With plentiful gas reserves and a stable political and financial climate, it is little wonder that Qatar Petroleum (QP) has a hoard of IOCs beating a path to its door. While the state has the largest non-associated gas field in the world, it has taken an impressive level of technical skill and experience to turn this potential into one of the success stories of global gas production over the past decade.

Company Qatar Petroleum
Oil Reserves 27.4 billion barrels
Oil Production2007 1.2 million barrels a day*
Gas Reserves 904.06 trillion cubic feet
Gas Production 2007 59.8 billion cubic metres
*includes NGLs. Source: BP Statistical Review 2008

LNG production from Doha’s shores is expected to hit 77 million tonnes a year (t/y) by the end of the decade, from about 31 million t/y currently.

Despite suffering from bottlenecks in the procurement and labour market, Qatar is steaming ahead with additional LNG trains at its Qatargas and RasGas ventures at Ras Laffan.

Unlike other NOCs in the region, QP has actively sought partnerships with oil majors, recognising the value of experienced operators helping to facilitate such a massive shift in its gas output.

This is a smart strategy for the tiny Gulf state. It can tempt IOCs into the country with the prospect of gas acreage, and those same oil majors will help it stem losses from some of its ageing oil fields and boost output from 900,000 b/d to 1.1 million b/d by 2010.

Capacity at QP’s fields – the onshore Dukhan and offshore Bul Hanine and Maydan Mahzam fields – has been almost static, at about 400,000 b/d for several years. Rumours are circulating within the industry that a review of the three fields may recommend the widescale introduction of enhanced oil recovery (EOR) technology to stem a gradual production decline.

QP’s decision to extend the moratorium on fresh developments in the North field until 2010 is finely balanced. Last year, the company seemed at ease with its gas-thirsty neighbours and IOCs despite the ban on new work.

Now, with the moratorium deadline potentially pushed back to 2013 from 2010, QP runs the real risk of alienating oil majors desperate for a slice of its supplies, while gas-thirsty customers in the region and beyond are left to question the wisdom of relying on the field for future supplies.

Internationally, Qatar is setting the pace for many NOCs in the region through its Qatar Petroleum International (QPI) arm, which has signed a raft of agreements with both governments and oil companies overseas. Created in 2005, QPI was set up to develop QP’s overseas business throughout the energy value chain, from hydrocarbons exploration and production to downstream oil and gas facilities, and distribution networks. It is now focusing on implementing previous agreements.

Respondents to MEED’s NOC survey rate the company’s overall performance and partnering with IOCs highly but are less positive about the company’s ability to deliver projects on budget or on schedule. RasGas, a 70:30 joint venture of QP and ExxonMobil Corporation, now expects its next two trains to come on stream in 2009. The first of these, train 6, will start production by the end of the first quarter of 2009, while train 7 is set to be completed by December 2009. The two trains, which will each produce 7.8 million t/y of LNG, were due to start operating in 2008 and 2009 respectively.

Similarly, Qatargas is understood to have agreed a revised timeframe on train 6, which also involves production of 7.8 million t/y.

Cost overruns

One Qatar-based energy contractor says he typically suffers cost overruns of 25-50 per cent when working with QP and blames “unrealistic specifications and repeated submissions for the approval of documents and materials”.

He cites the longest postponement to a project as eight months, caused by a delay in the submission process for materials.

Contractors say they are trying to convince QP to introduce a contracting model into the country to cut their exposure to financial risk on major state projects. However, while QP is certainly aware of discontent among contractors, it has yet to publicly comment on altering its preference for fixed-price contracts.

Downstream, QP is also developing an impressive large-scale investment programme through its 146,000-b/d Ras Laffan condensate refinery, the 250,000-b/d Al-Shaheen refinery and two integrated petrochemicals complexes with South Korea’s Honam Petrochemical Corporation and ExxonMobil Chemical Company. Although commitments have been made for each petrochemical complex, some uncertainty surrounds the ventures, with costs on the Honam project in particular up by more than 50 per cent temporarily.

A future ethane cracker and derivatives complex at Ras Laffan planned with Shell has also been sidelined.

Despite these cost and delay concerns, QP remains in excellent health. An interim indication on progress for the moratorium would be welcomed, but Qatar is playing a smart game in lining up overseas investments while flush with cash, and continuing to drive home its advantage as owner of the vast North field.