Monday, Aug 08, 2011
--$8.1 billion expansion on hold on gas shortage
--To revisit projects pending gas allocations
--To exceed full-year budget revenue, net profit targets
(Adds analyst comment in paragraph 7.)
DOHA (Zawya Dow Jones)--Qatari steel-to-fertilizer conglomerate Industries Qatar, or IQ, has put on hold two planned steel plants in the industrial city of Mesaieed worth 8.1 billion Qatari riyals ($2.22 billion) due to problems securing natural gas for the projects, the company said.
"The market should also be aware that following extensive discussions with Qatar Petroleum, it has been agreed to put the Qatar Steel Phase 2 and 3 projects on hold due to natural gas allocation restrictions," IQ said in a trading update dated Aug. 7.
"It is our intention to revisit the projects when sufficient natural gas allocations have been secured," the Doha-based conglomerate added.
Qatar Steel is fully-owned by IQ. Shares in IQ finished trading down 1.3% at QAR135 Monday in a broadly negative overall market.
A spokesman for IQ couldn't be reached immediately for comment.
The news is a blow for IQ's expansion plans in its fast growing steel division at a time of surging domestic demand for the metal as Qatar presses on with a huge infrastructure building program that will accelerate in the run up to the 2022 soccer World Cup. IQ made first-half revenue of QAR2.9 billion in its steel division thanks to strong domestic demand and robust prices, it said.
Rita Guindy, an analyst at EFG-Hermes in Cairo, said any decision to cancel the projects would be a blow to the group's growth prospects. But she added that "consolidated margins would be higher if they do not go ahead with the steel expansion as their steel business lacks the significant cost advantage that they have on their other divisions."
Industries Qatar said it was "on track to significantly exceed our full-year budget revenue and net profit targets of QAR14.5 billion and QAR4.9 billion respectively."
A person familiar with the matter said it was unclear why state-run energy giant Qatar Petroleum had failed to allocate gas for the projects. A spokesman for the company couldn't be reached for comment.
Qatar sits on the third-largest natural gas reserves in the world, after Russia and Iran. However, the development of its massive offshore North Field has been on hold since 2005, when the government declared a moratorium to conduct technical studies and ensure longevity of the world's biggest gas field.
Gas demand in the Arab Gulf state has soared in recent years on the back of rising domestic consumption, largely driven by large-scale industrial developments such as petrochemical and aluminium plants.
Industries Qatar said in April it planned to spend QAR12.6 billion on projects over the next four years.
Qatar Steel's phase two project was originally scheduled for completion in the third quarter of 2013 and phase three was due to be finished in 2015. Neither project broke ground or received IQ shareholder approval.
Qatar Steel, which manufactures and distributes steel and iron products, aims to produce 4 million tons of the metal by 2014, according to Zawya.com.
-By Alex Delmar-Morgan, Dow Jones Newswires; +974 6659 9818; alex.delmar-morgan@dowjones.com
Copyright (c) 2011 Dow Jones & Co.
(END) Dow Jones Newswires
08-08-11 1119GMT
