Qatar’s greatest asset is its natural gas reserves. In fact, the largest gas field in the world is here. Its discoverers were disappointed when they found it in 1971. They were looking for oil.

The boom Qatar now enjoys is the result of some daring investments in liquefied natural gas (LNG) back when people thought doing such a thing was a little batty. Faisal Al Suwaidi, the head of Qatargas, deserves the props for his wager, which have paid off handsomely. Today, Qatar produces about one-quarter of the world’s natural gas.

Qatar supplies such faraway customers as Japan, India and China. Qatargas also operates the largest LNG terminal in Europe at South Hook on the Welsh coast. This facility provides Britain with a fifth of its gas needs.

Qatar’s dominant position has filled its coffers and changed the country forever. On a per capital basis, it is one of the wealthiest countries in the world. And given the world’s growing energy demands and the appeal of clean-burning (and cheaper) natural gas when compared with oil, Qatar seems in a good position.

In Dubai, the story is quite different, as Dubai does not have Qatar’s gas reserves, nor does it have much oil. Dubai’s story is one of trade and finance.

As I write, the sun is just peeking over the horizon. It is dawn in Dubai. Out my hotel window, I can see two buildings with cranes over them and in the distance another building in scaffolding. For a city that was once booming and turned bust – as with most places – there is still a lot of construction going on.

As recently as September 2008, realtors could claim that no one had lost money in the Dubai property market. That’s no longer true. In fact, now the market has too much of just about every property type. One headline story noted how 32,000 homes are about to come on the market next year, which is a big number to choke down in any city. Dubai had a huge property boom and now must suffer the flip side.

The hotels, too, are pretty empty. We are staying at the new Address Hotel downtown, which has been open for only 25 days, we are told. I’m the first person to stay in my room. It still has that new carpet smell.

I wandered down for breakfast and was alone in a cavernous dining room. The hotel is brand-spanking new and everything looks wonderful. It’s just mostly empty. I think there are more hotel workers than there are guests.

In Dubai, revenue per room is down 35% from a year ago. Yet there is still an expansion going on. Next year, estimates call for a 15% increase in the number of rooms. This would mean a 40% increase in two years.

Over breakfast, I perused my complimentary copy of The National. One of the things I like to do in a foreign city is to read the local newspapers. I’m kind of a newspaper junkie anyway – I get three dailies delivered to my doorstep at home. In any event, I always find interesting nuggets from a perspective you might not get if all you read is The Wall Street Journal or Financial Times.

Today’s business page carried an array of tales… There was the arrival in Doha of a new LNG tanker, fresh from Seoul’s shipbuilding docks. There was a story about how UAE consumer confidence is up. Also, notes on bond issues in the Gulf, the latest figures on money supply in Kuwait (it’s rising at a frighteningly quick pace of 18.7%), the price of villas in Dubai and more. All sorts of little odds and ends that help paint the picture.

There was also a lot of chatter about infrastructure, which I found particularly interesting. Abu Dhabi, the capital of the UAE, which I will visit on this trip, is looking to raise $100 billion for infrastructure projects. From The National: “The emirate needs to fund new transport, electricity and telecommunications schemes…”

Dubai itself also has ambitious infrastructure spending plans. Last night, as we made our way to our hotel, we could see the new Dubai Metro stops along the way, which, lit up as they were in soft blue and white twinkling lights, looked like something out of the future.

Incredibly, the Dubai government last year spent about 45% of its budget on infrastructure projects – mostly on the roads and ports. But there is a lot more on tap, as The National reports:

“Dubai could invest as much as $20 billion in desalination projects in the next decade alone as it increases its water output by 2.72 billion liters a day… [There are also] plans to add 14,405 megawatts by 2017… Construction costs for those new plants amount to $11.6 billion, while infrastructure costs, including substations and transmission lines, will be about $11.6 billion.”

This massive build-out is not unique to Dubai, or even the UAE. There are also big infrastructure projects of all kinds in India and China and other emerging markets.

