Qatar Has Become The World's Biggest LNG Exporter, With 84M T/Y Target By 2013.

Qatar in March 2007 became the world's biggest exporter of LNG, with a nominal capacity of 31.7 million tons/year and actual potential of 32.5m t/y. The first country in the world to have launched two major LNG ventures at the same time, Qatar will become a source for 83-84.5m t/y of LNG out of 17 huge trains in the next decade. Its two pioneering sets of JVs involve some of the most prominent firms in the world and will have their capacity expanded to more than 83m t/y by 2012/14 - the latter figure is equal to more than 2m b/d of crude oil.

Its JVs at Ras Laffan, Qatar Liquefied Gas Co (QatarGas) and Ras Laffan Liquefied Gas Co. (RasGas), have firm contracts and MoUs for the sale of up to 77m t/y. Finding buyers for another 6m t/y should not be a problem - with the state-owned Qatar Petroleum (QP) and its foreign partners having become key players in LNG.

Qatar, home to the world's third-biggest natural gas reserves (proven at more than 910 TCF) next to Russia and Iran, is exporting more than 32m t/y of LNG already. Export volumes of LNG, methane gas super-cooled to liquid form for transport on tankers, include deliveries of surplus output to spot buyers at current market prices - at times in recent weeks the spot market value of LNG rose over $11/m BTU.

In QatarGas and RasGas the lead partner of QP is ExxonMobil. In the first QatarGas the other partners are Total and Japanese trading giants Mitsui and Marubeni. In the first RasGas venture the other partners are Japanese trading houses Itochu and Nissho-Iwai, and a South Korean group of companies. The RasGas and QatarGas sets of JVs will have a combined cost of $56 bn when they are completed in 2012. The RasGas JV will cost $26 bn; those of QatarGas will cost $30 bn.

QP has made a series of major investments overseas in the past few years, teaming up with ExxonMobil on the Golden Pass LNG terminal in the US and with Total on the South Hook terminal in Wales. QP and ExxonMobil signed an agreement in 2003 to have 45% in the Edison LNG terminal in Italy. All are receiving LNG via QatarGas. These QP assets will be held by QP's external arm, QPI (see omt11QatrExprtSep10-07).

QP aims to complete a study into the state of its offshore giant, the North Field, in 2009 and hopes to boost its output and exports thereafter. On the sidelines of a conference in Abu Dhabi last February, Qatar's Industry and Energy Minister and CEO of QP Abdullah bin Hamad al Attiyah said: "I hope at the end of the study in 2009, it will show us where to go". Qatar has put new projects on hold while it undertook a study of the field after rapid development made the country the world's top exporter of LNG.

Qatar has said it would only go ahead with a second phase of development at the North field when it was sure it could do so without damaging the reservoir by pumping too hard. Once the study is completed, Qatar could boost exports through the Dolphin pipeline to the UAE and Oman. The integrated $5 bn Dolphin gas E&P/downstream project has the first cross-border gas pipeline in the Arab Gulf Co-operation Council (GCC) region and in March 2007 began supplying the UAE with gas. Dolphin will supply neighbouring Oman in 2008.

Attiyah said Qatar also needed to boost gas output from the field to meet soaring domestic demand for power generation, adding: "Our power generation needs are increasing very rapidly, the growth in demand for power is one of the highest in the world".

It took 26 years for the first LNG venture to materialise, from the discovery of the North Field in 1971 by Shell to the start of LNG exports from the QatarGas plant in early 1997. The lead time from a capacity of 6m t/y to 27.25m t/y was nine years. The lead time to 83m t/y will be seven to eight years. At such a speed, as tiny a neighbour as Qatar has got the huge eastern mainland of Iran worried. Not only has Tehran failed to catch up with Doha in getting LNG ventures off the ground, mainly because of US sanctions and partly for lack of experience in this business, but Iran is concerned that the speed in tapping North Field gas has affected the reserves of its South Pars - which is an extension of the North Field.

Iranian experts claim the gas is migrating from South Pars to the North Field at a rate much faster than seen in the 1990s, while on the eastern side of the structure the gas is getting more sour and more complicated to extract. In Doha such alarm is dismissed as being political; in Tehran experts say they can prove their point.

Apart from the fact that Qatar is the main military base for the US in this part of the world, with the help of such a powerful partner as ExxonMobil (now the world's biggest corporation) and other majors, financing for the QatarGas and RasGas ventures as well as other projects has been easy and commercially advantageous. Confidence in Qatari LNG was shown as RasGas' second bond of $660m was four times over-subscribed in the spring of 2004. Six months later it was the bank market to show its approval, with QatarGas-II's commercial tranche receiving commitments worth $3,600m, the biggest commercial facility ever secured in the Middle East.

RasGas-II has finances some of its capacity without resorting of the markets. In late 2004, Finance Minister and RasGas Chairman Yousef Hussein Kamal said: [RasGas-II's] Train-3 has been 100% financed internally; for Train-4, 80% has been completed without borrowing...; on Train-5, we just signed the first cash call from shareholders".

Qatar wants to capture global trade in the world's fastest-growing energy commodity with the creation of an LNG contract based at the International Mercantile Exchange (IMEX), an energy bourse to be launched in October in Doha. And talk of a gas cartel has followed a meeting in Doha of the Gas Exporting Countries Forum (GEFC) last April. The idea of a gas OPEC, proposed by Iran in March, has been rejected by Russia, but other GECF members, such as Algeria, at ambivalent and want experts to study the proposal.

A traded contract in LNG will pose a new challenge to gas-exporting countries, with the arrival of liquidity and price transparency in an opaque market. There are only two spot gas markets in the world: the Henry Hub, in the US, and Britain's NBP price. Henry Hub and NBP prices are often widely divergent, while in Asia and continental Europe the sale of gas is cloaked in secrecy and dominated by long-term supply contracts with destination clauses which prohibit secondary trading.

Philip Thorpe, head of the Qatar Financial Centre Regulatory Authority (QFCRA), says IMEX will bring transparency to a market on the cusp of change because of the growing trade in LNG. He adds: "There is currently no pricing reference point for LNG. Last year was a wake-up call as shipments of LNG were diverted to European markets in response to higher prices".

The LNG contract is being developed for IMEX by Hess Energy Trading Co. (Hetco) and Clifford Chance. Jon O'Neill, of Hetco, says there is an emerging spot trade in LNG cargoes and the first task for IMEX is to develop a spot market for LNG similar to the dated Brent crude oil contract developed by in the 1970s BP and Shell. O'Neill sees huge interest in a tradable LNG contract, saying: "The whole gas market east of Suez has zero transparency. LNG is the bridge that brings the markets together". According to Patrick Heren, a gas industry consultant, gas exporters in the Middle East and Asia are coming under pressure, with new LNG supplies hitting the market. He says: "You will also have two thirds of the old LNG contracts coming up for renewal". If a new, tradable LNG contract is emerging, it gives added reason for Qatar to act first - exporting a third of the market. The IEA predicts LNG will be almost 50% of global trade in gas by 2030.