Once upon a time there was a tiny Middle Eastern desert kingdom whose economy, such as it was, rested on two stools: fishing and especially pearl diving. Unfortunately the latter was kicked out from under them when the Japanese perfected cultured pearls and the price crashed.
But today Qatar is one of the richest nations on Earth.
So what happened? No prizes for guessing the discovery, in 1939-40, of onshore oil.
Not that the find translated into instant fabulous wealth – it was 10 years before it made its first oil export shipments.
The road to riches began in 1971 when Shell discovered the giant offshore North Field. Not that anyone recognized it at the time.
In fact, as Bloomberg notes in an excellent shorthand history of energy development in Qatar, it was considered a disappointment since there was no crude, just pesky natural gas.
(In the early days as much as 80 per cent of the gas by-product of crude wells was simply burned off.)
In fact it was to be another 20+ years before Qatar partnered with Shell, Exxon Mobil, Total (France) and ConocoPhillips plus Japanese customers Mitsui and Marubeni to start building the first of what would become 14 liquefied natural gas (LNG) plants.
By 2006, Qatar was the biggest exporter of LNG with one-third of the global supply – and it has more than doubled its gas production since then.
But what fascinates me is how smart the Qataris have been in handling their hydrocarbon windfall. Historically the pattern had been that while an until-then impoverished nation would benefit, the lion’s share would be exported to the country of origin of the energy companies actually getting the stuff out of the ground and shipping it to market.
Not with Qatar.
As early as 1973 it decreed its share in the Qatar Petroleum Company would increase five per cent per year until it reached 50 per cent, later increased to 60 per cent.
That policy thrust has continued so that Qatar today has majority ownership in the extraction of the natural gas, the plants that liquefy it and even the ships that deliver the LNG to customers around the globe.
That, obviously, has translated into mega bucks going into the kingdom’s coffers and to the benefit of the people. There is zero income tax, unemployment is less than one tenth of one per cent and no one lives before the poverty line. No surprise given the average wage is around $14,000 per month!
But even with all that there was still pots of money left. And this is where the Qataris made their second smart move: in 2005 they created the Qatar Investment Authority (QIA) which today has assets around the world worth $335 billion.
It is amazing how many pies it has its fingers in.
For example, let’s say you win the lottery and decide to splurge on a holiday in England. You fly British Airways (20 per cent QIA stake) and land at Heathrow airport (20 per cent).
Because you have money to burn, you stay in the world famous Savoy Hotel and go on a shopping spree in the equally famous Harrods – QIA has stakes in both of those UK properties, and more.
It’s the largest shareholder in Volkswagen, has a 13 percent holding in Tiffany and in 2011 bought French soccer team Paris-Saint Germain since when that club has won four French league titles. It even has small stakes in Shell and Russian theoretical competitor Rosneft.
I could go on but the point is made, it has a very diversified portfolio.
Of course the good times can’t roll forever. Which is where Qatar is playing it smart again.
More than a decade ago it banned any new drilling in the North Field, the idea being to make domestic supplies last longer. To counter balance that it has invested in exploration in Cyprus and Morocco and it hoping to get a slice of the Mozambique gas discovery.
And there are more examples of Qatar’s forward looking approach, but I am out of space.
Retired Kitimat Northern Sentinel editor Malcolm Baxter now lives in Terrace, B.C.
baxyard@gmail.com
