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Lloyds List: Liquid gold Qatar leads the way with huge export projects

Lloyds List: Liquid gold Qatar leads the way with huge export projects

31 May 2005

 

‘THERE is Qatar and there is everyone else,’ is now a common statement in the LNG industry.

 

And no wonder. Qatar and its oil major partners are raising the industry benchmark with their huge projects to export gas to the UK and US, notably through the largest ships and liquefaction trains ever built.

 

Within the next three years, this tiny nation will become the world’s largest exporter of LNG, thanks to the series of RasGas and Qatargas projects. Not long after that, Qatar Gas Transport (Nakilat) will take over the mantle as the world’s leading LNG shipping company.

 

After February’s announcement of a project with Shell, Qatargas 4, the emirate now has five LNG ventures in construction or under development.

 

The Shell project takes committed LNG capacity up to 77m tonnes a year by 2010’2011, of which no less than 57m tonnes will be built at Ras Laffan Industrial City during the next five years. By that time, a staggering $68bn will have been invested in Qatar’s LNG industry.

 

The foundation for this dynamic growth is Qatar’s North field, which is one of the world’s largest single non-associated gas fields, with recoverable reserves estimated at more than 900trn cu ft.

 

The North field represents 9% of the world’s proven gas reserves.

 

Although Qatar has several major projects in hand, it is Qatargas II which has become the template, both for its scale and innovation.

 

Qatargas II, a joint venture between Qatar Petroleum and ExxonMobil to ship LNG to the UK, has an impressive roll-call of firsts.

 

It is the first integrated LNG project taking in everything from the upstream field development and liquefaction through to shipping and import terminal ownership.

 

Qatargas II has also broken the mould in terms of LNG technology. It is building the world’s largest liquefaction trains, each with a capacity of 7.8m tonnes a year, and the first LNG carriers in excess of 200,000 cu m.

 

The economies of scale gained have enabled Qatar to conquer remote markets, such as the US.

 

In terms of financing, Qatargas II has also marked a turning point, setting new benchmarks for size, pricing, terms and structure.

 

A record $7.6bn in energy project financing has been raised by the project, with ‘unprecedented operational flexibility and expansion terms’.

 

The funds were raised from 57 institutions in the first-ever financing on a full LNG chain-integrated basis.

 

Qatargas II also marks the entry of Qatar into every part of the LNG value chain. Qatar not only holds a majority stake in the LNG joint venture, but will also part-own the fleet of ships and the largest interest in the import terminal.

 

And what a fleet of ships Qatar will have under its control.

 

Earlier this year, Qatar’s Minister for Energy Abdullah bin Hamad al-Attiyah said the intention was to order 70 ships, the majority with a capacity of more than 200,000 cu m, by 2010.

 

The total cost will be more than $15bn within a five- to six-year time frame and all the ships will come from South Korea, where Qatar has already reserved building slots.

 

Nakilat’s strategy is to form joint ventures with established shipping companies which acquire the building slots and then time-charter vessels on a 25-year basis to the LNG project.

 

Qatar acquired the block of building slots to prevent ten or 12 shipowners all trying to chase the same shipbuilders and to keep control of the technology with the yards.

 

In every time charter agreement, the Qatari interests have the right, but not the obligation, to own a minimum of 30%.

 

Qatar is clearly at the forefront of technological change, which always carries some risks.

 

However, Hassoum Kharbotli, of Qatar Petroleum’s project finance division, says that Qatar’s LNG projects have always been ‘on time and always on spec’.

 

With so much excitement in Qatar’s LNG industry, it now seems hard to believe that in 1971, when the North field was discovered, gas was held in such low regard that the nation’s government was said to be disappointed the field did not contain oil.

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