Qatar’s expanding energy sector received a series of major boosts this month, with the signing of major deals to develop the country’s enormous gas potential. With two major international energy giants inking agreements with Qatar Petroleum (QP) inside 10 days, July looks likely to go down as a milestone in the country’s energy producing history.
The first of these deals was signed early July between QP and Qatar Shell GTL Limited (Shell). This Development and Production Sharing Agreement (DPSA) provided fiscal and legal terms for the Pearl gas-to-liquids (GTL) project, which got its Heads of Agreement (HOA) back in October last year.
The project consists of a series of measures to develop upstream gas production facilities as well as to construct an onshore GTL plant. This facility will produce 140,000 barrels per day (bpd) of GTL products alongside associated condensate and liquefied petroleum gas.
In phase one of the project, due to be completed by 2009, around 70,000 bpd of GTL products will be produced, with the second phase – due for completion by 2011 – bringing production up to its final target.
The upstream element involves the development of a block within Qatar’s vast North Field gas reserve, with this already well underway. The first of two appraisal wells was drilled there in February 2004, while the Front End Engineering and Design (FEED) contract for this was awarded back in March to JGC Inc. of Japan.
“The signing of this agreement is a key milestone in the progress of the Pearl GTL project,” Abdullah bin Hamad al-Attiyah, second deputy prime minister and minister of energy and industry, told reporters at the DPSA signing. He then added that it was “a major achievement for the State of Qatar. It highlights real progress towards realising our ambition of becoming the GTL capital of the world.”
This ambition was clearly boosted a few days later, when al-Attiyah signed another agreement, this time with Exxon Mobil subsidiary ExxonMobil Qatar GTL Ltd.
This $7bn project is set to see the construction of the world’s largest single, fully integrated GTL facility, at the Ras Laffan Industrial City in Qatar.
This HOA, signed on July 15, specifies the principal terms for the project that will then be defined in a DPSA later on. Covering a period of 25 years from the start of production in 2011, the agreement allows for ExxonMobil to design, construct and perform all petroleum operations in connection with the GTL project, with the company’s investment contribution totalling 100% of the projected capital cost.
This gives ExxonMobil the right to develop and produce gas, associated liquids and other hydrocarbons in sufficient quantities to meet the 154,000 bpd capacity of the projected GTL plant. Approximately half of the facility’s production will be for sulphur-free diesel, about 20% will be in high-quality lube base stocks, with the remainder in naphtha and other associated products.
Meanwhile, with the HOA in its pocket, ExxonMobil will commence drilling an appraisal well for the GTL project this year. It is also due to develop its earlier preliminary FEED work, with this getting fully underway with the signing of a DPSA.
“As the leading foreign investor in Qatar”, Harry J. Longwell, director and executive vice president, Exxon Mobil Corporation, told reports at the signing, “we are very pleased to partner with Qatar Petroleum on this important GTL project… We believe our proprietary technologies and project management expertise will bring competitive advantage to this project for the benefit of both parties.”
ExxonMobil is certainly a cutting edge outfit in GTL technology, having invested more than $600m in GTL research over the past 20 years. The plant is due to use the company’s patented AGC-21 GTL technology, a three-step process for converting natural gas to high-quality transportation fuel, lubricant base stocks and petrochemical feedstocks.
The deals also represent significant progress for the government’s energy – and economic – strategy, as al-Attiyah pointed out.
“This project represents another important step under the ambitious vision of … Emir Sheikh Hamad bin Khalifa Al Thani,” he said at the signing, “that aims to ensure the optimal utilisation of the country’s hydrocarbon resources by diversifying sources of national income while creating development opportunities for the welfare and prosperity of Qatar.”
GTL fuel represents a potential diversification in energy supplies for many consumers as it is a gas- rather than oil-derived fuel that can still be used in automobiles. High oil prices also make it more economically viable than ever, while it also has a low emissions performance, making it more environmentally sound than traditional, oil-based products. GTL also overcomes the high costs of transporting natural gas.
This is all good news for Qatar, which has some of the world’s largest natural gas deposits. Capitalising on this is naturally a key government strategy – and so far, it seems to be going well.
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