The largest of Qatar’s major hydro-carbons-producing areas, the North field, may be out of bounds to exploration until 2013 at the earliest because of the moratorium on new projects imposed by the government in 2005, but Doha is serious about pushing on with a host of other schemes designed to increase oil and gas production.

The main thrust of the country’s gas explor-ation and production activity is currently focused on the pre-Khuff reservoir located outside the North field. In mid-November 2008, state energy firm Qatar Petroleum (QP) signed a 25-year oil and gas exploration and production sharing agreement (Epsa) with Germany’s Wintershall for offshore block 4 North (4N).

It is the first of four Qatari blocks to be awarded for the 544-square-kilometre offshore acreage, located near the Al-Shaheen field northwest of the North field.

International interest

Wintershall plans to reprocess and interpret the existing seismic data for the 4N block over a two-year period, while it undertakes additional research. The first two exploration wells are due to be drilled in 2010.

The company is committed to spending $100m on exploration of block 4N over the next two years. “We are very optimistic about the prospectivity in block 4N,” says a Wintershall spokesperson.

“The [pre-] Khuff formation, for which we have the rights to explore according to the licence, is the same productive formation as the largest natural gas field in the world, the North field. Block 4N is only 30 kilometres west of the North field.”

With Wintershall having taken the first of the four-block offering, QP is now lining up more than 10 IOCs to bid for block A, with awards on this block, as well as blocks B and C, due in March 2009. Although there is a likelihood of only limited output from these deep-water blocks, the offerings are generating interest among IOCs. With the moratorium on the North field unlikely to be lifted until 2013, the licences are acting as a taster for possibly more productive future exploration and production openings in Qatar.

The deep-water nature of these blocks will not be too onerous for the more experienced foreign bidders. The other blocks in the pre-Khuff round extend under the North field area, so oil firms could be drilling much deeper than if they were drilling in the North field itself.

Wintershall, part of Germany’s BASF group, is already present in Qatar and has the rights to explore two other licences in the country: blocks 11 and 3.

At block 11, Wintershall is currently conducting appraisal work to assess the commerciality of a gas discovery. Block 3 was awarded in early 2008, and the company is conducting exploration activities on the field with partners Cosmo Energy of Japan and Indonesia’s PT Pertamina.

The level of interest from IOCs in the pre-Khuff round is expected to be strong, despite doubts over the prospectivity of the reservoirs.

“The view among oil companies is that there is definitely potential in these areas, but there are also concerns that there is no seal to trap hydrocarbons,” says Ross Cassidy, analyst at UK energy consultant Wood Mackenzie. “There is definitely a source rock, but from available data, no clear traps or structures.”

At such considerable depths, the blocks will be gas prone, but Qatar is also seeking to boost its oil production over the next 12 months. Denmark’s Maersk Oil & Gas is expanding work at the Al-Shaheen field, where production is planned to be gradually increased from 240,000 barrels a day (b/d) to a plateau level of 525,000 b/d by late 2009.

Under Maersk’s commitment to block 5 and the extension area, the company will drill more than 160 additional production and water injection wells over a six-year period, and will build three additional offshore platforms with production and accommodation facilities -15 new platforms in total -interconnected by sub-sea pipelines.

Qatar’s main crude reserves are found in the onshore Dukhan field, located along the peninsula’s west coast. There are six main offshore oil fields: Bul Hanine, Maydan Mahzam, Idd al-Shargi North Dome, Al-Shaheen, Al-Rayyan and Al-Khaleej.

Despite a raft of exploration and production activity, there have been few crude discoveries in recent years. Though Maersk’s block 5 will account for the largest slice of Qatar’s oil production increase, further increases will come from offshore activity carried out by a host of IOCs.

The US’ Anadarko Petroleum is undertaking exploration of offshore block 13, while Canada’s Talisman is exploring offshore block 10.

Some blocks remain unlicensed. Block 14, previously offered in 2005, has received renewed attention. Lying on the border between Qatar and Saudi Arabia, it is in an area that has been frequently drilled but where there has been little success.

“The perception remains that it is not prospective,” says Cassidy.

Blocks 1 and 7, just off the Doha coast, are two further unlicensed blocks.

Price impact

However, with Opec cutting production in the wake of oil price declines, QP is unlikely to push too hard on boosting crude production in the coming year and spend resources on ambitious new production targets.

Oil Minister Abdullah bin Hamad al-Attiyah said at the Oil & Money Conference in London, in October 2008, that his country’s energy projects would be safe, as long as oil prices remained in excess of $55 a barrel, which is the price at which the 2008-09 Qatari state budget is calculated to break even.

With oil prices closer to $40 a barrel in the opening months of 2009, some projects could then be at risk, although Opec has said that it is targeting an oil price of $70 a barrel in the second half of the year.

The spectre of the slump is unlikely to completely smother Qatar’s energy investment programme, but the high-risk nature of some exploration blocks will clearly be factored into IOCs’ decisions on whether or not to bid on some of Qatar’s licensing blocks.

The main priority in Doha is to develop gas for the domestic market, where, like most Gulf states, demand is increasing sharply. US energy giant ExxonMobil Corporation is developing phase two of the Al-Khaleej gas project to supply gas to the local market and recover associated condensate at a rate of 15 million barrels a year, as well as 1 million tonnes a year (t/y) of natural gas liquids.

The long-term outlook for the upstream sector is muddied by uncertainty over the future of the North field. Though initially perceived as a massive homogeneous structure, the latest geological view is that the field is a substantially more complex reservoir. This requires careful custodianship.

In July 2008, Faisal Mohammed al-Suwaidi, chairman of Qatargas, announced that further development of gas from the North field would be delayed for at least another five years, until 2013-14.

Doha first announced the moratorium in 2005, ahead of a study that would determine the status of the field, which is estimated to hold 910 trillion cubic feet of recoverable gas.

There is no sign that the moratorium will be lifted any time soon. “QP wants to see how the reservoir reacts once all the North field projects that have been sanctioned come on stream,” says Cassidy. “The last one sanctioned was the Barzan gas project, and its impact might not be fully assessed before 2015.”

The exploration break has allowed other, less high-profile, components of Qatar’s energy sector to enter the limelight. Progress on pre-Khuff blocks in the coming months will show whether IOCs are still interested in exploration and production deals in Qatar, and how eager Qatar is to press ahead with its upstream programme.