Qataris would like to see next WTO round bring down tariffs

Nov 07, 2001 01:00 AM

While much of the arcana of World Trade Organisation issues relating to intellectual property, services and agriculture may pass Qataris by, they would like to see the next WTO round bring down tariffs on their ever increasing petrochemical exports. Complaining of European and Japanese duties of up to 30 % on some petrochemical products, Abdullah al-Attiyah, the energy and industry minister, calls such protection unfair because it reduces the net return to developing country producers like Qatar.
"We believe in free trade, and want everyone to respect it." Qatar is no beginner in using its gas as feedstock for a variety of industries. The Qatar Petrochemical Company (Qapco), a partnership of Qatar Petroleum (QP) with TotalFinaElf of France and ENI of Italy, is the Middle East's largest producer of low density polyethylene.
Qatar Fertiliser Company (Qafco), a partnership of QP and Norsk Hydro of Norway, is the region's largest producer of chemical fertilisers. But, despite the ups and downs of the petrochemical sector, these companies are spawning fresh ventures.
One is the Qatar Vinyl Company (QVC) to make caustic soda, vinyl chloride monomer and ethylene dichloride. Largest shareholder is Qapco, with QP, TotalFinaElf and Norsk Hydro holding direct stakes. Qatar Chemical Company (Q-Chem), a new joint venture between QP and Chevron and Phillips, will, when it is finished in a year's time, produce annually 450,000 tons of high and medium-density polyethylene and 50,000 tons of Hexane-1.

Tim Roberts, Q-Chem's general manager, gives several reasons why Chevron and Phillips decided to invest in Qatar. "First of all there is the surety of the feedstock coming from Qatar's huge North Field. This provides long term viability to our project."
His deputy, Ahmed al-Emadi, points out the advantage of depending on gas that lies separate from oil. "All you have to do is to remove a bit of sulphur from it, compared to gas associated with oil where a lot of treatment is needed and the production rate is dependent on the pace of oil extraction." The other attractions of Qatar, says Mr Roberts, are "the pro-capital, pro-market business environment" of the country and its "location between the major markets of Asia and Europe".
The US is much harder to sell to as it has a slight excess of capacity over demand. But Mr Roberts says the market in Europe is in balance and the market in Asia is in serious imbalance with demand outstripping supply.
Some parts of the Asia market are highly competitive, with the US, Europe, the Mid East, Korea and Japan all trying to sell into China. So Q-Chem needs the feedstock advantage Qatar gives it, says Mr Roberts.

To cope with the petrochemical sector's growing demand not only for raw gas as a feedstock but also for propane and butane as inputs, new natural gas liquids plants are being built. To ensure better use is made of gas to generate electricity and desalinate water, the government has put these tasks in private hands. AES of the US has a majority stakein the country's first independent power and water project.
It has also transferred more power stations to the partly privately-owned Qatar Electricity and Power Corporation (QEWC). The sensitive question is how these private bodies will be paid. While expatriates pay a subsidised rate for their power and water, Qatar citizens get them free. The government would clearly like to phase out subsidies for expatriates and to start charging Qataris for the first time.
However, political sensitivities suggest that subsidies will continue to be paid, but through the Kahramaa, a new body that replaces the old ministry of power and water. It has contracted to take the output of the new AES-led operation and of QEWC, and will have to bear the cost of passing this on at less than cost to consumers.
The Kahramaa has floated the idea of giving Qataris a free monthly quota of power and water, and charging them for any consumption above that level. But it has not gone down well in a country used, as one Qatari remarks, to regard power and water as "gifts from the emir".

Source: FT.com
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