Regards,

Chris Mayer

Source: Greetings from Qatar!

The high and rising price of oil is causing real pain in the heartland… and yet the view looks quite different from the Middle East.

Chakib Khelil, the Algerian oil minister and president of OPEC, has flatly stated that “there is no shortage.”

The oil minister of Qatar is even more blunt. “The market doesn’t need more oil,” he says.

Hussain al-Sharistani, the oil minister of Iraq, takes the strangeness even step further. “There is more oil in the market than consumers want,” he argues. (Which begs the question: Which consumers exactly?)

There is obviously plenty of bad news in crude oil’s meteoric rise. But the bright side is, real pain means the U.S.A. — and much of the world — is finally on the cusp of real change. That means profit opportunity on a major scale.

Nosebleed Oil Prices — Whose Fault?

A few weeks ago, OPEC members seemed to shrug their collective shoulders at the thought of $200 a barrel oil. President Khelil points out that much of the price rise is due to a weak dollar. (Every one percent decline in the dollar’s value, OPEC estimates, increases the price of crude by $4 a barrel.)

So the dollar is one major culprit. But there are many other small factors that add up.

For example, China, after suffering through its worst earthquake in decades, has had to shut down mines and wells for safety reasons. Apart from the terrible human tragedy of more than 34,000 lives lost, this can only add upward pressure to oil prices.

In South America, Venezuelan oil exports recently dropped to a five-year low, and evidence is mounting that the country has become a state sponsor of terrorism under Hugo Chavez.

In Nigeria, rebels continue to keep oil and gas production on a knife edge. In places like Russia and Mexico, oil and gas output is declining at an eye-opening rate.

The little things pile up; if it’s not one thing, it’s another. This is generally the case when supply and demand are so tightly matched there is almost no margin for error. That’s where we stand now in terms of global oil demand vs. available daily supply.

It’s not rocket science to see how all these factors add up to $127 a barrel oil. For years, naysayers have been telling us that the price of oil was about to collapse and head back to ‘cheap’ any day now.

Of course, what was cheap just kept edging higher and higher. First it was $25 a barrel. Then it was $35. Then $45, $55, $65. And now we’re at the point where $85 or $90 a barrel oil would probably seem ‘cheap’ relative to today.

Growth and More Growth

The supply side of the equation is tough and getting tougher. And when we look to emerging markets, it becomes clear that the demand train isn’t slowing down.

The U.S. consumer might be spent, but consumers in other countries are just rolling up their sleeves.

For example, Bloomberg reported last week, “China’s retail sales climbed at the fastest pace since at least 1999, signaling that domestic consumption may help to buffer the world’s fourth-biggest economy against an export slowdown.”

At the same time, Thailand reportedly booked its fastest growth in two years in the first quarter of 2008.

A key debate these past few years has been whether or not domestic demand growth would kick in strong enough, allowing export-heavy regions of the world like Asia to become captains of their own economic fate. The evidence suggests this is happening.

Then add to that mix the fact that shopping malls are spreading like wildfire in Russia, cheap cars are conquering India, Southeast Asians are doubling and tripling the amount of meat in their diets, and so on.

For much of the 20th century, the Western world threw a party that the rest of the world missed out on. Now that the West is miring itself in economic slowdown, ROW (a common Wall Street acronym for “rest of the world”) seems to be saying, “No thanks. We’re not much interested in your pity party, either… but we do intend to get our fair share of those resources you’ve been hogging.”

The Good News

Again, there is plenty of good news, too.

High oil prices may be here to stay, but the reasoning behind this phenomenon is not all bad. It’s a good thing for ROW to be coming on line… to see new wealth being created, new economic breakthroughs, new dreams of escaping poverty and hardship on a grand scale.

And here in the land of plenty (the United States), it’s good to see habits truly changing for the first time. It was a phenomenon itself these past few years how stubborn the American consumer seemed to be in the face of rising gas prices.

