Cancellation of petrochemicals schemes has knock-on effect on utilities projects
- Shelving of Ras Laffan independent water project (IWP) is a result of the cancellation of major petrochemicals projects
- More than $14bn-worth of industrial projects have been cancelled in the past six months
Qatars decision to cancel plans to build an independent water project (IWP) at Ras Laffan Industrial City is the latest sign that Doha is scaling back its energy and industrial projects pipeline.
Qatars General Electricity & Water Corporations (Kahramaas) decision to shelve the planned Industrial Desalination Water Facility (IWDF) IWP follows on from the cancellation of major petrochemicals projects in the past six months, and is a further indication that Qatars industrial projects sector is set to disappoint the regional and international contracting sectors.
The cancellation of the 35 million imperial-gallons-a-day (MIGD) water facility, which had already been downsized from the initially planned 65MIGD, brings the total value of cancelled industrial projects in Qatar to $14.3bn in the past seven months. This may rise even further in the coming years, with about $15bn-worth of offshore oil projects looking increasingly likely to be shelved as the oil price remains low.
The cancellation of the IWDF IWP does not come as a major surprise, with the plant originally having been slated to provide industrial water for major planned petrochemicals projects at the Ras Lafan industrial complex. The shelving of the $7.4bn Al-Sejeel petrochemicals complex, in September last year, and the $6.4 Al-Karanaa petrochemicals scheme, in January this year, has dramatically reduced the future forecasted demand for industrial water. The withdrawal of the tender for the water project also provides an indication that no additional major industrial projects will be forthcoming in the short to medium term.
Additional water capacity required by existing or under-construction industrial projects will be serviced by the planned A3 Ras Abu Fontas desalination project. In March, Japans Mitsubishi signed a contract to build the plant with the Qatar Electricity & Water Company (QEWC), which is developing the A3 plant under an IWP model.
Qatars future domestic water requirements will be serviced by the Facility D independent water and power project (IWPP). Kahramaa recently selected a consortium led by Mitsubishi to develop the facility, which will have a desalination capacity of between 123.5-136.5MIGD of water.
Dohas scaling back of its industrial projects pipeline is largely due to the effects of the fall in oil prices. While the impact of the lower crude price will affect Qatars plans to upgrade and prolong production from its mature oil fields, the much bigger impact of the drop in oil price is the impact on gas prices. As the worlds largest exporter of liquefied natural gas (LNG), Qatars economy is set to be hit hard in the mid-term as a result of LNG prices dropping in tandem with the fall in crude prices.
In addition to the recent dip in gas prices, increased competition from LNG markets in Australia and the US will put further pressure on Qatars main export in the coming years.