IT has been an eventful year for Qatar's oil and gas producers. Qatar General Petroleum Corporation (QGPC) has reversed the record of recent years to boost sustainable oil capacity by 40,000 barrels a day (b/d) as well as launching a second liquefied natural gas (LNG) project. The crowning achievement will come in December when QGPC presides over the inaugural LNG shipment from Qatar Liquefied Gas Company (Qatargas).

Qatargas has proved a defining project for QGPC as it pioneered limited recourse financing transactions in the local market and launched Qatar into the global gas business. It has also won for Qatar what it conspicuously lacked just a few years ago: international credibility. There have been difficult moments: a major foreign shareholder dropped out in 1992 and a $680 million loan for upstream development work has still to be finalised. Yet, Qatargas is still on track to hit all its target dates.

On target

'Credibility is the most important goal for everyone and on Qatargas we have demonstrated that,' says Oil & Energy Minister Abdulla Bin Hamad al-Attiya. 'Even though the upstream loan agreement has been delayed, it has not affected the project's progress as some people said it would. It is on target... and shows that we respect our commitments and realise that the customer has to be placed first.'

QGPC is aiming to build on the Qatargas experience to push ahead with the Ras Laffan LNG Company (Rasgas). a second gas venture. Rasgas is planning a four-train development with a total capacity of 10 million tonnes a year (t/y). With just one sales and purchase agreement in place to supply Korea Gas Corporation (Kogas) with 2.4 million t/y from August 1999 Rasgas is pressing on with construction of a one-train facility. At the same time, it is pursuing additional commitments from Far East and European customers, which will validate eventual construction of the three additional trains.

There are risks to this approach, but AlAttiya is confident that Rasgas will fulfil its ambitious agenda. 'Rasgas is working very hard to have the further three trains committed,' he says. 'It is in discussion with the Koreans about exercising the option (of 3 million t/y) and it holds letters of intent, which are valid, with other prospective customers including Taiwan and Turkey. It has started discussions with some other parties. Additional agreements should be reached by the end of the year.'

Rasgas gets going

The minister's confidence stems in part from the knowledge that Rasgas is no longer just a plan languishing on the drawing board. Site preparation has begun at Ras Laffan and the three main engineering, procurement and construction (EPC) contracts have been awarded. Three Japanese trading houses are keen to join the venture, which will give Rasgas the option of expanding its shareholder base in exchange for financial and marketing support in the key Japanese market. 'Discussions are going on with the Japanese, but we really have to see what the newcomers can bring in terms of marketing and finance, before a final decision is taken.' Al-Attiya says.

A decision is expected before the end of the year on the fate of yet another LNG project being developed by the US' Enron. The 5 million t/y scheme is dependent on Enron turning into firm gas commitments outline agreements for 7.5 million t/y with customers in India and Israel.

It is a measure of QGPC's current workload that the huge LNG projects are only part of its overall brief. An increasingly important task for the state energy company is to lift sustainable oil capacity to provide sufficient revenues to underwrite the gas export developments. There have been some major strides in this regard over the past 12 months.

Just 18 months ago, QGPC was aiming to reverse the steady decline in oil production by adding 80,000 barrels a day (b/d) of new capacity. The intention was to lift output to 500,000 b/d by 2000. Early success has led to a steady escalation of the capacity estimates. In March, QGPC said that capacity could reach 600,000 b/d by the end of the decade. Now, officials are confidently predicting that capacity will hit 700,000 b/d by the turn of the century.

The steady rise in capacity forecasts is predicated on bullish predictions of the potential in Qatar's offshore acreage, where new production sharing agreements with foreign companies are getting results. By 2000, output by foreign ventures is set to reach 266,000 b/d, a five-fold increase from 1995 production of 59,000 b/d. The growth will come from:

ldd al-Shargi. Since the innovative development and production sharing agreement (DPSA) was signed with the US' Occidental Petroleum in October 1994, output has risen to 60,000 b/d from 20,000 b/d. With further enhanced oil recovery and planned refurbishment of facilities, output will grow steadily to 11,000 b/d in 2000.

Al-Shaheen. Maersk Oil Qatar has successfully employed both horizontal and vertical drilling techniques over the past three years to produce 25,000 b/d from oil trapped in tight reservoirs. The company is planning a major development of the field, which will involve installing a series of platforms with a total design capacity of 150,000 b/d. By 2000, capacity is set to have risen to 85,000 b/d.

Al-Khaleej. Elf Aquitaine Qatar is due to bring 30,000 b/d of production on stream at the field in 1997. A further 10,000 b/d of capacity is expected over the next four years.

Al-Rayan. QGPC gave the go-ahead in June for Arco, the field operator, to proceed with a 25,000-30,000 b/d development. The first production is expected in September.

QGPC's quest for international partners who are prepared to shoulder development costs and bring in appropriate technology continues unabated. In the spring, the US' Chevron teamed up with the Hungarian Oil & Gas Company for an exploration and production sharing agreement (EPSA) for block one northwest. A decision is also pending on block one southeast, and discussions have taken place for block seven.

However, there are limits to the foreign charm offensive. Despite the success of the DPSA accord for Idd al-Shargi, QGPC has no plans to offer similar agreements for key production areas, such as Dukhan. 'Yes, companies have approached us about Dukhan,' Al-Attiya says. 'But we told them gently that we can do the development work ourselves. It is an easy and low-cost field and there is really no excuse to give it to any other company.'

QGPC plans to raise capacity at Dukhan, the oldest producing field in Qatar, by 60,000 b/d to 330,000 b/d over a four-year period. The centrepiece of the programme is the $300 million Arab D gas recycling scheme, which will help restore oil reservoir pressure through the reinjection of dry gas as well as producing condensate and natural gas liquids for export. Once again, QGPC has taken an innovative approach and is to implement the project on an alliance basis.

The alliance concept, developed in the North Sea, brings contractors and client closer together by creating financial incentives to complete the work as quickly and efficiently as possible. The risk-reward model at the heart of the arrangement means that any savings on the expected costs are shared out among the partners according to a predetermined formula.

The Dukhan Alliance now has a full complement of members and construction work is under way. Much hinges on the success of the project. If it lives up to expectations, then the alliance contracting method is expected to become the local standard and be applied to similar schemes, including the planned Arab C recycling project in the offshore Bul Hanine field.

Over the past five years, Qatar has made a habit of turning glum predictions on their head. In 1992, the very idea of a second LNG plant was not treated seriously outside QGPC and no-one was talking of oil capacity rebounding to 700,000 b/d. However, QGPC has demonstrated the flexibility necessary to achieve such ambitions and recent developments have made both claims credible. The positive attitude has rekindled international interest and the Qatar energy sector has become a hive of new activity.