Energy Levels

Qatar

Economic News

22 Jul 2010
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Qatar has announced plans for more sophisticated gas refining facilities as it moves to diversify products to meet the demands of an expanding global market.



On July 27, Qatar Petroleum and Royal Dutch Shell announced the launch of Qatar's second gas to liquids (GTL) facility - the Pearl GTL plant. The fully integrated project is being developed under a development and production sharing agreement between Shell and the government of Qatar, covering offshore and onshore costs, with Shell providing 100% of project funding.



Shell has not released the development costs of the plant. As GTL is a costly process, some observers estimate the cost of the Pearl GTL project has almost doubled to $12bn.



The Pearl GTL complex will consist of two 70,000 barrels per day (bpd) GTL trains and associated facilities.



Upstream, the Pearl GTL project sees the development of Qatar's offshore natural gas reserves from the North Field, where around 45m cu metres of gas will be pumped per day and processed to produce around 120,000 barrels of oil equivalent (boe) consisting of condensate, ethane and liquefied petroleum gas. During the course of the project, it is expected to produce total upstream resources of around 3bn boe.



The downstream facilities will be the largest integrated GTL plant in the world and will manufacture an additional 140,000 bpd of liquefied hydrocarbon products.



With a high cetane number and near zero sulphur and aromatics, GTL fuel is considered a "clean" fuel. It can be used either as ultra-clean diesel in itself or as a blend with traditional diesel - which produces a fuel with lower emissions. As European and Asian countries are tightening restrictions on fuel emissions, GTL offers an alternative transportation fuel. For example, in Europe, over half the vehicles on European roads are already diesel-driven, providing the potential for GTL in the market.



Shell's project is expected to produce four times as much GTL as Sasol's Oryx plant, which began production in June. However, the Pearl GTL plant is not expected to start production until around the end of the decade, giving Oryx a four-year head start.



Demand for GTL fuel is essentially new and is expected to expand quickly, with much opportunity for producers who enter the market early.



At the same time, Shell's plans for GTL go beyond the transportation fuels market. The GTL base oils that the plant will produce will be able to access the global lubricants market.



"The Pearl GTL plant will have a very sophisticated product slate," Andy Brown, managing director of Shell in Qatar, told OBG.



"It will produce GTL fuel, but it's not just about GTL fuel - it will also produce GTL base oils and we've been looking at GTL kerosene... GTL products can also be used in dry cleaning fluids and to manufacture detergents."



As its economy is dependent on energy production, such moves to diversify possible markets are part of the state's long-term goals. Qatar is moving into position as the world's largest exporter of liquefied natural gas (LNG) and is intent on extending its position to become the global hub of GTL production.



Qatar's oil reserves, estimated at 27bn barrels in December 2005, are relatively small and as such the emirate's future is pinned on its natural gas reserves. Expanding global demand for natural gas combined with high energy prices have already given the country the highest GDP per capita in the world as well as a budget surplus of over QR14bn ($3.85bn).



By 2011, ExxonMobil's GTL project is scheduled to start and the minister of energy and industry, Abdullah bin Hamad al-Attiyah, announced that, by then, Qatar will be producing 300,000 bpd of GTL.



However, it is still early for GTL and observers are uncertain that a commercial plant can scale up production and at the same time reduce capital and operating costs. The process of creating GTL is itself far more complex than that used for manufacturing LNG, and in terms of engineering it will be necessary for the GTL producers to improve the processes' thermal efficiency.



Capital costs for a GTL plant are relatively expensive, especially when compared to a conventional petroleum refinery, but it is the current environment of high energy prices that has done much to make GTL production more worthwhile.



With some reports predicting oil hitting $100 a barrel that trend, at least, looks set to continue. With some oil and gas industry insiders predicting that, in 30 or 40 years' time, gas will rival oil, Qatar has a raft of possibilities provided by GTL.

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