Full steam ahead for Qatargas

18 October 2002

Qatar Liquefied Gas Company (Qatargas) is expected to sign by the first quarter of 2003 a detailed heads of agreement (HoA) with Spain's Repsol YPF and Italy's Enel for the long-term export of liquefied natural gas (LNG) to Europe (MEED 12:10:01).

'We are closing in and are at a very advanced stage of signing a detailed HoA. It will define the commercial parameters,' Qatargas vice-chairman and managing director Faisal al-Suwaidi told MEED on 13 October.

In October 2001, Qatargas and the two European companies signed a memorandum of understanding to carry out a feasibility study into the construction of a fourth gas train at Ras Laffan. The capacity of the new train will be 4.8 million tonnes a year (t/y), considerably larger than Qatargas' existing 2 million-t/y trains.

Qatargas, which has primarily relied on Japanese customers for long-term sales and purchase agreements (SPAs), is now looking at the European market. 'We have made an entry into the [European] market through short-term or spot deals, but our aim now is to be a medium and long-term player,' he said.

On 14 October, Qatargas signed an SPA with the UK's BP for the export of 750,000 t/y of LNG into the Spanish market for three years. The agreement calls for the delivery of 12 cargoes of LNG a year on a freight-on-board (FOB) basis. The first cargo is scheduled for delivery in the third quarter of 2003. BP will dedicate its carrier, British Merchant, for the offtake of LNG from Ras Laffan.

Plans are also being pursued for a long-term deal in the UK. In June, Qatar Petroleum (QP) and the US' ExxonMobil Corporation announced the signing of a HoA to supply LNG. The HoA called for QP to take a 70 per cent stake and ExxonMobil a 30 per cent interest in two new liquefaction trains to be built at the Qatargas site (MEED 28:6:02).

Feedstock for the proposed new trains is expected to be sourced from the enhanced gas utilisation (EGU) project, which is being jointly developed by QP and ExxonMobil (MEED 29:3:02).

'The intention is to build two new trains of 7 million-7.5 million-t/y capacity,' Al-Suwaidi said. Qatargas will be the site for the two gas trains, which are proposed to be commissioned in 2006/07. 'It will be an ex-terminal project: we will produce the LNG, transport and regassify at an LNG receiving terminal to be built in the UK. Qatari gas will then be fed into the existing pipeline network.'

QP and ExxonMobil are looking to finalise various outstanding issues on the project, and a steering committee and project management team have been set up to finalise studies. The next major milestone in project development will be the signing of a joint venture agreement between the two parties.

Along with the signing of agreements to sell LNG into the European market on a medium/long-term basis, Qatargas is also firming up plans to significantly increase its production capacity through the construction of greenfield facilities and modification of its existing trains.

A major project under consideration is a recent proposal of France's TotalFinaElf - the construction of a new 5 million-t/y LNG train, with an option of a second unit of similar capacity.

'We have proposed that the first train be set up without delay,' Thierry Desmarest, chairman and chief executive of TotalFinaElf, said in Doha on 12 October. 'We are ready to give a commitment for the marketing of Qatari LNG. Part of the gas will be fed into our own gas distribution network in Europe and the remaining [volumes] will be sold to third parties.'

The second project that will increase Qatargas' production capacity is the debottlenecking scheme, which is expected to deliver 9.5 million t/y of capacity, up from the original target of 9.2 million t/y. 'The hardware in the existing [LNG] trains will be modified to produce the additional volume,' Al-Suwaidi said.

A joint venture of Japan's Chiyoda Corporation and Paris-based Technip-Coflexipis carrying out the estimated Eur 100 million ($91 million) engineering, procurement and construction (EPC) contract to debottleneck the facilities. It covers Qatargas' three trains, which have a current capacity of 7.7 million t/y. The project is scheduled to be completed by early 2006. The front-end engineering and design (FEED) contractor is the US' Kellogg Brown & Root (MEED 26:10:01).

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