(MENAFN- The Peninsula) Standard & Poor's Ratings Services affirmed Qatar's 'AA' long-term and 'A-1+' short term foreign and local currency sovereign credit ratings on the Qatar. The outlook is stable. The S&P also affirmed the 'AA' long-term issue ratings on the bonds issued by Qatari Diar Finance and SoQ Sukuk A A QSC.
The agency revised its macroeconomic projections for Qatar due to steep fall in oil prices. Prices for crude oil in spot and futures markets have fallen by more than 50 percent since June 2014, leading S&P to revise down its oil price assumptions significantly over this period. 'When we last reviewed Qatar, in September 2014, we expected Brent oil prices to average $105 per barrel, in 2015 and $100 in 2015-2018. We now assume an average Brent oil price of $55 per barrel in 2015 and $70 per barrel in 2015-2018. Consequently, we have revised our macroeconomic projections for Qatar,' S&P report on Qatar noted.
The ratings agency estimates Qatar's GDP per capita at $71,000 in 2015. According to the report, the hydrocarbons sector creates about 55 percent of Qatar's GDP. The oil and gas sector grew by about 2 percent in 2013-14, while the non-oil sector expanded by 12 percent, resulting in average annual GDP growth of about 6 percent. S&P projects Qatar's population growth will average about 6 percent per year until 2017.
In S&P's view, medium-to-long-term challenges to Qatar's competitive position in the liquefied natural gas (LNG) market are likely to come from new shale production, Russia's gas pipeline to China, and increased pressure to delink LNG contracts from the oil price. Nevertheless, it sees several factors that support Qatar's competitive position in the LNG market.
'First, we expect global demand for natural gas to remain strong, absorbing the new supply. Second, Qatar's strategy has been to diversify into all major markets, adjusting the mix of destinations and contract types according to market needs. Moreover, the majority of its exports are under long-term contracts, which provide certainty of volume off-take, while built-in diversion clauses in the contracts provide additional flexibility to manage quantity and price risks. Third, Qatar will continue to have a cost advantage over many of the new projects in other countries.'
The agency also assumes that the oil production will decline as output from maturing fields contracts. 'We expect an average annual decline in crude oil production of 5 percent over 2014-17. We project largely flat gas output-LNG and Natural Gas- given Qatar's moratorium on new investments in the sector, while condensate volumes will likely increase by about 5 percent per year over the same period. The S&P also expects government spending to slow to an average of 4 percent for 2014-2017, enabling the government to contain emerging fiscal deficits in 2015 and 2016.'
S&P assumes Qatar's net external asset position will remain strong, at around 200 percent of current account receipts in 2015-2018. Qatar has accumulated considerable foreign assets over the past decade as a result of its development of its natural resources. The ratings agency forecast that the general government net asset position will remain strong, averaging about 100 percent of GDP during 2015-2018. The pace of asset accumulation will depend on how hydrocarbon production and prices develop. Qatar's assets to provide many decades of production at current levels.
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