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Shell delays Qatargas 4 LNG plant by a year

Reuters UK
Mon Nov 23, 2009 5:46pm GMT

* Delay to weigh on production growth

* Pearl start-up in line with earlier guidance

* Delay could ease supply glut

(Adds background, detail)

By Tom Bergin

LONDON, Nov 23 (Reuters) – Royal Dutch Shell (RDSa.L) said it had delayed one of its largest schemes by around a year with start-up for the $8 billion Qatargas 4 liquefied natural gas project now planned for late 2010 and the first cargo possibly pushed into 2011.

The delay, which a Shell spokeswoman said was due to contractors struggling to keep up with the pace of developments in Qatar’s gas industry, will make it harder for the Anglo-Dutch oil major to turn around a long run of falling production.

“We had been planning for a start-up in early 2010 but now we expect that to come in late 2010,” the spokeswoman said on Monday, adding the slippage represented a delay of 10 months.

She declined to say when first cargoes would load but a statement from the company said ramp-up of the project could continue into 2011, raising the prospect the facility may not be in a position to load ships until then.

One dealer said they were not surprised by the delay, as Shell had flagged problems to analysts in recent weeks.

Further delays are possible, with industry analysts at Waterborne LNG saying they expect first cargoes in mid 2011.

The postponement could ease pressure on LNG prices which have come under pressure after the economic recession hit gas demand. Most economists expect the global economy, and energy demand, to be stronger in 2011 than 2010.

The Qatargas 4 project will produce 7.8 million tonnes of LNG annually, equivalent to 280,000 barrels of oil equivalent per day.

State-run Qatar Petroleum owns 70 percent of the project, while Shell owns the rest. Gas will be exported to China and Dubai under oil price-linked contracts which will make the project highly profitable, analysts said.

LNG is natural gas cooled to liquid so it can be exported in ships over distances too far for pipelines to be economic.

Shell has a target of 2 percent to 3 percent average annual growth between 2009 and 2012, despite output falling in recent years.

Qatargas was not immediately available for comment.

Europe’s largest oil company by market value said its larger Pearl gas-to-liquids project in Qatar was scheduled to be completed by the end of 2010, with production ramp-up from late 2010 and into 2011.

In March, then-Chief Executive Jeroen van der Veer said Pearl would come onstream in late 2010 or early 2011.

(Additional reporting by Simon Webb in Dubai and Edward McAllister in New York; Editing by David Cowell) ((+44 20 7542 1029, [email protected], Reuters Messaging [email protected]))

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