Developments in Qatar are changing the way banks think about project finance. Risk attitudes have been rethought as banks adjust their capacity to accommodate the financial needs of an economy that has sought to build one of the world’s largest energy production and export facilities in barely a decade. When Qatar decided in the mid-1990s to press ahead with the exploitation of its vast gas reserves, budgets were tight. As a modest oil producer, it had to keep a careful eye on affordability as it worked to develop its position in an industry that demands hefty up-front capital investment. The answer was to look offshore.
A decade on, and with the “dash for gas”, a central global preoccupation, the strategic importance of Qatar’s North Field gas is widely appreciated, not least by project financiers. The scale of this is underlined by the $10.25 billion Qatargas 2 deal of 2005, which delivered several industry records, attracting the participation of 57 banks. Bankers calculate that the value of project financing deals planned or under way will soon reach $130 billion – and this is not restricted solely to the LNG sector.
“Qatar has also unveiled large projects in other energy intensive industries such as the $3 billion joint-venture with Norsk Hydro for an aluminium plant, and a further
$3 billion investment in the petrochemical industry,” says Kris Babicci, Standard Chartered’s chief executive in Qatar: “Given the breadth of the projects and increasingly sophisticated customers’ needs, we will see more creative tools coming in. This will also translate into greater development in the local capital markets.”
Local banks are playing significant roles in big-tickets transactions, alongside the large names soon to set up in the Qatar Financial Centre. Qatar National Bank has been rated the second largest local project finance bank in Arabia. According to the bank’s corporate-banking and capital-markets’ general manager Azza Foutuh, “our specialist corporate finance and syndications team acted at senior levels in 30 large syndicated financings in Qatar and elsewhere, with aggregate financing commitments exceeding QR4 billion.”