QATAR - QatarGas II.

QP (70%) and ExxonMobil (30%) by end-2004 had put in place all the elements for QatarGas II to take off as an integrated, $12,000m mega-venture. It has set up several affiliates to manage the various project elements. Qatargas II by end-2004 had become the template for new LNG development in Qatar, given its success. All the key construction contracts and the $7,600m financing deals were signed on schedule in late 2004. With the exception of RasGas II, launched in 1999, all future capacity will be built on an integrated basis. It will use the latest LNG technology from Air Products of the US which, by taking advantage of better economies of scale, will cut plant unit and shipping costs by 30%. Such cost cuts help explain how the subsequent ventures - RasGas III, Qatargas III & Qatargas IV - can target the US market, the use of LNG super-tankers being one key element.

Qatargas II is to supply mainly the UK and other European markets. The various deals include a $4,000m EPC contract given to a JV of Technip/Chiyoda for two of the world's largest LNG trains, each with a capacity of 7.8m t/y. The latest deals were a finance for the LNG import/regasification terminal at Milford Haven in south Wales and the $700m EPC job to Chicago Bridge & Iron (CB&I) for the first-phase work on the South Hook terminal at Milford Haven. Train A is set to start up in late 2007 and Train B will be ready nine months later.

ExxonMobil's determination to be the sole foreign partner in this key venture got a blow in late 2004, however, as QP could not resist getting the French major Total on board, at least for Train B. A $3.5 bn deal was signed on Feb. 28, 2005, under which Total was to pay $1 bn for a 16.7% stake in Train B and to buy up to 5.2m t/y of LNG from QatarGas II for 25 years. Elated by the outcome of his thrust into this mega-venture to boost his company's brand LNG business on a global scale, Total CEO Thierry Desmarest then said: "The execution of this agreement...is another important step in the fulfillment of Total's continuing objective to grow its LNG portfolio". A Total executive later said Train B would start up in mid-2008, rather than in the autumn of that year. A separate JV company for Train B is to be owned 65% by QP, 18.3% by ExxonMobil and 16.7% by Total. Total is to market its share of the LNG in Europe and the US, but could also make spot sales to any other market.

Abu Dhabi's National Petroleum Construction Co. (NPCC) in late 2004 got the $500m EPC North field platform and pipeline contract from QatarGas II. Technip will help NPCC in providing engineering and procurement services. This EPC contract covers three wellhead platforms, with two-phase separation, the two export pipelines, intra-field pipelines and extensive cabling.

Qatargas II will have its own dedicated fleet to transport LNG to South Hook in Wales. In November, it signed 25-year time charters for eight vessels, with capacities of 209,000-216,000 cubic metres, with two consortia: Pronav, Commerzbank and Qatar Gas Transport Company (Nakilat); and Overseas Shipholding Group, Anglo Eastern and Nakilat.

South Hook LNG Terminal Co. in March 2005 gave CB&I the $325m EPC contract for the Phase II construction of the terminal near Milford Haven. This is to double the facility's regasification and sendout capacity, refurbish a second loading berth on the existing jetty, provide two additional 155,000 cu m full-containment LNG storage tanks, and expand the associated facilities. Phase II, executed through the CB&I John Brown office in London, is running concurrently with Phase I, with construction having begun in mid-2005. CB&I's Phase I work includes a ship-unloading system, three 155,000 cu m full-containment LNG storage tanks, and a regasification and sendout system. Marine works include major refurbishment of an existing jetty to allow berthing of LNG tankers. Completion of Phase I is expected late in 2007. South Hook, a UK firm owned by affiliates of QP and ExxonMobil, will own and operate the LNG facility.

ExxonMobil and QP have 90% in a terminal project off the Italian east coast. Final agreements were signed last April for construction of the 800mn ($1 bn), 5.8m t/y (8 BCM/y) Isola di Porto Levante regasification terminal. Milan-based Edison has the remaining 10% but will have access to 80% of the terminal's capacity. LNG from QatarGas III will be shipped to the terminal on a weekly basis from late 2007. QP and ExxonMobil will finance the construction of five LNG tankers to supply the terminal. Work on the site had already started by April, with contracts awarded to Aker Kvaerner of Norway's and SnamProgretti of Italy. Two other LNG terminals are under construction in Italy, by ExxonMobil/QP at Rovigo and BG/Enel at Brindisi.

QatarGas III: This is a $6 bn integrated mega-JV between QP (70%) and ConocoPhillips (30%). It will initially have one 7.8m t/y train - which will be No. 6 in the QatarGas series at Ras Laffan. The LNG, to be on stream in 2009, will go to the US.

Qatargas III is likely to have another 7.8m t/y train, perhaps by 2013 or earlier, if ConocoPhillips sees its share of the US market growing faster than anticipated.

QatarGas IV: This is a $7 bn integrated mega-JV between QP (70%) and Shell (30%). It will initially have one 7.8m t/y train as well, also for the US market where Shell is building up large LNG import and regasification capacities. Shell is also to sell a part of this LNG to Europe.

ConocoPhillips and Shell are developing adjacent portions of the North Field for their LNG ventures. But Shell's part is larger as its gas production will also supply its Pearl gas-to-liquids venture at Ras Laffan (see DT No. 10).

The Ras Laffan Liquefied Natural Gas Co. (RasGas) was set up in December 1992 to add two 2.5m t/y trains to the LNG complex at Ras Laffan. RasGas, an upstream/downstream venture, was then owned 70% by QP and 30% by Mobil. Ownership and planned capacity have since changed as follows:

63% by QP, which in early 1997 approved Mobil's plan to (a) raise the capacity of each train to 3.3m t/y, with two trains to be on stream in the first phase from 1999 and another two to be built later; (b) raise gas production to 1,100 MCF/d in the first phase and to 2,400 MCF/d in the final phase and raise condensate production to 50,000 b/d in the first phase and 140,000 b/d in the final phase; and (3) accept South Korean Kogas' condition to drop a floor price and get a Kogas group to join RasGas, in return for the utility's doubling of its LNG purchase to 4.8m t/y.

25% by ExxonMobil, operator of the whole upstream/downstream venture.

4% by Itochu Corp., having joined Oman LNG with a 1% stake.

3% by Nissho-Iwai which, with Itochu, joined RasGas in 1996 to help find Japanese buyers of LNG. The final accord with RasGas was signed in 1997.

5% by a South Korean group led by Kogas, which paid $50m in late 1999. Kogas is the main buyer of the LNG, taking 4.8m t/y under a 25-year sales and purchase agreement (SPA) signed at end-June 1997. The first shipment to Kogas was made in August 1999. There is no minimum price for the LNG under this deal. Instead, the price is based on the new formula agreed with the Japanese (see Vol. 61, Gas Market Trends 11).

The first of the two 3.3m t/y trains came on stream in late May 1999, two months ahead of schedule, although RasGas experienced leakage problems with the facility's main heat exchanger. The first shipment of LNG left Ras Laffan on June 23 to Lake Charles terminal in Louisiana under a spot deal with CMS Energy which later took other spot cargos from RasGas. The second train began deliveries in March 2000.

The financial adviser of RasGas was Goldman Sachs, contracted in 1994 to work on a unique financing package, with most of the funds secured from US sources. This was the first time Qatar received major project finance from the US. Mobil had thrown its weight in Qatar's gas sector and brought to this emirate a big number of US contractors. A total of $3,489m were raised (see Vol. 61, No. 11).

The EPC contract for the first LNG train (then set at 2.5m t/y) and plant infrastructure at Ras Laffan adjacent to QatarGas was awarded in March 1996 to JGC/MW Kellogg which bid a surprisingly low price of $600m. Bidders with higher prices were Chiyoda, Foster Wheeler with Toyo Engineering, and Bechtel/Technip. Chiyoda had done the FEED for the downstream end in early 1995. Hudson Engineering did the FEED for the upstream. In June 1997 JGC/ Kellogg signed with RasGas a contract to build the second LNG train for $400m. At the upstream and downstream, costs were cut by over 20% from original estimates. First gas reached the plant at Ras Laffan in mid-May 1999, two months ahead of schedule.

RasGas II, 70% QP and 30% ExxonMobil, was set up in May 2002 to have two 4.7m t/y trains (3&4) built. One went on stream in late 2003 for the Indian market under a 5m t/y contract to 2028 with Petronet LNG. The second is to be on stream in October 2005 to supply 1.7m t/y to Taiwan (CPC) under a 2008-33 contract, 2.5m t/y to Petronet's Kochin terminal in West India, and 3.5m t/y to Edison of Italy. For the upstream element, QP and ExxonMobil have signed a PSA for the US super-major to develop another portion of the North Field under the Al Khaleej Gas (AKG) project. The first phase of this went on stream in late 2003. Last month, AKG-2 raised gas production to 1,800 MCF/d.

RasGas II on Aug. 7 said it had begun AKG-2 production from its offshore Wellhead Platform 5 (WHP5) located at Ras Laffan's B block. Gas produced at WHP5 will feed the 4.7m t/y train which is to be on stream in October.

RasGas and RasGas II will then have a combined capacity of 16.25m t/y. This will bring Qatari LNG capacity to 27.25m t/y but the real run could exceed 28m t/y by end-2005.

The EPC contractor for Train 4 is Chiyoda/Mitsui/Snamprogetti. RasGas II also has sales commitments to Endesa of Spain's for 800,000 t/y for 20 years beginning in 2005 and Edison for 4.7mn t/y for 25 years beginning in 2007. RasGas has been negotiating with Petronet since early 2005 to increase LNG supplies to India further. RasGas Managing Director Jerry Wolahan said at a petroleum conference in New Delhi on Jan. 17 there was enough demand in India to justify LNG and piped gas imports from several sources.

Reuters on Sept. 1 quoted Petronet as saying it planned to raise the capacity of its LNG terminal in West India from 5m to 12.5m t/y by 2008. Petronet, which made its stock market debut in 2004, was launched by the Indian government to import LNG to meet the energy needs of a booming economy, and to build the terminals. Earlier this year, the firm said it would raise its capacity at the Dahej terminal in Gujarat to 10m t/y, by building two new LNG storage tanks. The additional capacity will raise Petronet's planned investment by Rs4 bn to Rs17 bn ($386.4m). India's state-owned Oil and Natural Gas Corp, Indian Oil Corp, Bharat Petroleum Corp and GAIL together own 50% of Petronet. Gaz de France has 10%. The remaining 40% is held by public and institutional investors. Petronet, looking to add 1.25m t/y of spot purchases, is planning to generate its first profits in 2006. Its turnover is expected to double from increased imports of Qatari LNG to Rs40 bn (about $920m).

RasGas III, 70% QP and 30% ExxonMobil, is a $10-12 bn integrated JV to have two 7.8m t/y trains built to supply the US market. Train 6 is to be on stream in 2008 and Train 7 is to be ready in 2009. As in the QatarGas II, III and IV ventures, QP will be ExxonMobil's partner in the US LNG/regasification terminals for RasGas II and RasGas III.

Together with debottlenecking the three RasGas ventures will have a total capacity of 35.75m t/y by 2012 but will be able to produce over 41.5m t/y. The four QatarGas ventures will also be able to produce over 41.5m t/y.

Qatar Gas Transport Co. (Nakilat), set up in June 2004, will directly or indirectly be involved with up to 100 LNG tankers of various sizes to carry the exports of the QatarGas series and RasGas series of ventures. It will have 40 ships for other purposes. It will be the largest LNG shipping company in the world. So popular Nakilat was on the Doha Securities Market (DSM) in January 2005 that its IPO ended in mid-February being nine and half times over-subscribed at $660m. But Nakilat's ambitions extend far beyond the LNG market. It is to become a major transporter of LPG, sulphur and condensate and the owner of one of the region's biggest dry dock by 2010. Its tanker orders are keeping South Korean shipyards busy for years.