Value-Added Energy

Qatar

Economic News

22 Jul 2010
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After establishing itself as the world's leading supplier of liquid natural gas (LNG) products, Qatar is now targeting its resources towards its own domestic market.



Long focused on exports, and being largely responsible for the upsurge of LNG usage around the world through its promotion of the product, Qatar's output is projected to exceed 77m tonnes a year by the end of 2010. While the vast majority of this is intended for the export market, an increasing percentage is being reserved for local industries.



On May 10, the Emir of Qatar, Sheikh Hamad bin Khalifa Al Thani, inaugurated Al Khaleej Gas 2 (AKG-2), a $4.7bn plant to process gas from the Khuff Reservoir, part of the massive North Field. Along with the already operational AKG-1, the two facilities have a combined daily production capacity of 56.6m cu metres, all of which will be channeled into the domestic economy.



According to Qatar's deputy prime minister and minister of energy and industry, Abdullah bin Hamad Al Attiyah, AKG-2 marks a milestone on the road towards diversifying and strengthening the country's economy.



"This project, developed in cooperation between Qatar Petroleum and ExxonMobil, will be a major supplier of clean energy sources for power plants and various industries, and will contribute to the country's comprehensive development," he said in his address at the opening ceremony.



Among the industries that will benefit is the Ras Laffan Olefins Company, which will be supplied by gas and ethane and gas-to-liquids producer Oryx GTL.



Output from the project will also be used to turn the turbines of the country's two largest electricity producers, the Ras Laffan Power Company and the Qatar Power Company. Not only will this help keep the lights on at home, but the additional gas will also assist the utilities in ensuring they can meet the growing needs of non-hydrocarbon industries.



When initially conceived a decade ago, the Al Khaleej project was intended to meet the needs of the export market, mainly in the Gulf region where the gas would be supplied to Dolphin Energy, the Abu Dhabi-led scheme to ship Qatari gas to the UAE. However, today only around 56.6m cu metres are being sent to the UAE each day.



This shifting of focus reflects the Qatari government's policy – one being pursued with increasing conviction – of moving from merely being a supplier of other countries' industries to becoming a country with industries needing to be supplied.



The Al Khaleej project is by no means the end of Qatar's plans to feed energy into its industrial base, with tenders having been called in April for the initial offshore development of the Barzan project, located on the north coast of Qatar, with four engineering, procurement and construction contracts worth around $1.7bn scheduled to be sealed by the end of the year.



With the finalisation of the front-end engineering design (FEED) and the tender process already under way, the new project could be in the production phase within four years, according to Saad Sherida Al Kaabi, Qatar Petroleum's director of oil and gas ventures.



"As far as Barzan is concerned, it is in the FEED stage and the plan is to float the engineering, procurement and construction process possibly in summer. So, 2014 is perhaps the right date for the project to come on-stream," Al Kaabi told reporters in early May.



Not only will the Al Khaleej and Barzan projects ensure a constant supply of energy to Qatar's existing industrial developments, but they also serve as an outstanding advertisement for the country's future potential. With its massive gas reserves and clear commitment to allocating a large percentage of these reserves to the domestic market, Qatar is in a position to attract new industrial projects – a clear advantage in the heated competition across the Gulf region to diversify economies and develop a broad industrial base.



While Qatar needs to maintain a balance between meeting the needs of overseas clients and feeding the growing local demand, the country is in the process of investing in its future on both fronts.

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