Qatar is well on its way to building a competitive petrochemical export market, but how will the country take its economy to the next level?
While Qatar has undeniable cemented its position as the region’s natural gas champion, the country is still in the process of converting it hydrocarbon wealth into products that can create a diversified economy that encourages entrepreneurship from SME’s.
Qatar’s natural gas export plans continued to dominate the headlines last month with the recent update from Mubadala on the Dolphin Pipeline which is reportedly on track for completion by the end of this year.
The pipeline will allow Qatar to export the full 3.2 billion standard cubic feet that the infrastructure was originally built to accommodate.
In late April, Qatar also inked a supply deal with Kuwait as the latter looks to meet increasing demand for power for air conditioning during the summer months.
The country’s central role in natural gas markets is no secret, thanks to the massive reserves tucked away in the North Field, the country has emerged as the world’s richest (per capita), with growth averaging around 14% over the past decade.
But in recent years, like the other countries within the GCC, Qatar has sought to diversify its economy away from simple hydrocarbon exports. For the petrochemicals sector, this has resulted in a petrochemical portfolio consisting of 19 million tons of capacity, earning up to $11.5 billion in revenues, producing diverse products like fertilizers, plastic and fine chemicals.
Such developments led Dr. Abdulwahab Al-Sadoun, secretary general of the GPCA to comment that “As a series of multi- billion dollar projects are announced and unveiled, Qatar’s downstream sector has emerged as a dynamic industry.” More recently, the country has seen rapid expansion of the marketing of its petrochemical products to global customers.
Earlier this year, Muntajat B.V., announced the opening of five international marketing offices in Amman, Jordan; Melbourne, Australia; Cape Town, South Africa; Kuala Lumpur, Malaysia; and Istanbul, Turkey. The offices will provide local and customised services to the company’s customer base while also seeking to develop new business for the country’s downstream products.
“The opening of Muntajat B.V.’s first wave of global offices represents a great achievement not only for Muntajat, but also for the State of Qatar. With the planned increase in Qatar’s output of chemical and petrochemical products to reach 23 million tonnes by 2020, the new offices will play an important role in bringing our products to the world,” said His Excellency Dr. Mohammed bin Saleh-Al-Sada, Qatar’s Minister of Energy and Industry, and Chairman of Muntajat‘s Board of Directors.
In addition to boosting its international presence, Muntajat has also been increasing its local brand.
Domestically, the country also has plans to increase infrastructure spending as large-scale developments, including several for the 2022 World Cup finals, kick off as part of $180 billion worth of projects over the next five years. Naturally this will create even more demand for higher value petrochemical and chemical products, as well as plastics converters.
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While these massive government-led projects have been vital to the country’s rapid economic growth over the last decade, there has been a very limited response from the private sector. Across the GCC states there has been a drive to develop entrepreneurship and small to medium enterprises, but this is a realm in which Qatar may be lagging behind.
In fact, Qatar Shell recently called for more emphasis on bolstering the number of SMEs in the country, saying it could boost the supply chain and improve the economy by reducing the number of imports.
A spokesman for the company, Ali Reyad al Ansari, told the Gulf Times that “in any industry, SME’s can do a lot in helping bolster a supply chain, especially when you’re talking about local SME’s, then you start depending less on importing goods from the outside”.
He said once more products were distributed by the local manufacturing industry “it definitely helps the supply chain and helps the security of the supply chain.”
“Manufacturers who transform basic plastic products into finished goods represent nearly 20% of the region’s plastic industry,” said Dr. Abdulwahab Al-Sadoun, Secretary-General of the GPCA.
“These plastics converters introduce a number of additives to manufacture finished goods that suit the requirements of a diverse range of industries.” According to the organisation’s research, the plastics conversion market across the entire region comprises of over 1,000 companies that can be classified as small and medium enterprises, including family owned businesses and startups.
“SMEs are today at the forefront of business innovation in the Middle East,” continued Dr. Sadoun.
“SMEs involved in plastics conversion are particularly innovative as they extend the plastics supply chain by creating value-added products for the construction, infrastructure and food & beverage sectors, while creating thousands of new jobs.” But the drive towards developing a larger SME market has been significantly less prevalent in Qatar as compared to other states within the GCC.
Saudi Arabia for example, currently represents 62% of the GCC’s plastic conversion market. The Kingdom also leads the plastics market, producing an estimated 18.4 million tons, or 74% of the region’s polymer production capacity.
The United Arab Emirates is the second largest plastic converter in the GCC, after Saudi Arabia, accounting for 19% of the total regional output. The country also ranks second in total plastics manufacturing capacity, representing 10.2% of the region’s polymer capacity.
“Ultimately, what we want is to help build strong SMEs in Qatar because our goal is to develop the nation and if these companies likewise do well abroad, then they will give a good name for Qatar,” Ansari was quoted as saying.
Factbox:
– 3.2 billion scf the Dolphin Pipeline will soon transport this much gas from Qatar to the UAE.
– $180 billion the Dolphin Pipeline will soon transport this much gas from Qatar to the UAE.
– 23 mln tons Qatar plans to output this many chemical and petrochemical products by 2020.
