Market focus: Pressure focuses Qatar’s priorities

19 February 2010

With the North field subject to a moratorium until at least 2014, development of other offshore reserves is taking precedence as the country strives to meet domestic demand

The offshore oil and gas sector of Qatar represents some of the most-prized acreage in the world. The state’s giant North field, discovered in 1971, holds 910 trillion cubic feet of gas, which translates into about 20 per cent of global gas reserves. Extending over an area of about 6,000 square kilometres, the abundance of reserves in the field has allowed Qatar to become the world’s largest producer of liquefied natural gas (LNG). Output is scheduled to top 77 million tonnes a year (t/y) by the end of 2010.

Despite that, the North field is out of bounds for new exploration until at least 2014 – while Qatar Petroleum (QP) completes a study on its characteristics. QP says it will only embark on a second wave of exploration when it is satisfied it can increase gas output from the North field without damaging the potential of the reservoir. This means conducting a study to determine its condition, effectively producing a new model of the reserve. In the interim, the main priority in Doha has been to develop gas supplies for the domestic market, where, like most Gulf states, demand is increasing sharply.

In numbers
  • 910 trillion - Amount of gas in cubic feet in Qatar’s North field
  • $100m - China National Offshore Oil Corporation investment in exploratory drilling
  • 77 million - Qatar’s expected liquefied natural gas output in tonnes in 2010

Local market

US energy giant ExxonMobil is developing phase two of the offshore Al-Khaleej 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 t/y of natural gas liquids. QP and ExxonMobil have also teamed up to develop the offshore Barzan gas project. Most of Qatar’s oil production of 1 million b/d is also sourced from offshore fields. Its sole onshore oil field, Dukhan, along the peninsula’s west coast, produces about 335,000 b/d or a third of total production.

The six main offshore fields of Bul Hanine, Maydan Mahzam, Idd al-Shargi North Dome, Al-Shaheen, Al-Rayyan and Al-Khaleej provide the balance of 665,000 b/d.

Much of the country’s offshore output now comes from the Al-Shaheen field, which contributes 340,000 b/d to overall output. State-run QP signed an exploration and production sharing agreement with Denmark’s Maersk Oil in 2004 to develop the field. A further $5bn development plan signed in 2006 has seen the two sides commit to raise production levels to 525,000 b/d by 2011.

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. It will also build three additional offshore platforms with production and accommodation facilities – 15 new platforms in total – interconnected by sub-sea pipelines.

Despite its success in increasing production from the Al-Shaheen field, there have been few other major discoveries for Qatar from its offshore fields in the last few years.

A Doha-based analyst says interest in offshore oil exploration remains limited.

“It has been a mixed bag in terms of new oil discoveries in Qatar and I think a lot of companies like Occidental [of the US] and Maersk – which have been here for a while – are reluctant to commit to sizeable new investment at the moment,” says the analyst.

Anadarko Petroleum of the US is undertaking exploration of offshore block 13, Canada’s Talisman is exploring offshore block 10, while GDF Suez of France is to explore for oil and gas in Qatar for the first time after acquiring a 60 per cent stake in offshore block 4 from Anadarko Petroleum in July 2009.

The main focus for the country’s gas exploration and production activity is currently on the pre-Khuff reservoir, which is located outside the North field. 

In 2008, QP broke with tradition to organise a formal bid round for new undeveloped acreage located near the Al-Shaheen field northwest of the North field. Germany’s Wintershall won a 25-year oil and gas exploration, and production sharing agreement to develop offshore block 4 North with the first two exploration wells due to be drilled in 2010.

In September 2009, China National Offshore Oil Corporation also won a 25-year deal for the 5.6-square-kilometre BC Block. The blocks are close to QP’s existing oil fields Bul Hanine and Maydan Mazham.

The Chinese company is conducting a $100m exploration drilling campaign until 2014, and will make further investment decisions after it has studied the results.

QP expects to tender a fifth area, called block 11, following an award on block B and block C.

While international oil companies are showing interest in offshore oil field development, in the medium term the development of the state’s North field gas reserves is more likely to capture energy majors’ attention.

A MEED Subscription...

Subscribe or upgrade your current package to support your strategic planning with the MENA region’s best source of business information. Proceed to our online shop below to find out more about the features in each package.

Get Notifications