Qatar Natural Gas Meca Economy

March 17 (Bloomberg) -- As Dubai scales back plans to build a waterfront development twice the size of Hong Kong Island, 30,000 workers off the coast of Doha in Qatar are constructing a $14 billion luxury residential project called the Pearl.

The first residents will move into condominiums costing as much as $1.4 million on a man-made island this summer, and boutiques including Sonia Rykiel and Stefano Ricci are already doing business on the marina looking onto the Persian Gulf. From the quayside, where yachts are moored, building sites are visible in the distance with cranes stretching up into the sky.

Gas-rich Qatar, the Gulf’s fastest-growing economy, is spending more than $100 billion in the next three years on projects including a new financial district and international airport. This comes as Dubai suffers a real-estate crash spurred by its dependence on banking and tourism, and the region’s oil- producing economies, such as Saudi Arabia, dip into reserves to avoid recession.

“Qatar doesn’t seem to have any problems; the money is there,” said Lionel Scharly, chairman of the French luxury design company Scharly Designer Studio. After visiting Dubai in December and deciding not to do business, he is bidding for work at the Pearl and plans to open an office in Doha. “In Dubai, everyone is talking about the crisis,” he said from Paris.

A sheikhdom smaller than the U.S. state of Connecticut, with a population of about 1 million, Qatar in 2008 had the world’s second-highest per capita income, at $101,000, after Liechtenstein. It is hurt less than neighbors by the slump in oil prices to $47 a barrel, from more than $147 last July, because of a bet its rulers made 25 years ago: natural gas.

LNG Exporter

Today, Qatar is the world’s largest exporter of liquefied natural gas. Most of the LNG is sold on 25-year contracts, which although renegotiable, aren’t subject to the same price volatility as oil. LNG prices paid by Japan, the biggest importer, have fallen 13 percent since July, compared with the 68 percent plunge in crude.

With the world’s third-largest natural-gas reserves, after Russia and Iran, Qatar plans to more than double LNG output to 77 million tons a year in 2011. It will earn more than $153 billion in gas sales over the next three years, according to the International Monetary Fund.

That means the government will continue to post budget surpluses and can finance 60 percent of the planned investments, according to the Doha-based unit of HSBC Holdings Plc.

Science and Technology

Construction of a deepwater port is to start next year amid expansion of a science and technology park and an education hub. Qatar is also building an energy quarter and new installations for LNG exports in partnership with companies including Royal Dutch Shell Plc, Exxon Mobil Corp. and ConocoPhillips.

Sheikh Hamad bin Khalifa al-Thani, who deposed his father in a bloodless coup in 1995, accelerated the development of gas by plowing billions of dollars into building facilities to export LNG, which is natural gas chilled to liquid form and then transported by ship. By the end of 2010, 14 LNG plants are due to be operational.

The leadership “has put the country onto a very fast growth rate with measured steps,” said Reiji Joseph, director of corporate finance at the Qatari branch of KPMG, the auditing and consulting firm.

At the Pearl, two young women wearing jeans and high heels under traditional black Islamic robes were shopping at French luxury retailer Hermes International SCA. Leaving the store with shopping bags and orange leather Hermes handbags under their arms, they waited for a chauffeur-driven car to pick them up. In the city’s restored Souq Waqif, Doha’s oldest market, diners crowded tables on the terraces of upscale restaurants.

World Exception

While the world experiences recession in 2009, Qatar’s economy is forecast by the IMF to expand at the fastest rate in more than a decade -- 29 percent. The median growth estimate of seven economists surveyed by Bloomberg is 9 percent.

Saudi Arabia, the largest Arab economy and the world’s top oil exporter, expects a 65 billion-riyal ($17 billion) deficit this year, after posting a record budget surplus of 590 billion riyals in 2008. Standard Chartered Plc in January cut its growth forecast for the kingdom to 1 percent from 2 percent.

The United Arab Emirates economy, meanwhile, will contract by between 0.5 and 1 percent in the first half before recovering to annualized growth of 0.5 percent, Standard Chartered says. Dubai, the second-biggest U.A.E. sheikhdom, ran up $80 billion of debts to banks to become a financial and tourism hub.

Villas on Hold

Government-owned real-estate developer Nakheel PJSC has financing for only 700 villas at Dubai’s Waterfront project, after planning to build 10,000. Emirates, the sheikhdom’s airline, announced on March 11 that it will reduce weekly flights to Shanghai and Beijing.

State-owned Qatar Airways Ltd. said the same day that it will add six routes to Australian and Indian cities next winter and raise frequency on other routes at the end of this month.

The Qatari arm of Vinci SA, the world’s biggest construction company, got 2,500 applications last month when it advertised in Dubai, 400 kilometers (250 miles) away, for 100 white-collar jobs. The company, based near Paris, is about to start building the world’s longest bridge, between Qatar and Bahrain. The $4.5 billion project is expected to employ 10,000 people.

“It’s much easier to hire than it was a year ago,” said Gerald Mille, chief executive officer of Vinci’s joint venture with state-owned Qatari Diar. “We put the ads in Dubai and it worked immediately.”

-- With reporting by Tim Barwell in London. Editors: Anne Swardson, Peter Hirschberg