Qatar major projects still on despite World Cup pull-out threat

09 June 2014 06:10 Source:ICIS News

Focus story by Muhamad Fadhil

Qatar major projects still on despite World Cup pull-out threatTEHRAN (ICIS)--Qatar is expected to proceed with its major projects directed at boosting tourism, spelling good news to its petrochemical sector, although the country now risks losing the right to host the 2022 World Cup, industry sources said on Monday.

In 2010, the Middle Eastern country beat Australia, Japan, South Korea and the US to host the major sporting event on 2022, after a long drawn-out voting process, which is now being questioned.

The Federation Internationale de Football Association (FIFA) – the organiser of the World Cup, which is held every four years – is under pressure to conduct a re-vote amid recent allegations of bribery involved in the bidding process that resulted in Qatar winning the bid to host the event.

“With or without the World Cup, Qatar will proceed with its goals to develop the country rapidly. The petchem industry does not need to be too concerned,” said a Middle East-based industry source.

There are concerns that Qatar’s economy may slow down if it was stripped of the right to host the 2022 World Cup.

The country is ready to spend $140bn to build infrastructure, including stadiums, according to global auditing firm Delloite. This planned massive spending is expected to translate to robust demand for petrochemicals.

In 2013, aggressive government spending allowed the Qatari economy to grow 6.5%, according to data from state-owned Qatar National Bank (QNB). This year, the economy is expected to pick up pace and post a 6.8% growth.

“Definitely, there are spin-off benefits to hosting the World Cup. Petchem demand will surge in Qatar and downstream sectors will [flourish],” according to a UAE-based polypropylene (PP) trader.

The expected surge in demand was also behind the government’s plan to pump in $25bn to beef up Qatar’s petrochemical capacity to 23m tonnes by 2020 from about 16.8m tonnes in 2012.

None of these projects are expected to be halted mid-way because of the threat of a FIFA World Cup pull-out, industry sources said.

“New hotels and shopping malls are being built. Such projects will boost demand for plastics and polyurethanes,” according to a source close to a Middle East supplier.

Furthermore, construction of several projects are already ongoing, so scaling back four years after the initial FIFA vote is not an option.

“Contracts are already awarded. Qatar cannot back out now,” according to a Middle East polyolefins source.

For tourism infrastructure, Qatar has budgeted about $20bn in investment in the years leading to the World Cup event in 2022, according to Deloitte. This included the building of the Hamad International Airport in the second quarter of this year.

“All these new projects will boost polyolefin demand. Every aspect of a new airport or hotel requires petchem … in one form or the other,” a polyethylene (PE) buyer in the Middle East said.

Should it lose the right to host the 2022 World Cup, Qatar may delay the construction of sport complexes or world-scale football stadiums.

“If FIFA punishes Qatar, it may put on hold or even scrap building stadiums as there is no longer an urgency [or need]. This may lead to less demand for plastic seats or pipes in the stadium,” according to a source close to a Middle East supplier.

However, such cutbacks only make up a very small percentage of Qatar’s overall petrochemical consumption leading up to 2022, the source said.

The bigger question, however, is what will happen after all the structures were built, and there was no real demand to support them.

A comprehensive report following an investigation into the alleged bribery in the process of selecting the host country for the FIFA World Cup  is expected to be handed over to the FIFA ethics committee late on Monday, a day before the governing body starts its annual congress in the Brazilian city of Sao Paulo.

Brazil is hosting the 2014 World Cup, which will kick off on 12 June and lasts for a month.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Muhamad Fadhil