Persian Gulf States Qatar Industry

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Persian Gulf States - Qatar Industry


The government has established heavy industry to diversify Qatar's economy. The pattern has been to allow foreign firms to provide expertise in planning, construction, management, and marketing in return for minority shares in the companies. Oil revenues have funded the construction of plants and the development of infrastructure; natural gas has been used as a source of power and as feedstock. The country's main power generation and water desalination plants are at Ras Abu Abbud and Ras Abu Fintas. Electrical generating capacity in 1990 was 1,095 megawatts, and there were plans to add an additional 234 megawatts in the early 1990s. Power consumption in 1990 stood at 4,818 million kilowatt-hours and peak demand at 987 megawatts. Bureaucratic delays stalled many projects, and poor market conditions and technical problems doomed others to unprofitability. Major construction projects such as factories are seldom completed on schedule.

The Industrial Development Technical Centre (IDTC), formed in 1973, directs much of Qatar's industrialization, apart from petroleum extraction. The IDTC identifies industries to meet Qatar's medium- and long-term needs and coordinates industrial planning. In addition, the IDTC monitors the performance of all industries on a monthly basis. In the early 1980s, the center began assessing the environmental impact of industrial plants and production. The IDTC has also been involved in pilot manufacturing programs: in 1989 it announced the formation of the Qatar Industrial Manufacturing Company, owned partly by the government and designed to establish small- and medium-sized enterprises and to buy shares in existing companies.

The country's center for heavy industry is Umm Said. Smaller industries and businesses are concentrated in the As Salwa Industrial Area. The government encourages business and industry by offering, among other things, low-interest loans; free road, water, and electrical hookups; subsidized electricity and water; land leases at minimal cost; and protective tariffs and tax incentives.

The three largest enterprises are the Qatar Fertilizer Company (Qafco), Qatar Steel Company (Qasco), and Qatar Petrochemical Company (Qapco). Qafco was established in 1969 and since 1975 has been owned by OGPC (75 percent) and Norsk Hydro of Norway (25 percent). The government took over Qafco's management in 1991. The Qafco facility, which uses methane-rich natural gas from the Dukhan field as feedstock to produce ammonia and urea, has been less affected by periodic drops in oil production than plants relying on offshore natural gas. Production increased steadily in the 1970s, and a second plant opened in 1979. Nonetheless, because of a steep decline in world fertilizer prices, in 1986 Qafco faced its first operating losses since 1977, despite record levels of production (660,000 tons of ammonia and 744,000 tons of urea). In 1990 Qafco produced 710,000 tons of ammonia (down from 714,000 tons in 1989) and 760,000 tons of urea (down from 778,561 tons in 1989). It had profits of US$40 million in that year. India and China are Qafco's main customers.

Qasco was established in 1974 with 70 percent state ownership. Kobe Steel Company (20 percent) and Tokyo Boeki (10 percent) of Japan hold the remaining shares. Japanese companies initially handled construction, production, marketing, and export. The Qasco plant, which began producing in 1978, has consistently outproduced its 330,000-ton per year design capacity. Its main products are steel bars used to reinforce structural concrete. The plant uses imported iron ore and local scrap; its direct reduction and rolling stages are rated as highly efficient. Despite high levels of output, lack of demand and low prices have contributed to millions of dollars in losses.

Production levels have risen steadily from the outset, with 1979 production at 378,544 tons of steel bars. Because of declines in world steel prices, in 1982 the plant registered its first losses despite a 485,000-ton production level. The mid1980s saw a sharp decline in demand and increased foreign competition. The company registered a loss of US$13.7 million in 1985. In response to cheaper Japanese and Korean imports, the government imposed a 20 percent tariff on bars similar to those produced domestically. The plant returned to profitability in 1988. Qasco took over management of the plant in 1989; Kobe Steel Company remained as consultant. In 1990 Qasco produced a record 565,000 tons of steel bars, up from 556,538 tons in 1989. Plans to expand the plant were approved. Saudi Arabia has been the principal customer, followed by the UAE and other gulf countries.

Qapco's petrochemical complex in Umm Said started production in 1981 with an annual output of 132,679 tons of ethylene, well below its 280,000-ton capacity. The plant also has a capacity to produce 140,000 tons of linear low-density polyethylene (LLDPE) and small amounts of sulfur and propylene. QGPC holds 84 percent of the company, and ORKEM of France holds the remaining 16 percent.

Shortages in feedstock caused by troubles in 1982 with gas pipelines from the offshore fields caused production to drop by one-half. Such difficulties, combined with sluggish sales in the early and mid-1980s, contributed to large operating losses: QR69 million in 1984; QR156 million in 1985; and QR57 million in 1986. The end of the decade, however, saw significant improvement, with profits of around QR420 million in 1989 and production of ethylene at 295,000 tons, LLDPE at 181,000 tons, and sulfur at 52,000 tons.

As a result of the 1989 cabinet reshuffle, the Supreme Council for Planning (SCP) was formed to coordinate the diversification of Qatar's economy by, among other things, encouraging industries linked to the North Field gas project. There are plans for a US$500 million petrochemical complex and also a 240,000-ton per year aluminum smelter at Umm Said that will use North Field gas.

Some industries that are smaller but important suppliers of the domestic market include a flour mill and several cement companies. The Qatar Flour Mills Company processes flour and bran from wheat. It began production in 1969, and output in the 1980s was 700 tons per day. The Qatar National Cement Company (QNCC), owned jointly by the government and private shareholders, uses local gypsum in cement production. QNCC was established in 1965 with a production capacity of 100,000 tons per year. By 1982 the plant had a capacity of 330,000 tons per year. Annual production varied as a result of the competition of cheap imports, and after achieving an output of 319,740 tons in 1985, production declined steadily. Following a low of 160,000 tons in 1988, in 1990 the plant produced 327,000 tons of cement in 1990.

You can read more regarding this subject on the following websites:

Arab states of the Persian Gulf - Wikipedia
Persian Gulf - Wikipedia
Foreign investment and oil industry in the Persian Gulf states
Persian Gulf states : country studies | Library of Congress
Oil in the Persian Gulf | Hormuz - The Strauss Center

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