Site preparation is well under way at Ras Laffan's second LNG project, Ras Laffan Liquefied Natural Gas Co (RasGas). The company has now finalised the participation of two Japanese trading houses in the venture. They will take a combined 7 per cent equity stake in the company. Itochu Corporation will take a 4 per cent interest in RasGas and Nissho Iwai gets the remaining 3 per cent, involving a capital investment of $70 million dollars.
Under the terms of the deal, the two Japanese trading houses will assist LNG North Field development with loans worth $900 million and actively market LNG in Japan for RasGas. Shareholders QGPC and Mobil will reduce their 70 per cent and 30 per cent shareholdings accordingly to accommodate the Japanese trading houses. RasGas has an agreement with Korea Gas Corporation (KGC) to supply it with 2.4 million t/y of LNG annually for 25 years beginning in 1999. South Korea is the fastest-growing market for LNG in the world, with imports projected to reach more than 15 million tonnes by 2000 from 7 million tonnes in 1995.
Recently, KGC has put pressure on RasGas to renegotiate terms on a further 3 million t/y supply of LNG after signing a deal with Oman to supply natural gas to the Far East country without setting a minimum price. RasGas had insisted in its initial deal with KGC on a minimum price guarantee of $2.50 per million British thermal units (BTUs) in order to ensure the financial viability of the project. RasGas's aims of expanding the Ras Laffan project to at least 10 million t/y of LNG depend on the company's ability to find further markets for its gas, which explains the rearrangement of its shareholding structure to get the Japanese groups on board. 'The Asian market is where the growth is,' says RasGas managing director Neil Kelly. 'RasGas has already undertaken extensive marketing activities in Japan, China, Taiwan, Thailand and India.'
Now that the engineering, procurement and construction contracts are all in place at Ras Laffan, Kelly is confident that RasGas' one-train facility will ultimately lead to the construction of the three additional trains that would see it produce the 10 million t/y capacity. 'Our shareholding structure for upstream work is the same as that for the downstream development, which makes things considerably easier for us. Where interests are different, conflicts can arise and managing things becomes more difficult,' he says.
RasGas' success rests on the foundations of Qatargas. Qatargas' first LNG shipment from that facility to Japan will put even more momentum behind the second Ras Laffan LNG venture to succeed. With QGPC acting as the major shareholders behind both ventures, their relationship is likely to remain
co-operative rather than explicitly competitive.