Rising gas consumption has been a strong feature of the UK energy market over the past 20 years. Between 1982 and 2001, gas consumption rose by 109 per cent to 9,200 million cubic feet a day (cf/d), as gas-fired power stations replaced coal-fired plants. The growth is set to continue. The Energy Group, part of the government’s Department of Trade & Industry, forecasts that UK gas demand in a low price scenario will reach 115.9 million tonnes of oil equivalent (toe) a year by 2010, from 96.8 million toe/y in 2002. By 2020, the figure is set to rise to 129.9 million toe/y.

The UK’s thirst for gas has not gone unnoticed 5,000 kilometres away in the Gulf. In June, Qatar Petroleum (QP) and the US’ ExxonMobil Corporation unveiled plans to supply up to 11 million tonnes a year (t/y) of LNG to the UK for a period of 25 years, with first deliveries anticipated in 2006-07. Under the heads of agreement, the two parties plan to build the world’s two largest LNG trains at the Qatar Liquefied Gas Company (Qatargas) complex in Ras Laffan, as well as a new LNG import terminal in the UK.

Instrumental

The credibility of the promoters is not in question. QP and ExxonMobil are among the biggest players in the international LNG business and have been instrumental in transforming Qatar into the world’s fastest growing gas exporter. Both are shareholders in Ras Laffan Liquefied Natural Gas Company (RasGas) and Qatargas, which together produced 14.5 million t/y of LNG in 2001 and are projected to raise output to 35 million t/y by 2010. They are also partners on the enhanced gas utilisation (EGU) project, a $1,200 million upstream development in the North field, which is set to provide feedstock for the two new trains.

The strength of the QP/ExxonMobil relationship is in its symbiotic nature. QP has access to abundant and low cost feedstock, contained in the world’s largest non-associated gas reservoir, the North field. With reserves now estimated at 900 trillion cubic feet (tcf), the North field can support an almost limitless number of LNG trains.

As for ExxonMobil, it has marketing expertise not only in the Far East, but also in Europe. In 2000, it was Europe’s largest marketable gas producer, selling over 7,000 million cf/d to customers. It also has extensive upstream assets in the North Sea.

Liberal

Some fears have been expressed in Doha that the UK will not allow Gulf imports to enter its $16,500-million-a-year market. However, they appear groundless. The UK’s gas market is the most liberal in Europe and the government says it welcomes proposals to secure long-term energy supplies from any producer.

In addition, while gas demand is rising, indigenous supplies are set to decline. By 2010, imported gas is expected to account for 30 per cent of all gas consumed, rising to 80 per cent by 2020.

QP and ExxonMobil will be hoping to secure a significant share of imports. Indeed, under their schedule, Qatari gas could account for about 15 per cent of the UK’s entire gas needs by 2007. If that happens, then it will mark another phase in the development of the entire Gulf energy industry. It would also prove that distance and the absence of gas receiving infrastructure are minor obstacles in the way of Qatari gas exports.