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Qatar commits to billions of dollars of LNG-funded spending
While heavyweight competitors including Australia and the US have been left licking their wounds, Qatar is now facing up to the reality of what it has achieved - and what it must deliver over the next decade. The smallest nation ever to host a World Cup, Qatar has committed to billions of dollars worth of spending on stadia, transport, accommodation and other infrastructure. It is also responsible for hosting a tournament that will be expected to do the entire Middle East proud.
Under that weight of expectation, at least finances shouldn't be an issue. Qatar has a population of some 1.68 million, of whom more than 85% live within a 20km radius of the capital, Doha. It also boasts one of the world's most lucrative Liquefied Natural Gas (LNG) fields, which has made it one of the wealthiest nations, per capita, on the planet.
"Qatar has tremendous income from LNG and oil exports, and is running a massive budget surplus every year," says Samuel Ciszuk, senior energy analyst for the Middle East and North Africa, at IHS Global Insight.
"The huge [LNG] field off Qatar's shore was always too deep for Qatar itself," he continues. "They could have developed a small part of it to cover domestic demand, but that wouldn't have paid its way for quite some time. Exporting the gas was really what was needed to be able to monetise such a massive field, and as soon as they realised the LNG market was big enough, they went for it."
World Cup investment programme to hit $125bn over five years
With the backing of this immense hydrocarbon wealth and predicted GDP growth of 18% in 2011 alone, Qatar has outlined its vision for an ultra-compact, ultra-modern World Cup that will rely on the very latest in technological innovation. What's more, it will be boosted by an investment programme that will see Qatar spend more than $125bn in the next five years on construction and hydrocarbon-related projects.
The 2022 World Cup will take place at 12 stadiums in seven 'host cities', all within a relatively compact radius of around 60km. Three of the 12 stadiums will be renovated from existing structures, and a stadium construction and renovation budget of approximately $3bn has been projected. In addition, Qatar submitted an estimated expenditure budget of more than $900m (inflation-adjusted) for the 2021 Confederations Cup and 2022 World Cup tournaments.
In all, Merrill Lynch estimates that the total cost of preparing to host the world's most-watched sporting event could be as much as $65bn, or around $40,000 per head in Qatar, compared to the $11.4bn or $232 per person, that South Africa spent preparing for the 2010 World Cup. And costly though this might appear, policymakers in Doha are unlikely to find themselves having to cut back their ambitions.
"In order to execute these massive plans in a timely fashion, Qatar might resort to borrowing in the short- to medium-term," suggests Ciszuk at IHS. "They borrowed to fund their LNG expansion but they've pretty much paid that debt off by now, and so the revenues that have previously gone towards servicing billions in project finance, are just now starting to add up into their sovereign wealth fund.
"They will have much more cash in their hands in the coming years, and if they need a little more, then they will again go to the debt markets," he adds.
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