By investing in processing facilities for condensate production, Qatar is aiming to provide a reliable and sustainable alternative to liquefied natural gas exports
Laffan Refinery Company’s plans to double the capacity of its condensate refinery is an indication of how a versatile byproduct of Qatar’s huge gas production is being utilised to push Doha’s domestic hydrocarbons ambitions.
According to the UK’s BP, the country’s oil production has risen from 754,000 barrels a day (b/d) in 2001 to more than 1.7 million b/d in 2011. About 700,000 b/d of this increase relates to the condensate produced from non-associated natural gas. Qatar’s Energy and Industry Minister Mohammed al-Sada commented last year that condensate production will gradually exceed the country’s crude oil production.
Qatar will produce about 780,000 b/d of condensate by 2015 and Doha is keen to use as much as possible for domestic consumption in both petrochemicals and refined products, such as gasoline, diesel and jet fuel. Any remainder will be sold on the international market as raw condensate.
Condensate: Versatile product
Condensate is classified in the same category as oil and marketed according to the oil price. It is much lighter than crude and easier to process. It can also be used as a blending agent for heavy oil to make lighter products.
Qatar produces two different types from its fields: deodorised field condensate and low sulphur field condensate. Deodorised field condensate results from the liquefaction of the North Field’s gas. This type is suitable for processing into ethylene cracker feedstock and leaded gasoline blending. It can also be processed into jet fuel.
Low sulphur field condensate is produced from the North Field. It is used in the domestic petrochemicals industry and also as a lightening agent for heavy crude oil.
Doha’s plan to use the extra condensate production domestically, particularly as feedstock for petrochemicals production, will give it a flexibility that extends further than its liquefied natural gas (LNG) export strategy.
“At the moment, Qatar is having great success selling its LNG to Asia, but as more and more producers enter the market this situation could change in the future,” says a senior refining executive based in Qatar. “Building dual-feed crackers for its petrochemicals industry that can utilise either gas or liquid feedstock produced from condensate gives Qatar more options.”
Doha has pledged to increase domestic petrochemicals production from 9 million tonnes a year (t/y) to 23 million t/y by 2020. To achieve this, at the same time as remaining the global swing producer of LNG, will require the deft handling of all of its natural resources.
This means that, as well as offering ethane as a feedstock for petrochemicals, it will also be increasing the use of naphtha, along with butane and propane, which are derived from natural gas liquids.
“Securing large quantities of its LNG into long-term contracts with Asian offtakers is a shrewd move for Qatar and utilising condensate for domestic use is a good idea,” says the refining source. “But in the future, if LNG prices start to fall, Qatar could then use its gas for petrochemicals production and sell refined products that have been processed from its condensate.”
Qatar operates two condensate refineries, located at Mesaieed and Ras Laffan. The Mesaieed refinery is operated by Qatar Petroleum (QP) and was completed in 2001. The facility has a capacity of 137,000 b/d and produces liquefied petroleum gas (LPG), naphtha, premium gasoline, super gasoline, jet fuel, diesel and marine fuel oil. The majority of the gasoline and diesel feeds the domestic market, while the naphtha is mainly exported to the Far East.
The Ras Laffan facility is operated by Laffan Refinery Company. This is a joint venture of QP, which holds a 51 per cent stake, and the US’ ExxonMobil, France’s Total, Malaysia’s Idemitsu and Japan’s Cosmo, with 10 per cent each, and Japan’s Mitsui and Marubeni, with 4.5 per cent each.
The first phase of the refinery was completed in 2009 and this is now being followed by plans to double capacity with a second phase.
France’s Technip has carried out the front-end engineering and design (feed) for the second phase. The $1bn project will enable the refinery to process an additional 146,000 b/d of condensate.
The proposed product mix is likely to stay the same and will comprise 61,000 b/d of naphtha, 52,000 b/d of jet fuel, 24,000 b/d of gasoil and 9,000 b/d of LPG. A benzene, toluene and xylene unit that will process aromatics feedstock to be used in the local petrochemicals sector will also be added to the complex.
An engineering, procurement and construction contract for the second phase is expected to be awarded in the first quarter of 2013, with completion and commissioning scheduled for 2016.
Switching focus from LNG
The plan to utilise more condensate domestically, along with setting the ambitious target of 23 million t/y of petrochemicals production, indicates that Doha is starting to focus on diversifying its hydrocarbons sector away from LNG.
Feedstock from the Laffan Refinery Company will be used by two major petrochemicals schemes planned for the industrial city.
QP has formed a joint venture with the UK/Dutch oil major Shell Group to build a fully integrated $6.4bn petrochemicals plant. The Al-Karaana project consists of a mixed-feed cracker that can use ethane and propane as a feedstock and will have a capacity of 1.1 million t/y of ethylene and 170,000 t/y of propylene. Three other technical units will be built to utilise the ethylene feedstock. They will produce 1.5 million t/y of monoethylene glycol, 300,000 t/y of linear alpha olefins and 250,000 t/y of oxo-alcohols.
QP is also planning a scheme with Qatar Petrochemical Company (Qapco). This involves building a mixed-feed cracker with a capacity of 1.4 million t/y at a complex in Ras Laffan. It will produce a further 850,000 t/y of high-density polyethylene, 430,000 t/y of linear low-density polyethylene, 760,000 t/y of polypropylene and 83,000 t/y of butadiene.
“Qatar is definitely worried about the threat of shale gas [to its LNG export business], even if it publicly says it isn’t,” says an oil and gas analyst based in the GCC. “But the fact that it is putting a ‘plan B’ in place early means it could mitigate any major drop in the LNG price.”
LNG prices in the Asian market are expected to stay at more than $15 a million BTUs until 2015 at the earliest. The price might then be impacted as Australia ramps up its LNG operations between now and 2020 and cheaper gas becomes available from the US and Canada, which are enjoying big production increases as a result of exploiting large reserves of shale gas.
At the MEED Qatar Projects 2013 conference held in Doha in February, the Gulf state’s deputy prime minister, Abdullah al-Attiyah, stated that Qatar was not overly concerned by the shale gas boom. Shale gas has convinced many countries that gas is a long-term reliable fuel source and this can only be good for Qatar, the former energy minister said. He also pointed to the fact that if the US and Canada wanted to become large-scale exporters of LNG then they would have to be prepared to invest billions of dollars in liquefaction infrastructure as well as LNG carriers to transport the gas. This would drive up gas prices.
Qatar’s increased spending on processing facilities for its condensate production is aimed at providing a reliable and sustainable alternative to LNG exports.
Without the job creation pressures of its Gulf neighbours, Qatar only needs to provide alternatives to LNG as a means of monetising its natural resources. Condensate is versatile and adding its downstream products to the domestic petrochemicals feedstock mix is regarded by industry experts as a sound move by QP.
Condensate oversupply potential
However, condensate production is tied to gas. If Qatar was forced to cut back on gas exports as a result of a glut on the global market, condensate output would also be affected.
No one can predict exactly how expected increases in global gas production, driven by shale gas, will affect the LNG market. It may result in many countries vastly increasing their use of gas or it may create an oversupply that leads to lower prices. Doha has obviously identified this as a potential problem and is moving early to mitigate it.
Doha aims to increase domestic petrochemicals production to 23 million tonnes a year by 2020