Qatar's 'significant' shock absorption capacity to bulwark its economy: Moody's

Large hydrocarbon reserves and "exceptionally" high per capita income and the sovereign's very strong balance sheet provide "significant shock-absorption" capacity to mitigate Qatar's credit challenges, according to Moody's, a global credit rating agency.
The development of new gas projects will drive growth and revenue potential in the medium term, the rating agency said in its annual credit analysis.
Credit challenges include Qatar's heavy economic and fiscal reliance on the oil and gas sector, which exposes it to cyclical declines in hydrocarbon demand and prices, and to longer-term risks related to the global carbon transition, the rating agency said in its annual credit analysis.
Qatar's external vulnerabilities are mitigated by the availability of robust central bank reserves and foreign currency sovereign wealth fund assets, it however, said.
Qatar’s economy relies heavily on the hydrocarbon sector, although its share of nominal GDP (gross domestic product) has been volatile because of fluctuations in energy prices; it fell to 29% in 2020 before rising again to 37% in 2021 (and likely even higher in 2022), down from more than 50% before the oil price shock of 2014-15.
Qatar's economic strength in the hydrocarbon sector is supported by its very large proved hydrocarbon reserves and the country's strong competitive position in the global LNG or liquefied natural gas market, both of which underpin the economy's longer-term income generation potential.
According to the latest BP Statistical Review of World Energy, Qatar’s proved oil and gas reserves stood at 170bn barrels of oil equivalent (boe) at the end of 2020, one of the highest levels in the world, which would allow Qatar to produce natural gas and crude oil at the current rate for another 140 and 40 years, respectively.
Qatar's reserves "are all the more remarkable" compared with the size of its population, at around 65,000 boe per capita for the total population, by far the largest in the world, it said.
Qatar is the world’s leading exporter of LNG, accounting for over one-fifth of global LNG exports. Its LNG production cost, which "we estimate to be among the lowest globally at around $2 per million British thermal units, is the key source of competitiveness", it added.
Qatar's natural gas exports were equivalent to nearly 30% of GDP in 2021, contributing 73% to the overall hydrocarbon export mix, and accounting for 61% of its total goods exports. LNG accounted for around 85% of all natural gas exports by volume.
Qatar's LNG expansion is staggered into two phases. The first phase consists of the construction of four LNG mega trains in North Field East that will add 32Mtpa in 2025-27.
In February 2021, QatarEnergy signed an agreement for the engineering and construction of the first phase of planned LNG expansion. The project is likely to cost around $29bn (18% of 2021 GDP), and will be shared with QatarEnergy’s joint venture partners (25%), and evenly split between debt and equity.
The second phase consists of the construction of two additional trains that will increase production by 16Mtpa in 2027-28.
When the additional production from the new LNG project starts coming on stream during 2025-29, it will temporarily boost the hydrocarbon sector's contribution to real GDP growth and permanently increase Qatar's nominal GDP level.
The planned expansion will also support Qatar's non-hydrocarbon sector growth over the next five years through related construction projects and increased demand for other auxiliary services.
Nevertheless, the LNG expansion will also increase Qatar's economic concentration in the hydrocarbon sector, increasing the sovereign's longer-term exposure to the global carbon transition, according to Moody's.
"This exposure will be mitigated by the fact that demand for natural gas and LNG in particular is likely to peak significantly later than demand for crude oil, offering Qatar a longer time to transform its economic model," it said.