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Stepping on the gas

Written by  Author |   Wed, 12 March 2014 14:14


Qatar is fourth on the list after the US, Russia, and Iran when it comes to being the largest dry natural gas producer in the world, and the leading liquefied natural gas (LNG) exporter since 2006.

The oil & gas industry is considered the primary pillar of Qatar's economic development. The state-owned Qatar Petroleum (QP) controls all aspects of Qatar's upstream and downstream oil and natural gas sectors, including exploration, production, transport, storage, and marketing. To distant itself from the consuming markets of the east and west, Qatar had to rely on LNG production. Securing a long-term supply contract to Japan, followed joint venture agreements that launched more contracts with South Korea and India, the solid foundation for the LNG industry was set in Qatar.

An ambitious expansion of the LNG industry in Qatar saw novel and innovative technology that has culminated with the world's top LNG export capacity of 77 million tons per year, with Qatar's LNG fleet reaching any destination around the globe. The country's exports of LNG, crude oil, and petroleum products combined provide a significant portion of government revenues. According to the Qatar National Bank (QNB), Qatar's earnings from its hydrocarbons sector accounted for 60% of the country's total government revenues over the past five fiscal years (through fiscal year 2012-13).



Given the importance of this sector, partnership between Qatar Petroleum, ExxonMobil, Shell and Total paved the way for successful ventures. It started with Mobil entering the Qatargas 1 joint venture in the early 1990s, followed by RasGas I, a direct joint venture between QP and Mobil. Such co-operation mushroomed with the merger of Exxon and Mobil to include Qatargas 2, RasGas II, RasGas 3, Al-Khaleej Gas 1 and 2, and the Barzan project, which is slated to be operational this year.

The Qatargas Operating Company Limited (Qatargas), which operates four major LNG ventures (Qatargas I-IV), and RasLaffan Company Limited (RasGas), which operates three major LNG ventures (RasGas I-III), lead Qatar's LNG sector. Each venture has an individual ownership structure, although QP owns at least 65% of each.

While QP contributed the huge gas resources of the North Field and enacted legal, fiscal and logistical agreements that are conducive to long-term investments by international oil companies (IOCs), it was mainly ExxonMobil, the largest publicly traded international oil and gas company in the world, which has provided innovative technology, marketing strength, management skills, investment and financial capabilities, advanced research facilities, and development programs.

Nevertheless, the Qatargas consortium includes QP, Total, ExxonMobil, Mitsui, Marubeni, ConocoPhillips, and Shell, while RasGas is 70% owned by QP and 30% owned by ExxonMobil. The two LNG companies handle all upstream to downstream natural gas transportation themselves, while the Qatar Gas Transport Company (known as Nakilat) is responsible for shipping Qatar's LNG.

Plans to enhance the sector
Qatar is currently working on a number of projects aimed at adding value to Qatar's energy industry. Upstream, Maersk Oil's development plan for unlocking the further potential of Al Shaheen's difficult reservoirs has been approved by Qatar Petroleum (QP). For Al Khalij field, a new exploration and production-sharing agreement will extend the partnership between QP and Total for another 25 years.

As for exploiting the full potential of Al Shaheen, the field will see investments of more than $1bn. The investments are aimed at sustaining production rates of some 300,000 barrels of oil per day.

In another parallel development, a comprehensive plan is currently being implemented to raise the productivity of QP-operated oil fields. The plan includes BulHaniane Field redevelopment, a project aiming to completely redevelop the field, replacing a major portion of the offshore facilities and adding new onshore ones.

BulHaniane redevelopment is expected to double the field's current production rate from 40,000 to 90,000 barrels of oil per day and extend the life of the field by over 25 years with an initial investment of $10 bn to $13bn.

The project execution is expected to take 6 to 8 years from the start of construction. A similar plan is being formulated for Dukhan which will significantly reduce the forecasted production decline rate.

Qatar holds the 9th largest oil reserves in OPEC and 13th largest in the world
With proven reserves of crude oil estimated by the Oil & Gas Journal (as of January 2014) at 25.2 billion barrels, Qatar holds the 9th largest reserves in OPEC and 13th largest in the world. Qatar's crude oil and lease condensate production ranks 19th in the world, with most of the country's production sent abroad as exports. In 2012, Qatar's non-crude liquids production surpassed its crude oil production for the first time in the country's history.

Three major oil fields account for more than 85% of Qatar's crude oil production capacity. Oil exploration activity in Qatar is ongoing, although not to the degree seen in other oil producing countries. The last major discovery in Qatar came in 1994 (the Al Rayyan field), and any supply growth in the near term is likely to come from increased output at Qatar's existing fields, particularly through the use of enhanced oil recovery (EOR) techniques. Operators have used EOR techniques in several fields, including Al-Shaheen, Dukhan, Bu Hanine, and MaydanMarjam. Qatar's oil production comes from just a few fields, led by the Al Shaheen, Dukhan, and Idd al-Shargi, which combined, account for more than 85% of the country's crude oil production capacity.

Qatar's total liquids production, which includes crude oil, condensates, natural gas plant liquids, and other liquids, was 1.6 million bbl/d in 2012, a slight decline from 2011 but up by more than 70% since 2003. Qatar produced over 1.2 million barrels per day (bbl/d) of crude oil and condensates in 2012, according to EIA (Energy Information Administration) estimates.

The Qatar National Bank (QNB) expects Qatar's crude oil production levels to reach 800,000 bbl/d by 2017 as Qatar Petroleum's $6.6 billion development plan (2010-2014) for crude oil projects continues. A previous government crude oil production capacity target of 1.2 million bbl/d no longer appears feasible, although investment from IOCs (International Oil Companies) could also help boost, or at least maintain, crude oil production levels.

Diversifying into petrochemicals
Qatar has ambitious plans to produce 23 million tons of petrochemicals a year by 2020. QP is developing Al Karaana petrochemicals complex with Shell and Al Sejeel complex together with QAPCO. These ventures have been enabled by the timely execution of the Barzan gas project. This will channel ethane gas from the prized North Field to these petrochemicals complexes.

Within this context, many joint ventures will be or have already been established with international companies such as ExxonMobil, Shell and Total. In addition, QAPCO's third low-density polyethylene (LDPE) plant has been officially opened, allowing Qatar to boost its LDPE output to 700,000 t/y, making it one of the largest LDPE manufacturers in the Middle East.

Qatar's petrochemical expansion plans, along with those of Saudi Arabia and the UAE, stem from the need to diversify away from reliance on "upstream" hydrocarbon, and are based on the belief that the market for petrochemicals will continue to amplify supported by demand in China, India, and other emerging markets, as well as vibrant construction activity in the Gulf countries. Qatar intends to produce complex petrochemicals in addition to basic products, in order to better position itself in view of potential competition from other GCC states, and to benefit from cheap gas inputs.

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