Energy Allies

Qatar

Economic News

22 Jul 2010
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The recent visit to Qatar by the US energy secretary - and a string of contracts and inaugurations - have once again shown how serious the country is about becoming the world's leading source of liquefied natural gas (LNG).



Energy Secretary Samuel Bodman was on hand in the state on November 15 along with a coterie of other dignitaries and high-level energy industry executives. These included Rex Tillerson, president of ExxonMobil, and Yousef Hussein Kamal, the Qatari minister of finance and chairman of RasGas.



They were there to announce the launch of the Ras Laffan Liquefied Natural Gas Company Limited (3), dubbed by insiders as RL3 or RasGas 3.



This came too after last week's formal inauguration of the RasGas Train 4 manufacturing facility and a spate of shipbuilding contracts signed by Qatar for LNG carriers.



During Bodman's visit, the two countries also announced the signing of a $14bn agreement for the supply of LNG to the US market, starting in the second half of 2008. This is one of the largest export projects ever for Qatar, and the first such agreement between the two countries.



Qatar's diversification beyond oil into other forms of energy production, such as LNG - a method of cooling and compressing natural gas to allow cost-effective shipment - has helped the country of 860,000 maintain strong growth and one of the highest per-capital income levels in the world.



A joint statement by Qatar Petroleum (QP) and ExxonMobil, the two major shareholders in the RasGas group of companies, described the deal as a significant milestone for both RasGas and Qatar.



RasGas is one of two Qatari LNG exporters, the other being Qatargas, in which ExxonMobil also has a stake, alongside majority shareholder QP, French oil giant Total, and Japan's Mitsui and Marubeni corporations.



RasGas executives say the RL3 project will boost the group's output 40%, bringing the total number of RasGas LNG trains to seven and raising the group's annual production capacity to 37m tonnes of LNG and associated by-products. RL3 encompasses two trains of LNG production and shipment, scheduled to begin operation in 2008 and 2009 respectively.



Meanwhile, more ceremonies and announcements in the second half of November have kept the spotlight on Qatar's LNG development.



A week after the RasGas 3 launch ceremony, the Emir himself, Sheikh Hamad Bin Khalifa Al Thani, came out to celebrate the inauguration of RasGas 2's Train 4 project.



That facility, which actually went into production ahead of schedule in August, boosts total RasGas production from 11.3m tonnes per year to 16m tonnes per year, with the bulk of the train's shipments going to European and Asian buyers.



These projects form key parts of Qatar's drive to raise its total annual LNG production, which is expected to reach 77m tonnes per annum by 2010. Although some estimates of the country's LNG export growth rate are less optimistic than that, Qatar appears to be on track to become the largest LNG producer in the world well within the next decade.



Meanwhile, the country's LNG push is also proving a boon for shipbuilding. The Peninsula, a Qatari daily, reported on November 29 that RasGas has signed a deal worth $9bn for long-term charter of the group's largest vessels to date, 12 ships with a cargo capacity of 210,000-217,000 cu metres of LNG each.



The deal, signed with JC Nakilat and Teekay Nakilat corporations and with construction taking place at Daewoo, Samsung and Hyundai shipyards in Korea, allows for LNG delivery from the RasGas Train 6 facilities, with a capacity of 7.8m tonnes per year.



Starting in the second and third quarters of 2006, the ships will bring the liquefied product to facilities on the US Gulf Coast, where it will be converted back into gas and distributed to consumers.



Qatar might count itself lucky to have these US end users hungry for gas from the country's giant North Field, which contains the third-largest proven natural gas reserves in the world after Russia and Iran, with over 25 trillion cu metres.



Yet the presence of the US energy secretary at the RasGas 3 launch is also seen as a political signal, demonstrating Washington's confidence not just in the longevity of the Qatari energy supply, but also in the emirate's political stability.



Washington's confidence is an anchor without which Qatar's foray into LNG production and export would likely be far less aggressive. As Hassan Abu Arafat, economic editor at Qatari daily al-Sharq, told Agence France Presse recently, the RasGas deal represents "a strategic move of extreme importance, and one which can not be disassociated from the political partnership between the two countries".



On the Qatari side, the latest LNG deal is seen as a sign that the tiny peninsular nation is looking to seal an economic pact, not just a political and military alliance, with the world's economic powerhouse.
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