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Aug 10 2010

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Economic policy: QP budgets US$31bn to develop hydrocarbon sector

The plan involves a partial lifting of the moratorium on the exploitation of gas from the North Field. QP had placed the moratorium on further development of the world's largest single gas reservoir in 2004, ostensibly to discourage the clamour from international oil companies for more liquefied natural gas (LNG) and GTL projects than Qatar had already planned.

Separately, QP is in the process of opening at least three new blocks for oil and gas exploration to expand its hydrocarbon resources. Bidding for Block 1 is likely to begin by year-end, and that for blocks 7 and 8 in 2011. Currently, Qatar's oil reserves (including condensates) stand at 25.3bn barrels, while its gas reserves of 902trn cu ft are the third-largest in the world. At the current production rate of 810,000 barrels/day (b/d), oil reserves are expected to last 85 years and gas reserves about 100 years. However, in order to ensure that hydrocarbon-driven prosperity lasts longer, Qatar is seeking to open more areas, both onshore and offshore, to oil and gas exploration. In the early 1990s the country opened its hydrocarbons sector (which had been off-limits for foreign companies since its nationalisation in the mid-1970s) to international investment. The policy shift helped Qatar to expand its oil reserves and production: by 2004 oil reserves had grown to 25.3bn barrels, from 3.7bn, and production rebounded to 759,000 b/d from less than 350,000 b/d in 1995, thanks to new reserves found by international oil companies and advanced recovery techniques employed by them to extract more oil from ageing fields.

Qatar's total oil exploration area is divided into 22 hydrocarbons "blocks", covering a total surface area of 43,426 sq km. Of these, ten are producing and four are under various stages of exploration and appraisal. Since the early 1990s QP has entered into a number of exploration and production-sharing agreements (EPSAs) and development and production-sharing agreements (DPSAs) to produce oil. Under an EPSA, the foreign oil company is granted the right to explore for oil in a specified block and, if oil is discovered, to develop the field. Under a DPSA, the foreign company is required to cover appraisal and development of the block where oil has already been discovered, or further development of an existing field.

Oil and gas production constitutes the bulk of the Qatari economy, representing 54% of real GDP in 2009. In addition, large parts of the manufacturing and services sectors are closely linked to oil and gas, which (including petrochemicals) generate almost all export earnings and directly contribute around 74% of government revenue, with much of the remainder coming from income earned from the investment of hydrocarbon-generated surpluses.