Qatar lowers expected LNG production levels
Qatar accounts for one third of global LNG trade
Qatar intends to maintain its moratorium on development of new hydrocarbon projects until at least 2015, allowing itself enough time to assess the production performance of its gargantuan North Field.
According to the Business Optimism Index (BOI) report, Qatar's hydrocarbons segment has witnessed declining optimism since the fourth quarter of last year on lower expectations towards profits due to escalating raw materials and labour costs.
The BOI, prepared by Dun & Bradstreet for the Qatar Financial Center (QFC), showed that optimism in the hydrocarbon sector was on the decline in the third quarter of this year and stood at 1, which was seven points lower than that in the previous quarter of this year.
This is in line with the projected contraction in GDP from the hydrocarbon sector during 2014. According to International Monetary Fund forecasts, Qatar's real GDP (gross domestic product) from the hydrocarbon sector will contract by 1% during 2014.
On the sales front, the BOI survey found that the outlook tracked sideways with almost half of the respondents saying that they do not anticipate any change in the volumes (due to stability in the market coupled with the effect of long term contracts).
The selling price index within the hydrocarbon sector slipped into the negative territory due to a higher proportion of respondents planning to reduce prices, brought about by stiff competition.
A "significant" majority of firms do not plan to change their selling prices since they are either bound by long-term contracts or would like to stay competitive in order to get new contracts.
Liquefied natural gas (LNG) prices in Qatar's main export markets in Asia have so far remained largely unaffected by the rapid growth in the US unconventional gas and oil production.
While further expansion of LNG is possible, Qatar, which accounts for one-third of global LNG trade, will maintain a moratorium on development of new hydrocarbon projects until at least 2015 to give itself time to assess the production performance and carry out comprehensive study of its North Field.
The LNG production will remain steady at 76.3mn tonnes per annum in 2014, crude oil production will decline to 653,300 bpd from 726,900 bpd in the previous year, the report said.
The net profit outlook within the sector slipped 13 points to stand at -8 with 37% of the respondents expecting a decline in earnings in the third quarter due to escalating raw materials and labour costs as well as the impact of fewer orders.
Plans to invest in business expansion have also softened with 63% of the companies saying that they will not undertaken expansionary path in the review period.