Qatar: Processing power

Text size +-
Recommend

Having established itself as the world’s leading supplier of liquefied natural gas (LNG), Qatar is now looking to bring a new processing facility online to support a projected jump in local industrial activity.

Over the past decade, Qatar has invested heavily in increasing its gas extraction and processing capacity, with output of LNG having peaked at 77m tonnes this year. Although most of the country’s natural gas production is destined for the export market, Qatar is now focusing on building processing capacity to serve the domestic economy.

The $8.6bn Barzan natural gas project, to be located in Ras Laffan Industrial City, north of Doha, will process gas from Qatar’s North Field. The new facility will supply gas to power plants, ethane to the local petrochemicals sector, and liquid hydrocarbons for sale in both local and international markets. The first of two production plants is set to begin operations in 2014, with the second coming online the following year. The plants will have a combined capacity of 39.6m cu metres a day and will increase local gas supplies by around 50%.

Barzan is a joint venture between Qatar Petroleum (QP), the state-owned energy company, which will have a 93% stake in the project, and ExxonMobil, which will hold the balance of the shares. JGC Corporation of Japan and South Korea’s Hyundai Heavy Industries have been awarded contracts for onshore and offshore engineering, procurement and construction, with a number of other international firms having been contracted to supply materials and services as part of the project.

One such contractor, Swedish engineering firm Alfa Laval, on September 6 announced that it had received a $13.75m order from JGC to provide heat exchangers for the Barzan onshore plant. The heat exchangers, to be delivered in 2012, will be used for recovering energy in the gas cleaning process and for cooling of the overall plant, the company said.

Financing for the Barzan facility has yet to be finalised. In late August, Reuters reported that the joint venture was awaiting proposals from international, regional and local banks on a $4.7bn, syndicated loan to back the project. According to the report, the 16-year amortising loan will be divided between a $2bn uncovered loan and $2.7bn in financing from export credit agencies, which includes a mixture of covered loans and direct lending.

Although the deadline for responses to the loan package plan was extended into September, neither the joint venture partners nor the Royal Bank of Scotland, which is acting as adviser on the financing, has issued a statement regarding any bank proposals.

Barzan is by no means a new project, having been on the drawing board for a number of years. Indeed, QP and ExxonMobil signed their initial memorandum of understanding for the development in 2007, but Barzan was later put on hold by Qatar in early 2009 due to the soaring costs of materials and labour.

Although the delayed start has put off the planned commencement of operations from 2012 to 2014, it appears that the rescheduling will have little impact on Qatar’s continued transition to an industrialised economy. The move has also saved the joint venture an estimated $2.5bn, thanks to a decline in expenses.

The timing of Barzan is favourable, with a series of large-scale industrial and infrastructure projects due to take off in 2014 and beyond. Alex Dodds, the president and general manager of ExxonMobil Qatar, sees Barzan as the cornerstone of the country’s economic expansion.

“The Barzan project is a critical component of Qatar’s strategy because it will provide the remaining energy needed to propel the country towards sustainable development,” Dodds said in a recent interview with OBG. “Without an energy source to help develop and power the economy and provide the electricity needed to build the infrastructure, none of that can happen.”

For the moment at least, Barzan is expected to be the last of Qatar’s major gas projects. The government has announced a moratorium on further development of the North Field reserves to support the long-term sustainability of both the field and the national economy. Increasingly, it is intended that the economy will be supported by domestic activity, rather than exports, with Barzan at the core of that plan.

Read Next:

In The Middle East

Maqbool Al Saleh, Chairman, OHI Group of Companies

How would you assess the government’s privatisation initiatives, and what role have public-private partnerships (PPPs) played in these?

In Energy

The renewable projects driving Egypt’s energy transformation

Egypt is moving ahead with plans to transform its renewable energy capacity, spearheaded by the development of a major solar power station.

Latest

What’s driving Abu Dhabi’s maritime logistics and trade growth?

Abu Dhabi has strengthened its position as a regional trade and logistics centre, with container traffic at the emirate’s Khalifa Port rising by 82.4% year-on-year in the first half of 2019.