Qatar's LNG production to jump 35% from 2027, additional demand from Europe seen: S&P

Qatar's liquefied natural gas (LNG) production will increase by 35% from the current levels by 2027, suggesting demand for additional exports, particularly to Europe and enhancing the country's per capita income to rise above $80,000, according Standard & Poor's (S&P), an international credit rating agency.

"Qatar's LNG production is set to rise further once the North Field Expansion (NFE) project comes online, which we expect by 2026-27. The strategic pivot away from Russian gas, particularly by European economies, suggests there will be demand for additional exports from Qatar," S&P said, affirming 'AA/A-1+' long-and short-term foreign and local currency sovereign credit ratings on Qatar with a "stable" outlook.

The stable outlook reflects its view that Qatar's fiscal and external buffers should continue to benefit from the country's position as one of the world's largest exporters of LNG over the next two years, further boosted by production increases through the NFE project over 2026-30.

Qatar remains supported by its sizeable external and fiscal net asset positions, underpinned by funds accumulated within the sovereign wealth fund, the Qatar Investment Authority (QIA), from past exports of hydrocarbons, in particular LNG. "We forecast the government's liquid assets will average 165% of GDP (gross domestic product) over 2024-27.

"We expect Qatar to remain one of the largest exporters of LNG globally. The government plans to increase Qatar's LNG production capacity to 126mn tonnes per year (Mtpa) by 2027 from 77 Mtpa currently and further to 142 Mtpa before 2030, an almost 85% increase above the current capacity," it said.

Qatar derives about 40% of its GDP, 80% of government revenue, and 90% of exports from the hydrocarbon sector. As a result, S&P forecasts the country's strong fiscal and current account surpluses will persist in 2024-27, based on a Brent oil price assumption of $81 per barrel (/bbl) in 2024 and $75/bbl in 2025-2027, together with expected increases in LNG production capacity by 2027.

Finding that almost all of Qatar's exports currently pass through the Strait of Hormuz and more than 70% of Qatar's LNG exports go to Asia; the rating agency said "we expect this to remain broadly unaffected by the current geopolitical tensions, including the widening war between Israel, Hamas, and Hezbollah, and the incidents in the Red Sea."

"We understand that disruptions have not prevented delivery of Qatar's LNG, as shipments going north to Europe have been rerouted around the Cape of Good Hope," it added.

Qatar's fiscal and external inflows are expected to remain supported by uninterrupted export flows, given that Qatar predominantly exports LNG to Asian buyers and these flows have remained unaffected by the ongoing disruption of Red Sea trade, according to S&P.

Despite the geopolitical risks in the Middle East, it anticipates that the macroeconomic conditions in Qatar would remain broadly stable.

Forecasting the fiscal surplus to strengthen to about 8% of GDP by 2027 as new LNG production comes on stream from the NFE project, S&P said in the first half of 2024, the central government's fiscal surplus stood at QR4.6bn (0.6% of GDP).

"We expect real GDP to expand by 2% on average in 2024-25, supported by nonhydrocarbon sectors, such as wholesale and retail trade, finance, and hospitality. We forecast growth will temporarily accelerate to 7% in 2027 as additional gas production starts and the spillover effects also benefit the nonhydrocarbon sector," it said.

Highlighting that Qatar's income levels remain among the highest of rated sovereigns, supporting its credit profile; S&P forecasts GDP per capita should increase above $80,000, once the NFE project boosts LNG production after 2026.