Oil prices and overstretched supply chain force difficult decisions
Qatars decision to downsize the capacity of its planned independent water project (IWP) at its Ras Laffan development provides the latest signpost of the direction in the countrys development strategy moving forward.
While the decision to remove the industrial water element from the scope of the IWP is logical following the cancellation of both the $7.4bn Sejeel and the $6.4bn Karaana petrochemicals schemes in the past 6 months, it also shows that Doha has no plans in the short-to-mid-term to introduce any major new projects to its industrial landscape. The reasons for this are likely twofold.
First, the decision to shelve the petrochemicals projects is unsurprisingly linked to the global oil price. With the price of oil having halved in the past six months, the demand for spending billions of dollars on downstream projects throughout the region has dropped significantly as the projects become less commercially viable.
Second, the country has a mammoth challenge to complete an unprecedented construction programme in time for hosting the 2022 World Cup. When Qatar was selected in late 2010 to host the worlds largest sporting event it was clear it had a significant challenge on its hands to deliver. It now only has seven years, and while progress has been made with awarding contracts and beginning work on the Doha Metro scheme, much more needs to be done.
The initiation of the prequalification process for the Qatar Rail long-distance passenger and freight rail project in February suggests that Qatar is consolidating its hydrocarbons sector while focusing on developing its World Cup infrastructure in the short term.
It is clear that while Qatars energy sector has played the major role in its development focus for the past five decades, its target for the next five years will be on the World Cup.
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