The year 2010 will go down as a defining period in Doha’s industrialisation drive. It will be remembered as the year when Qatar’s liquefied natural capacity production capacity hit more than 77 million tonnes a year (t/y); the year when Qatar inaugurated its first aluminium smelter; the year that the first ever cables were made in Qatar; and the year that saw world’s largest gas-to-liquids (GTL) production facility start up and the inauguration of the world’s largest olefins cracker, in Qatar. It also brings to a close the fourth phase in the country’s industrial development.

Qatar’s industrialisation drive began in earnest in the late 1960s, with the start of offshore oil production and refining in 1968. Huge volumes of associated gas were being flared off, so the government decided to set up industries that could use the captured gas. Cement production began in 1969, followed by fertiliser production in 1973. These early industries were centred at Mesaieed, close to the country’s oil fields.

Encouraging investment

The pivotal year in the country’s industrial development was 1974, which saw the establishment of Qatar Petroleum and Qatar Petrochemical Company. It was also the year Qatar adopted its first five-year industrial development plan.

The plan set out an industrialisation strategy, the basic objectives of which remain in place today, namely to diversify income resources and increase the contribution of manufacturing to gross domestic product by adding value to hydrocarbon resources, and to increase the percentage of the national workforce employed by the industrial sector. It prioritised the development of metals and petrochemicals manufacturing, and the production of natural gas liquids.

Qatar Petroleum … will only embark on a second wave of exploration when … it can increase North Field gas output

Qatar Petroleum was tasked to lead the process by encouraging foreign investments and fostering cooperation with technology-rich international companies. Meanwhile, investigations showed the North Field discovered in 1971 was the world’s largest offshore non-associated natural gas field, with estimated reserves of more than 900 trillion cubic feet of recoverable gas.

The latest phase of Qatar’s industrial development began in 1991 with the completion of the development of the North Field, and it has been the most transformative period in the country’s history, raising Qatar to the ranks of one of the world’s richest nations. In 2006, Qatar became the world’s largest exporter and trans-shipper of liquefied natural gas (LNG), overtaking Indonesia, which had dominated the market for more than 30 years with exports of up to 25 million t/y. Two years ago, the country’s quarterly earnings from gas exports overtook those of its oil exports for the first time. This year, the country’s LNG production capacity based at Ras Laffan Industrial City will increase to more than 77 million t/y, following the start-up of new liquefaction capacity with RasGas 3 train 7 in February and Qatargas 4, planned to come online by the end of 2010. With global LNG demand estimated to reach 270 million t/y by 2012, these latest capacity additions will give Qatar a 29 per cent share of the global market.

But the pipeline of industrial projects is now drawing to a close. Qatar’s second cable factory, being built by France’s Nexans at Mesaieed, is to be completed in the third quarter of 2010. This follows the opening in May of the $100m Doha Cables plant (a 50:50 joint venture of the local Aamal and Egypt’s Elsewedy Cables) and the inauguration of the $5.7bn Qatalum smelter in April. No other major non-hydrocarbon-based industrial projects are currently under construction.

The inauguration of French oil major Total’s 1.3 million t/y olefins cracker in Ras Laffan in May was the last multibillion-dollar greenfield petrochemicals project in Qatar. The plant will feed Qatar’s new polyethylene plant, which started up in 2009. A smaller melamine facility will open later in 2010, followed by the completion of extensions to Qatar Fertiliser Company urea capacity and Qatar Petrochemical Company’s low-density polyethylene plant in 2011. But no other major plants are being built.

Meanwhile, the Pearl GTL Project, already being commissioned by the UK’s Shell, is the last project on the gas processing front. The two-train plant will convert 1.6 billion cubic feet a day of well head gas to produce 140,000 b/d of GTL products – gas oil, kerosene, naphtha, lubricant base oils and normal paraffin – as well as 120,000 barrels of oil equivalent a day of upstream products – ethane, liquefied petroleum gas and condensate. The second train will be commissioned early next year.

At an estimated cost of $19bn, the Pearl is the world’s largest natural gas project. In May, Germany’s Air Liquide was awarded a contract to build a second helium plant in Qatar to process the helium produced as a co-product in LNG production, but the GTL project is the last major project in the pipeline based on gas from the North Field.

The reason for the slowdown in project activity is that in 2005 the Qatari government placed a moratorium on new developments on the North Field. Initially it was expected to be in place for just a couple of years, while the condition of the reservoir was studied, but now it is not expected to be lifted until 2014 at the earliest.

By then, scientists will be able to tell what impact the series of projects launched since 1991 has had on the field and to determine whether it will be able to sustain a renewal of the LNG projects after the initial 25-year period expires.

Qatar Petroleum says it will only embark on a second wave of development when it is satisfied it can increase gas output from the North Field without damaging the potential of the reservoir.

Future movement

But assuming the green light is given for further exploitation of the field, a fifth-wave of industrial development is likely. Between 2005 and 2007, the US’ ExxonMobil, Shell and Total each agreed to develop major olefins complexes with state-run Qatar Petroleum at Ras Laffan, but the lack of new gas allocations prevented them from moving ahead. Three other GTL projects were also planned, but soaring engineering, procurement and construction costs, as well as uncertainty over gas supplies, caused those to be shelved. But those too could be revisited in time.

In May, there were some signs of movement on the ExxonMobil scheme, with engineering firms reportedly been invited to submit prequalification documents for the front-end engineering and design and technology deals, but it will be a long while before Qatar has another year quite like 2010.