QATAR - The Energy Base.

The fastest growing economy in the world, Qatar is investing $23.9 bn in its energy sector to end-2007 - with the emirate's energy base dependent mostly on natural gas. A major part of the investment is flowing from foreign firms, with ExxonMobil in the lead. By 2015-17, non-oil ventures involving foreign partners will provide about 40-50% of Qatar's annual budget.

Qatar's energy base is small. Oil consumption is averaging about 44,000 b/d, up from 10.500 b/d in 1985, with gasoline accounting for nearly 50%. Natural gas accounts for more than 82% of its energy and industrial consumption, up from zero in the 1960s. This share is set to grow as the industrial sector expands and North Field gas development projects are completed. In a country where petrol is cheaper to the state than water, oil accounts for less than 18% of total energy consumption.

Gas consumption, excluding gas injected into the oilfields and gas allocated for export in LNG form, is averaging 12.5 BCM/year, up from 11.6 BCM in 2003, compaged to 1 BCM/year in 1970.

The power sector and water desalination plants depend heavily on natural gas. Their combined consumption is over 350 MCF/day. According to the state-owned Qatar Petroleum (QP), this would rise to 420 MCF/day in 2010 - when total domestic gas consumption would amount to 850 MCF/day. Electricity demand is growing by about 7% per annum.

Qatari citizens, who account for 25% of consumers and 40% of consumption, continue to receive water and power free of charge, one main reason why demand for water and power has been rising rapidly. But Doha does not intend to make any major change affecting the Qataris, because the issue of water and power tariffs is politically sensitive. Instead, Kahramaa has proposed to set a monthly ceiling for household consumption by the Qatari nationals, under which the consumers will be charged if their use of water and power goes above a certain limit.

Qatar's power generating capacity now is 3,150 MW, up from 1,500 MW in 1995. Most of this capacity is owned by Qatar Electricity and Water Co. (QEWC), the 57% privately owned joint stock firm created in 1998 to take over the running of the sector from a grossly inefficient ministry of electricity and water (MEW). The remaining capacity consists of power plants at the oilfields. Power generating capacity by 2010 should exceed 6,000 MW.

The MEW was in 2000 replaced by the state-owned Qatar General Electricity & Water Corp. (Kahramaa). Since then Kahramaa has sold its power and water desalination plants to QEWC. Kahramaa is to privatise its power and water transmission and distribution systems. A study on this has been made by Fichtner of Germany.

The first gas-fired independent water and power producing (IWPP) venture in Qatar started up in 2004 at Ras Laffan Industrial City. This, Ras Laffan Electricity Co. (RLEC), is a JV of AES of the US (55%), QEWC (25%), Qatar Petroleum (QP - 10%), and the GCC's Gulf Investment Corp. (GIC - 10%). RLEC has a $720m complex built at Ras Laffan by Enelpower of Italy with a capacity of 750 MW of power and 40m gallons/day of water. RLEC's second phase, with 750 MW of power and 40m g/d of water, should be on stream in 2007. There will be at least two other IWPPs before 2010 (see background in Vol. 61, DT No. 9).

Key project accords, including the 25-year power and water purchase agreement (PWPA), were signed on March 1, 2005 by Kahramaa and a group awarded the second IWPP in September 2004. The project company, Q-Power, is led by QEWC 55%. Its partners are the UK's International Power with 40%, and Chubu Electric Power Co. of Japan with 5%. The IWPP, to be located at Ras Laffan, will have a capacity of 1,025 MW of power and 60m g/d of water. The first phase should be on stream in 2006. Full capacity will be operational in 2008. The plant will be close to RLEC.

Kahramaa buys power and water from the IWPPs under 25-year PWPAs. QP will supply the IWPPs with natural gas and sea water under long-term contracts.

The gas-fired Ras Abu Fontas B complex at Al Wusail, operating since late 1997, consists of a 625 MW power plant and a 33m g/d water desalination unit. It was built by Asea Brown Boveri, a Swiss-Swedish group, under a $1.1 bn contract awarded in January 1994.

Ras Abu Fontas is linked to the national electricity network through a Doha transmission system, built in 1997 in a $717m project, which is the fourth phase of a new grid for the emirate. The transmission system was built by a European consortium led by Cegelec of France.

As the MEW was abolished in 2000, Kahramaa was formed under the chairmanship of Energy and Industry Minister Abdullah al-Attiyah. One of Kahramaa's tasks has been to improve efficiency in the power and water systems. The number of people employed in these systems has been cut from 8,000 to about 3,000. In charge of project planning and implementation, as well as the IWPP business, Kahramaa is lowering costs across the board (see Vol. 57, DT No. 9).

A 1,000-1,200 MW power plant is to be built for an aluminium smelter. It was announced in December 2004 that QP and Hydro of Norway were to develop an aluminum production plant in Qatar with a capacity of 570,000 tons/year in a first phase, which will run at full capacity in 2009. The two plants will be owned 51% by QP and 49% by Hydro.

Power requirements at Ras Laffan will increase with new industrial projects coming on stream in the next few years. This is why RLEC will double its capacity by 2007. Major clients will be downstream facilities at Ras Laffan for the rapidly expanding QatarGas and RasGas LNG ventures. The main QatarGas and RasGas partners are having a 146,000 b/d condensate refinery built at Ras Laffan as a joint venture (see DT No. 10).

The other big industrial centre in the emirate, at Messaid (formerly known as Umm Said0, has been offering incentives to attract foreign investment. Expansion projects are being built there for Qatar Petrochemical Co. (QAPCO), Qatar Steel Co. (QASCO), Qatar Fertiliser Co. (QAFCO) and Qatar National Cement Co (QNCC). One plant at Messaid produces 660,000 t/y of methanol and 550,000 t/y of MTBE, run by the Qatar Fuel Additives Co. (QAFAC). A second QAFAC plant is being built.

Other projects in Qatar include a hot briquetted iron plant and four GTL plants to be built at Ras Laffan, plus an expansion of the Messaid oil refinery. A new 10m square metre industrial centre is being set up west of Doha (see the petrochemicals sector in DT No. 11).

Qatar and the other five member-states of the Gulf Co-operation Council (GCC) are to link their power networks in a project which could result in savings of up to $3.5 bn per annum. A Riyadh-based GCC inter-connection body has been set up to link the six grids in three phases.

Each GCC state is given a load capacity option and an allocation to buy power. The central body will do the buying and selling on behalf of the six national networks and will handle the payments for them. It will charge a service fee, which will cover its operations, administrative, and capital costs. Saudi Arabia has a load option of 1,800 MW, compared with 1,200 MW for Kuwait, 900 MW for the UAE, 750 MW for Qatar, 600 MW for Bahrain and 400 MW for Oman.