New Ruler Means New Hurdles for Qatar

07/03/2013 7:00 am EST


Sheikh Tamim, the new emir of the small but economically important Gulf nation, will need to get his country's vast energy reserves in order to maintain his disproportionately favorable position on the world stage, write Gregor Stuart Hunter and April Yee of The National.

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 fueled a rise in GDP from $29 billion to nearly $200 billion, 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 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 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 favor among investors because of rising inflation and expectations of smaller stimulus measures from the US Federal Reserve, stabilized yesterday after a rout earlier this month.

Yields on Qatar's ten-year Islamic bonds have risen 81 basis points since the Fed first discussed slowing the pace of asset purchases last month. (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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