Qatar’s North Field accounts for 14.2 per cent of global gas reserves

Source: MEED

Doha is due to award an estimated $5.1bn-worth of contracts during 2011, as part of the government’s long-term objective of developing the country’s infrastructure.

According to projects tracking database MEED Projects, there are about 240 projects currently planned or under way in Qatar with a total value of $260bn. Thanks to rising liquefied natural gas (LNG) exports and high oil prices, Doha has the funds to finance them.

Qatar has spent the past few years ramping up its LNG production capacity for export

For the energy sector, 2010 was about delivering on past promises. Six years ago, Qatar set out on an aggressive programme to become the world’s largest exporter of LNG and a global centre for gas-to-liquids (GTL) production. These two ambitions quickly made it one of the world’s most active energy project markets.

It has already achieved several of its goals; lifting LNG production to 77 million tonnes a year (t/y) with three new liquefaction trains at the giant industrial city of Ras Laffan in the northeast of the Qatari peninsula, giving it a 29 per cent share of the global market by 2012.

Qatar gas megaproject

Production is also set to begin in 2011 at the Pearl GTL project, the first integrated GTL operation in the world. Costing an estimated $18bn, the project is being executed by Qatar Petroleum (QP) in partnership with UK/Dutch Shell Group. Commissioning began in November and, early this year, gas will be brought in from the North Field and the plant will begin commercial production.

Despite a raft of exploration and production activity, there have been few crude discoveries

While Pearl is not Qatar’s first GTL plant, its sheer scale sets it apart. By the end of 2012, production with be ramped up to full capacity, converting about 1.6 billion cubic feet a day (cf/d) of gas into liquid fuels, such as diesel and naphtha, at an onshore plant. They will also produce about 120,000 barrels a day (b/d) of condensate and liquefied petroleum gas. By comparison, Oryx, Qatar’s first GTL plant also at Ras Laffan, started up in 2006 and its capacity stands at 32,400 b/d.

While Qatar has spent the past few years ramping up its LNG production capacity for export, it has been careful to not let its domestic demands suffer. Qatar’s natural gas consumption in 2008 was approximately 19.8 billion cubic metres, according to the UK’s BP.

Qatar gross domestic product
(QRm) 2009 2010e 2011f
Nominal oil and gas GDP  165,325 235,500 318,650
% change -23.1 42.4 35.3
Nominal non-oil and gas GDP  192,535 223,025 256,590
% change 2.4 15.8 15.0
Total nominal GDP  357,860 458,525 575,240
Nominal GDP % change -11.20 28.10 25.50
% Real GDP growth  8.7 14.5 17.0
e=Estimate; f=Forecast. Source: Qatar National Bank

To meet its domestic energy needs, the then Energy & Industry Minister, Abdullah bin Hamad al-Attiyah, said on 26 January 2010 that Qatar would award $1.7bn-worth of contracts for the development of the Barzan gas field by the end of the year. In total, the scheme is worth $5bn.

The tendering process for construction deals on the development, a joint venture with QP and US oil major ExxonMobil, had been delayed in 2008-09, while the country tried to take advantage of falling engineering, procurement and construction (EPC) costs.

Bids have now been submitted for the first phase of development and financial close for the project is expected to occur in mid-2011.

The project aims to produce 6.2 billion cf/d of natural gas from the giant North Field to meet domestic demand from power stations, water desalination and the petrochemical industry. It will be developed over three phases.

Phased construction for gas projects

The first phase is scheduled to come onstream in 2014. It involves the construction of two onshore gas processing trains with a combined capacity of 1.7 billion cf/d. The second phase will deliver a further 2 billion cf/d of gas and the third phase another 2.5 billion cf/d.

The estimated $900m EPC contract for the scheme’s onshore portion, covering two onshore gas processing trains, was awarded to Japan’s JGC Corporation at the beginning of January. The award was somewhat unexpected, with JGC considered to be in third place for the deal, behind a consortium of Japanese rival Chiyoda and South Korea’s Samsung Engineering. Chiyoda was selected for the front-end engineering and design (feed) contract in May 2008.

The award follows QP’s selection of South Korea’s Hyundai Heavy Industries (HHI) for the offshore portion of the scheme, estimated at $800m. The firm will build three unmanned offshore wellhead platforms, two 34-inch wet gas pipelines running 72 kilometres to the shore, two intra-field pipelines, and onshore pipelines to gas reception facilities.

The deal is HHI’s first offshore platform contract in Qatar. The firm has previously won work in the state building LNG carriers for government-owned Nakilat and onshore gas processing facilities for Shell’s Pearl GTL project.

The long-term outlook for Qatar’s upstream sector is muddied by uncertainty over the future of the North Field and a slowdown in oil discoveries. Despite a raft of exploration and production activity, there have been few crude discoveries in recent years.

Oil recovery in Qatar

To offset its projected declines, QP is considering the use of enhanced oil recovery (EOR) techniques at several of its oldest fields. Denmark’s Maersk Oil, which signed a $6.2bn production-sharing agreement with QP in 1992, completed the expansion of the Al-Shaheen oilfield in March after installing 15 new platforms.

Maersk’s block 5 will account for the largest slice of Qatar’s oil production rise, increasing production capacity at the offshore field to 525,000 b/d from around 240,000 b/d. The onshore Dukhan field, located along the west coast of the peninsula, is the country’s largest producing oil field.

Oil will continue to play a major contribution to the country’s economy, but with the resources at its disposal, Doha has rightly focused its energies on its gas sector. Work has now come to an end on the three new LNG trains at Ras Laffan and production has been lifted to 77 million t/y.

While Qatar has been one of the big spenders over the past few years, its forecasted awards for 2011 are dwarfed by its neighbours’. In Saudi Arabia and the UAE in 2011, state-run energy companies will sign more than $12bn-worth of contracts, according to projects tracker MEED Projects. Algeria is forecast to award $8bn, followed closely by Libya with $7bn. Qatar, meanwhile, is set to award $5bn.

A far bigger prize will be in reach when the moratorium on new developments on the North Field is lifted, the largest of its hydrocarbons-producing areas. Containing about 907.3 trillion cubic feet of gas and accounting for 14.2 per cent of global reserves, the field lies at the heart of Qatar’s long-term plans. The moratorium, imposed in 2005 due to concerns about the depletion of the field’s reserves, was originally to be lifted in 2007. However, this was subsequently delayed until 2014 to allow QP more time to collect data on the structure of the field and evaluate how best to exploit the gas it holds.

Last year, Doha extended the freeze on new energy projects until 2015, to allow more time for technical studies. Once these are complete, a final decision on whether to sanction additional development of the field rests with Emir Sheikh Hamad bin Khalifa al-Thani.

During this time, Doha has plenty of other challenges to meet. Some $119bn-worth of infrastructure projects are expected to be completed between 2011 and 2015. Surging LNG revenues will provide the government the financial firepower to push ahead with its project plans, but with its objective to build an economy primarily funded by non-energy revenues, there is still a lot more work to do.