The six-member Gulf Co-operation Council (GCC) can expect slower economic growth in 2002 as oil production is reigned in, the United Nations reported last week.
According to a report prepared by the UN Economic and Social Commission for Western Asia (ESCWA), the GCC’s combined gross domestic product (GDP) is expected to grow by only 0.8% in real terms to $253.5bn in 2002.
Saudi Arabia is expected to have the most meagre rate of growth for 2002 at around 0.5%. The forecasted figure for Saudi Arabia, the largest member country of the GCC, will likely hurt the economies of neighbouring countries that are expected to have higher growth.
"Because Saudi Arabia has by far the largest economy in the region, the slow growth in its GDP is the main factor in the slow growth in the GCC’s combined GDP this year," the report said.
Qatar is expected to continue to top the other countries in growth for the fourth year in a row. The country's growth rate is forecasted at 5.5% and around 1% in both the UAE and Bahrain. In Kuwait, a decline of 0.6% is expected for this year.
Lower oil prices and a reduction in oil production in the GCC countries are, most agree, to blame for the sluggish growth, with the Organisation of the Petroleum Exporting Countries (OPEC) members keen to stick to an agreement to tighten supplies to boost crude oil prices.
July crude futures were down last week on the International Petroleum Exchange on news the week before of the sizeable build up of 6m barrels of crude oil stock and that OPEC countries were pumping 1.4m barrels per day (bpd) above current quotas.
The low prices and the need to maintain quotas will likely be discussed at a meeting on June 26th of OPEC members.
Estimates of crude oil production of the six GCC countries show a decline this year of 700 000 bpd compared to last year, and prices per barrel could be around $2 below their 2001 average of around $23.5. This figure would translate roughly into a 12% fall in combined oil revenue to $90bn this year.
This is off the robust figure of $130bn recorded in 2000, which was a catalyst for explosive growth in GCC countries, with nominal growth exceeding 15% in some countries.
Qatar has been able to keep up the high pace of growth – one of the most vigorous in the world – mainly on the basis of ambitious gas projects.
And three projects announced on June 13th in Qatar worth around $2bn will expand that country’s petrochemical industry.
Chevron Phillips Chemical and Qatar Petroleum (QP) signed a $1.1bn agreement on June 13th to form Q-Chem II, a joint venture for the production of high-density polyethylene (HDP) and normal olefins. The ethylene derivatives units will have a combined production capacity of 350 000 metric tonnes per year.
Qatar Petroleum (QP) will hold a 51% equity position in Q-Chem II, with an unnamed affiliate of Chevron Phillips Chemical holding the remaining 49% stake.
Another deal, announced the same day, is set to create a linear polyethylene plant as part of the $550m Qatofin project.
According to the terms of the agreement, Qatar Petrochemical Company will hold a 63% stake, ATOFINA - a unit of TotalFinaElf - will hold a 36% share, with QP keeping the remaining 1%.
Another venture between the two parties will be for the construction of a $470m ethane cracker that will have an initial annual capacity of 1.3 metric tonnes. The project will reportedly see Q-Chem II holding a 53.31% stake, Qatofin 45.69%, with the remainder held by QP.
In other news, the United Arab Emirates and Qatar have joined a common Arab stocks database that tracks the trading of regional bourses. The UAE recorded the highest growth in the first quarter among the 12 markets on the system, according to a report prepared by the Arab Monetary Fund (AMF).
Nearly $21.8bn in market capitalisation was added to the Arab Stocks Data Base (ASDB) at the Abu Dhabi-based AMF with the addition of the linked markets of Abu Dhabi and Dubai and Qatar's Doha Securities Market.
The ASDB's total market capitalisation has been given a boost of some 12% with the addition of the new markets and stood at $180.4bn at the end of the first quarter.
The AMF's base has a total of 12 listed member markets, including those in Bahrain, Kuwait, Saudi Arabia, Egypt, Jordan, Tunisia, Lebanon, Oman and Morocco.
The AMF's report said the UAE had recorded the highest growth rate among the listed markets. The index of the Abu Dhabi Securities Market rose by 8.8% at the end of March and the Dubai market went up by around 5%.
The report said that the combined turnover of the 12 member markets leaped by more than 50% to $12.8bn in the first quarter of the year, compared to $8.4bn recorded for the same period last year.