad trends have dominated liquidity in Qatar: first, credit to the public sector to finance development projects and second, the price of energy. During the first half of 2003, domestic liquidity as measured by M2 rose by 7.7%, with a significant increase in demand deposits by 87.9%. Savings and time deposits declined by 11.4% during the first half of 2003.

In February 2001, the QCB removed its ceiling on interest rates for local currency deposits, freeing the banking system from all interest rate policy restrictions. In July 2001, the QCB introduced a new monetary instrument called the ÒQatar Monetary RateÓ (QMR), which allows banks in Qatar to deposit or borrow from the QCB, overnight funds of an amount not less than QR 2.0 million, at rates determined by the QCB, which are fixed on a daily basis. Short-term interest rates in Qatar follow closely those prevailing in the US, with a slight positive differential.

The Oil Sector

Qatar’s main oil operations are carried out by state-owned Qatar Petroleum (QP) www.qp.com, which manages Qatar’s oil, gas petrochemicals and refining enterprises in Qatar and abroad. Qatar’s total oil exploration area is divided into 18 blocks covering a total surface area of 46,840 square kilometers.
The Government's oil policy has the twin aims of replenishing proven reserves within currently producing fields and identifying additional new reserves. Qatar’s oil reserves at year end 2002 stood at 15.2 billion barrels, which represents 1.4% of the world’s total reserves. Qatar’s oil reserves have substantially risen over the past years, from 3.7 billion barrels in 1998 to 15.2 billion barrels in 2002.

QP has embarked upon an investment programme with the intention of expanding oil production capacity from its onshore and offshore fields to around 1 million bpd by year-end 2006. QP produces oil on its own account from one unit onshore and two offshore fields and from other fields through Exploration/Development and Production Sharing Agreements (EPSAs/DPSAs) with major international partners such as, Occidental Petroleum, Maersk Oil, TotalFinaElf Qatar and Anadarko Petroleum.

Qatar’s oil production averaged 730,000 bpd in the second quarter of 2003, compared with 740,000 bpd in the first quarter of 2003, according to the Middle East Economic Survey (MEES). Qatar’s oil price averaged $25.5 p/b during the second quarter of 2003, compared with $29.8 p/b during the first quarter of 2003. Qatar’s oil prices are based on the average of a basket of two crudes (Dukhan and Marine), which amounted to $27.1 p/b in 2000, $23.6 p/b in 2001, and
$24.5 p/b in 2002.

The Natural Gas Sector

Qatar’s North Gas Field, discovered in 1971, is the largest nonassociated gas field in the world, with proven reserves currently estimated at over 900 trillion cubic feet (tcf), which is equivalent to about 162 billion barrels of oil. These reserves would translate into 15.3% of the world total and will be sufficient to support planned production of natural gas for over 200 years.

QP has initiated and developed two major LNG projects with foreign shareholders for the purpose of utilizing the North Field gas for exports in the form of LNG. These projects are Qatargas and Rasgas.

Expansion of LNG facilities through RasGas II, Qatargas II, and Qatargas III is being pursued to meet additional export opportunities. Sales and Purchase Agreements (SPA) have been reached with a number of countries, which at their peak in 2009 will reach 27.7 million tons per annum (mtpa). With planned expansion projects in the LNG, total LNG exports would reach about 51 mtpa by 2010.

QP continues to research other avenues for the utilization of the Country’s natural gas resources. Technologies for the direct conversion of natural gas into globally marketable and more easily transportable liquid products have evolved significantly in recent years and are of particular interest as a potential adjunct to direct exports of LNG and natural gas. Qatar's six projects which are at different levels of completion and/or negotiations will be responsible for the export of the following quantities:

Other GTL Projects:

Other Industrial Sectors

In addition to its roles as the basis for the LNG industry, and as a fuel input for power generation, natural gas is used in a wide range of industries as feedstock to produce various value-added products for both domestic consumption and exports. These projects among others include: