Economic Update

With a high-level delegation from Doha touring South Asia this week, Qatar’s relations with its Indian Ocean neighbours have been under the spotlight, with the gas, IT and construction sectors all likely benefactors.

India has emerged in recent years as the largest overseas market for Qatar’s liquefied natural gas (LNG) exports, while the Gulf state has long benefited from labour coming from the sub-continent. In particular, the state of Kerala has been the home of many workers in Qatar, so it was no surprise that the Qatari delegation was in Thiruvananthapuram and Kochi this week.

The delegation was led by Foreign Minister Ahmed Bin Abdullah al-Mahmoud, and was presented with 21 different projects by the Kerala state government, the Indian Pioneer News Service (PNS) reported on June 24. One of the most significant of these is a regasification terminal planned for Kochi. Also up for discussion was a convention cum hotel complex in Akkulam in Thiruvananthapuram, where the third phase in the development of a technology park is about to start.

At the same time, “Some members of the delegation visited Kim’s hospital in Thiruvananthapuram and talks are proceeding on a super speciality health care facility having centres in Qatar and Thiruvananthapuram,” PH Kurian, secretary of the local industrial promotion board, told PNS.

All this comes as the latest stage in a long process of development in Indian-Qatari ties. India is now the eighth-largest consumer of Qatari exports, with the giant country coming in as 10th-largest in value terms when it comes to Qatar’s imports. The main items brought in from India are ready-made garments, tea and vegetables, although there is also significant trade in machinery and instruments, rice, marble, gold and precious metals, bus tyres, cosmetics, textiles and ceramics.

The trade volume has also been increasing recently. During the 2004/05 financial year, non-oil trade volume stood at $776.11m, or more than twice the $315.44m recorded during the 2003/04 financial year.

Meanwhile, Qatar has long been a destination for Indian workers. Indian Minister for Commerce and Industry Kamal Nath told reporters during the Qatari delegation’s visit that around 20% of the population of Qatar consisted of non-residents from India.

“We have invested in the form of human resources in Qatar and now we are looking for other investments from Qatar to India,” he said.

In this, it is hydrocarbon, rather than human, energy that is largely the name of the game. New Delhi is currently looking for LNG to restart the $2.9bn Dabhol power project in Maharashtra, for which it requires some 1m tonnes per annum. This will fire the 740-MW Phase I of the project and the nearly complete 1444-MW Phase II.

Yet that extra 1m tonnes is not all. “We have sought conversion of the present supplies of 5m tonnes per annum of LNG into 7.5m tonnes,” Indian Petroleum Minister Mani Shankar Aiyar told reporters on June 20. The extra 2.5m tones is in addition to the 1m necessary for Dabhol.

The gas currently comes from Qatar’s RasGas, which is contracted to supply India’s
Petronet LNG, a company put together by the state-owned Gas Authority of India Ltd (GAIL), the Oil and Natural Gas Corporation (ONGC), the Indian Oil Corporation and Bharat Petroleum Corporation Ltd. The extra 2.5m tonnes per annum is now being negotiated, in all likelihood to be brought ashore with the rest at Dahej in Gujarat.

Yet India is not the only local state angling for Qatari gas at present. Early in June, Pakistani President Pervez Musharraf was in Doha talking up the proposed $1.88bn Gulf-South Asia Pipeline (GUSA). This 1186 km giant will have one intermediate compressor station at Diba in the UAE, and an initial gas flow of 1600m standard cubic feet per day (mmscf/d). The delivery point in Pakistan is set for Jiwani, near Gwadar, where the gas will be hooked up to the Pakistani market system.

Pakistani Minister for Petroleum and Natural Resources Naseer Khan Mengal described talks on the GUSA in Doha as “positive” at the conclusion of Musharraf’s visit.

At the same time, Pakistan and India are together negotiating a tri-nation pipeline deal with Iran for the supply of more natural gas. With both countries witnessing colossal demand, “there is a clear understanding on the part of both India and Pakistan that we need to access all resources we can in order to meet our humongous energy requirement”, Aiyar told reporters on June 8. “It is a common quest for energy security.”

Indeed, this common interest was also visible behind India’s formal proposal on June 16 that it too join the GUSA project.

Aiyar suggested that the route could be extended to the Indian coast, saying that he had already discussed this with Islamabad and had proposed sending an official delegation to Qatar for detailed discussions.

“The Pakistani leaders conveyed to me that they would have no objection to Indian participation in the project,” Aiyar stated. “Given India’s energy security interests, we would be happy to associate ourselves with this project and to examine with Qatari and Pakistani authorities the technical and commercial feasibility of the proposal.”

While the pipeline poses some engineering challenges – around 100 km of the route is through deep water – it seems likely to be of considerable benefit to all. Not least to the Qataris, either, whose gas, it seems, will long be coveted on the other side of the ocean.