Gas Overpowering Oil


Economic News

22 Jul 2010
Text size +-

Although Qatar played host to the World Petroleum Congress earlier this month, more attention has been focused recently on the country's expanding gas industry.

As a quick example, alongside the opening of the congress came the official opening of a USD900m gas-to-liquids (GTL) venture between Qatar Petroleum (QP) and South Africa's Sasol Synfuels. The plant will be the most technically advanced in the world.

The deal is further evidence of the importance of natural gas to Qatar's future. The plant, a 51-49% joint venture, will be the world's first commercial GTL venture outside South Africa and is expected to have a capacity of 34,000 barrels per day (bpd) by late 2005. Although the deal was formally announced early December, the contract for construction on the project was awarded in January, and work actually began at the site in September.

When completed, the plant will convert some 330m cubic feet per day of natural gas into premium, environmentally friendly fuels. GTL fuels, like liquefied natural gas (LNG), are cleaner than petroleum products; however, unlike LNG, GTL fuels do not need specialised tankers for transport. LNG must be reduced to around -160 C, meaning tankers must be equipped to handle such cold temperatures. Furthermore, LNG must be regasified, requiring specialised receiving terminals. Accordingly, GTL is seen as a more commercially viable alternative.

The cost and technological requirements of LNG have also created some problems for Qatar's initial idea of having gas purchasers pay for shipping and receiving. The deal with the Italian company Edison was one example. Even though Edison was to build a receiving facility, the agreement eventually required QP and ExxonMobile to step in and acquire a 90% stake in the offshore project in order to keep the deal from falling through. Qatar also had to agree to provide shipping. Similar concerns have been reported from India, which has emerged as a major purchaser of Qatar's gas.

Whether through LNG or GTL, however, gas is expected to overtake petroleum as Qatar's key export earner by 2007. Qatar is aiming to export some 60m tonnes of LNG by 2011. The development of the country's massive North Field, which at 900m cubic feet is the world's single largest gas reserve, has underpinned the recent economic surge in Qatar. The GTL deal with Oryx is seen as further enhancing the diversification of Qatar's gas industry and related downstream industries. Indeed, talks are allegedly already underway for plans to expand the plant's capacity to 120,000 bpd.

Natural gas is seen as a major opportunity for growth in the energy industry, because of its environmental friendliness and overall efficiency. In turn, given the increasing attention Qatar is receiving from major companies in the gas industry, the country is set to be the rising star of natural gas. Indeed, the day after the Oryx GTL plant was officially launched, QP and energy giant ConocoPhillips inked a statement of intent facilitating the establishment of a USD5bn GTL plant at Ras Laffan industrial city. The plant is projected to produce 160,000 bpd. The first phase of construction will be completed in 2009, and see an initial capacity of 80,000 bpd.

The primary focus of Qatar's gas exports will be the markets of Asia and Europe, and the increase in GTL projects will likely help Qatar overcome the difficulties so far evident in attempts to export LNG to these markets. It is anticipated that the future construction of long-distance pipelines to Asia and Europe will open these markets even further. However, LNG sales to the US appear on track, as American plans to build a number of LNG receiving terminals continue to move ahead.

Speaking at the World Petroleum Congress, Second Deputy Premier and Energy Minister HE Abdullah bin Hamad Al Attiyah said that an increase in global gas demand is expected to coincide with an increase in demand for petroleum. Tapping into the supply to meet this demand will require substantial additional investment, as energy projects are typically more capital intensive, given the work that is involved even before production begins.

The Middle East is expected to reap the benefits of the vast majority of this growth, as the region accounts for 66% of the world's proven oil and gas reserves. With the Middle East providing some 45% of the world's gas supply, Qatar is well positioned for continued growth fuelled by its massive gas reserves. Qatar touts its fair, comprehensive and transparent legal framework, the application of international accounting standards, lack of corruption and fair policies towards foreign capital as helping to provide an environment where the sort of capital intensive projects needed to harness the country's reserves can thrive. Commenting on the GTL deals, Al Attiyah said, "This is the first step towards establishing Doha as the GTL capital of the world."

Covid-19 Economic Impact Assessments

Stay updated on how some of the world’s most promising markets are being affected by the Covid-19 pandemic, and what actions governments and private businesses are taking to mitigate challenges and ensure their long-term growth story continues.

Register now and also receive a complimentary 2-month licence to the OBG Research Terminal.

Register Here×

Product successfully added to shopping cart

Read Next:

In Qatar

Report: How Qatar is confronting environmental and social challenges

With the publication of its National Environment and Climate Change Strategy in 2021, Qatar has recognised that a proactive and holistic approach is needed to meet the challenge of global warming...


Exploring the future of sustainable aquaculture in emerging markets

With per capita fish consumption having doubled in the past six decades, aquaculture is becoming more important in combatting food insecurity. Recent innovations seek to improve sustainability and...