Is Doha the next Dubai? (page 1 of 2)

In the space of four days in October, Qatar became an energy superpower. It signed natural gas megadeals with ExxonMobil and Shell worth $17 billion, and has other projects worth an estimated $20 billion with US and European energy giants in the pipeline.

All this will make the tiny emirate - OPEC's smallest oil producer - the world capital of the gas-to-liquids industry by 2010 and the single largest supplier of liquefied natural gas to the United States, a huge energy market that is ready to undergo rapid and vast expansion in the coming years.

Qatar, which has been assuming a more assertive role in Gulf affairs, is on target to become the world's biggest LNG exporter by 2010 with an annual output of 30 million tons and is pushing to raise production to 45 million tons a year. Current LNG production is 15 million tons a year, mainly to Japan, Spain and the US.

Qatar's success in forging these new contractual connections, particularly with the United States, will provide it with the kind of stability and security that its neighbors can only dream about.

It also gives the emirate a huge head start on the other Gulf producers, which are increasingly looking to gas as the energy and export-driver of the future. LNG - natural gas supercooled and condensed for transportation by ship - is viewed by Washington as vital to the long-term fuel supply.

The ExxonMobil deal, worth $12 billion, is the centerpiece of these glittering prizes, but it has deep political implications as well. Qatar has emerged unscathed from the political strains the events of September 11th placed on the United States' relations with the Gulf states.

It proved itself a trusted Arab ally through its support for US policy and military operations in Afghanistan and Iraq, particularly by allowing the US Central Command to set up its operational headquarters in the emirate when other Gulf states refused. Centcom is a vital element in President George W. Bush's war against terrorism and the most active military command in the US defense establishment.

According to the Texas-based security think tank Stratfor, this has meant that Doha has been given "access to some top-shelf technology. In addition to de facto security guarantees that serve both countries' interests, and the economic benefits of having a few thousands soldiers kicking around their country, having Centcom in Doha gives Qatar a say in how, where and when US forces operate and policy is implemented - massively magnifying the small state's geopolitical punch."

Qatar has the world's third largest natural gas reserves after Russia and Iran - an estimated 900 trillion cubic feet at the end of 2002. Under the terms of the ExxonMobil agreement signed by state-run Qatar Petroleum in Doha on October 16th, the emirate will supply 15.6 million tons a year from Qatar's vast North Field in the southern Gulf.

That's the single largest investment in Qatar's booming gas sector and the largest project for importing LNG into the United States announced so far.

Delivery is scheduled to start in 2008-09 and is expected to run for more than 25 years. The project involves everything from production to shipping, with the Ras Laffan Liquefied Natural Gas Co. II (RasGas II), which will supply the gas, chartering two more 145,000 cubic meter capacity LNG carriers.

Ultimately, the project will entail the construction of two new LNG trains in the RasGas complex, each with an annual production capacity of 7.8 million metric tons, tripling the current two-train production capacity of 6.6 million tons a year at a stroke.