No matter how much pain was felt at the pump, we just kept driving. The gas-guzzler culture seemed to be bulletproof. Ford Excursions and Chevy Suburbans just kept rolling off the lots.

Drivers will likely need to become comfortable with gas at $4 a gallon, as oil experts say an era of historic pain at the pump will endure well beyond the Memorial Day weekend, when prices traditionally peak.

You might trade in that GMC Yukon for a Honda Civic, skip the highway for the bike lane and redefine that time-honored tradition of the road trip. Americans are already reordering their Memorial Day weekends, with AAA predicting a decrease in travel for the first time since 2002.

But those changes might not be enough to immediately pull down a gasoline market that follows the whims of the world economy. Newfound wealth fills pockets of the globe once known for overwhelming poverty, and for the first time prices are responding to their thirst for fuel as much as demand in America.

The new world order for petroleum markets has some analysts predicting far higher prices ahead. Gasoline in the U.S. could reach $7 a gallon because more drivers in India and China will hit the road even as American oil consumption retreats, the Canadian Imperial Bank of Commerce predicts.

The flip side of sky-high crude oil prices is that Gulf States are raining money. Read on here to find out about a “backdoor” way into the booming Gulf.

Once we see that happen – and I’m convinced we will – you can kiss goodbye to the dollar.

Right now, business from the Middle East is about the only thing keeping the greenback above water.

But it’s already starting to drown!

You see, oil – the Gulf’s greatest export – is priced in dollars. It’s traded in dollars. Therefore a huge part of their foreign currency reserves are invested in dollars.

Trouble is… the dollar’s plunging. And the only thing propping it up is this Middle East investment.

But they’re losing patience by the day!

And no wonder…

As the Fed slashed interest rates in a desperate attempt to stave off recession, they’ve unwittingly landed their unlikely saviours up the proverbial creek!

Thanks to their peg to the dollar Gulf States have seen record rises in inflation – between 7% and 10% by Dec 2007, up from just 1.4% in 2005.

Why don’t they just go ahead and dump the dollar now?

The fact is they are SO heavily invested in dollar-denominated assets it would be domestic political and economic suicide if they were to instantly pull the rug. Dollars accounted for 67% of Gulf Corporation Council state assets in 2007.

So it’d be bad for business to do it now, but they are working very hard on diversifying their investments.

Already the Qatar Investment Authority, the emirate’s sovereign wealth fund, is looking at investment opportunities in countries like China, Japan, Korea and Vietnam to diversify currency risk, says head of strategic and private equity, Kenneth Shen.

So here is my prediction…

Doom for the dollar… boom for Vietnam

Economic necessity will see the Gulf de-peg from the dollar and establish a single currency.

Backed by the region’s massive energy reserves, the new Gulf currency will emerge as one of the world’s major currencies alongside the dollar, euro, sterling and the yen.

It’ll result in falling inflation in the Gulf and lay the basis for a sustained economic boom in the region. Gulf investment houses will then become major players on the global stage.

Gulf merchant banks should be a big beneficiary of this. But another market with their coffers open, ready for filling – and which you won’t expect – is Vietnam.

You see, as Gulf investors begin looking for new opportunities to invest their petrodollars, many of them are waking-up to the potential of Vietnam.

Just listen to Bader Al-Sa’ad, CEO of Kuwait’s sovereign wealth fund, the Kuwait Investment Authority:

“The government has a will to change the economy; there is a huge jump in direct foreign investment year over year,” he says. “They are learning from the Chinese experience and it is easier to enter Vietnam than other emerging economies . . . We are interested in buying a stake in a financial institution but these stakes are not cheap.”

With Vietnam’s market now some 50% below its peak last November, Mr. Al-Saad may soon get his chance.

I’m predicting it’s going to be a big winner as the tide of petrodollars hits this gloriously undervalued Southeast Asian state.

For clever way to ride this trend, click here.

Regards,
Manraaj Singh
Editor Profit Hunter