Qatar Presses Ahead With Orders To Become World's Biggest LNG & GTL Exporter.

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*** Iran Secures Major LNG Supply Deal With China As Part Of Big Accord To Include E&P

The state-owned Qatar Petroleum (QP) and its foreign partners are on schedule towards making the Qatari peninsula by far the world's biggest exporter of liquefied natural gas (LNG) and ultra-clean fuels from gas-to-liquids (GTL) ventures. New LNG plant capacities now under construction and planning in Qatar involve 57.7 million tons/year, so that by 2011 the emirate will be exporting 77 million t/y, up from 19.3m t/y at present. Fuel exports from GTL ventures by then could exceed 400,000 b/d.

Qatar, home to the world's third-biggest natural gas reserves (proven at more than 900 TCF) next to Russia and Iran, is exporting more than 19.5m t/y of LNG. Export volumes of LNG, methane gas super-cooled to liquid for transport on tankers, are expected to swell by 4.8m t/y by April 2005, when an additional train comes on stream.

Qatar has several JVs for LNG emanating from the two main ventures, QatarGas and RasGas, in which 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.

QatarGas-II, in an integrated 70:30 QP/ExxonMobil venture, mostly for the UK and partly for other European markets. Award of the EPC contract for its UK receiving and regasification terminal at Milford Haven is expected early this month. First LNG deliveries from this to the terminal are due in late 2007.

QatarGas-III, a 70:30 QP/ConocoPhillips venture, will be for the US market. Its first 7.5m t/y train, the biggest of its kind in the world, should be on stream by 2009. Its second train of the same size would be on stream by 2011.

RasGas-II, a 70:30 QP/ExxonMobil venture, will be for the Indian and other Asian markets, with some volumes to go to the European markets.

RasGas-III, a 70:30 QP/ExxonMobil venture, will be for the US market. This could eventually be an integrated venture with QP to have a stake in its American terminal.

So far, Qatar and its partners have secured firm contracts and MoU for the supply of more than 60m t/y of LNG. It should not be long before they secure purchase deals for the remaining 17m t/y to be delivered in the next decade.

According to Qatar's Minister of Energy and Industry, Shaikh Abdullah Bin Hamad Al-Attiyah who is also a second deputy prime minister and chairman of QP, the 77m t/y of LNG exports will be almost evenly distributed to Asia, Europe and the US. "We will be the first country in the world to sell LNG to all three regions", he says.

To move its booming exports of liquefied methane, Qatar is launching an initial public offering (IPO) on Jan. 15, 2005 for its LNG shipping company, Qatar Gas Transport Co. (Q-Gas). Attiyah says this will be the world's largest LNG shipping firm, with 21 LNG tankers on order from South Korea.

The IPO is expected to raise Q-Gas' share price substantially. In the state's offering of Industries Qatar earlier this year, the share price rose by 257%; this is a diversified manufacturing conglomerate. Attiyah says the IPO for Q-Gas will first be open only to Qatari individuals.

Set up last May, Q-Gas in the medium term will have gas carriers costing a total of $14 bn starting from 2007 to 2009. Faisal Mohammed Al Suwaidi, vice-chairman of Qatargas, says the company would require about 57 LNG carriers, including a giant vessel with a capacity of 250,000 cm to meet its commitments to supply gas to Europe and the US. He said QatarGas and RasGas will not have a stake in the company, but will sign a charter contracts with the owners of the vessels for 25 years. Q-Gas, which will have a 30% stake in the charter hire, will own vessels with other partners.

Suwaidi adds: "We are not building [LNG] ships for the sake of it. We are building them to transport gas, because from now on to 2009 we are planning for six trains with RasGas Train-5 starting next year and by the end of 2009, hopefully we will have reached a production of almost 70m t/y of [liquefied] gas". He said that, based on the company's studies, the size of the fleet would be sufficient to transport the amount of LNG, because the number of terminals and the number and size of ships that they can call on have been taken into consideration.

A project to build a dry dock in Qatar has been put on hold. Suwaidi says the future shipyard repair facility would be built in one of the six potential sites that have been selected both in the northern and western parts of the Qatari peninsula, one in Ras Laffan port and one close to it, in Al Wakra and Messaied. There is a big need for such a facility in the Gulf and the shipyard will have a major advantage because of operational requirements with almost 77-vessel dry dock at the facility. He says there are also operational benefits in having a dry dock, as repairs require three to four days that cost about $70,000 charter hire per day. Currently the QatarGas vessels dry dock in only two shipyards, in Singapore and Dubai.

Q-Gas and Maran Gas Maritime of South Korea recently initialled deal for the Qatari company to acquire a stake of up to 30% in four LNG tankers each with the capacity of 145,770 cubic metres. The vessels will be delivered within three years, and will be chartered to QatarGas and RasGas ventures.

In June Teekay Shipping was awarded contracts to charter three 151,700 cm LNG carriers to RasGas-II at fixed rates, with inflation adjustments, for a period of 20 years (with options to extend up to 35 years), beginning in late 2006 and early 2007. In connection with these contracts, Teekay has entered into agreements with Daewoo Shipbuilding & Marine Engineering of South Korea to build the three tankers at a total cost of about $510m.

The charter contracts are to generate about $55m in annualised cash flow from vessel operations. Q-Gas is expected to acquire a stake of up to 30% in the vessels, as in the case of the deal with Maran gas. At the signing ceremony, David Glendinning, president of Teekay's gas division, said: "We are delighted to have been selected as a provider of LNG shipping services in Qatar, which is expected to become the largest exporter of LNG in the world within the next few years. The profitability of this transaction has been enhanced through an 'en bloc' order for all three vessels from one shipyard combined with an attractively priced, long-term fixed-rate loan facility that was locked in at interest rates below current levels...The RasGas-II contracts are an excellent example of building on the strategic LNG platform that Teekay acquired" with another venture elsewhere.

(Teekay Shipping transports more than 10% of the world's sea-borne oil and is also expanding its position in the rapidly growing LNG shipping sector. With a fleet of over 160 tankers, offices in 14 countries and more than 5,000 sea-going and shore-based employees, the company provides a wide range of marine services. Teekay has a high reputation for safety, quality and innovation).

RasGas-II is to produce 9.4m t/y of LNG from its Train-3 and Train-4 facilities by Sept. 30, 2005.

For the time being, Qatar is exporting about 75% of its LNG sales to Asia, mainly to South Korea and India. The QatarGas and RasGas series of ventures are helping to diversify Qatar's economy away from oil. Qatar's gas wealth overshadows its oil reserves, which are much smaller. But oil production has kept rising since the mid-1990s and it should exceed 1m b/d within the next two to three years.

Attiyah says Qatar would also top the ranks in gas-to-liquids (GTL) ventures by 2011 with production of 400,000 b/d of ultra clean fuels. And by that time, Qatar's push into gas will have boosted its production of condensates from 180,000 b/d now to 600,000 b/d.

ExxonMobil and Shell may build plants in Qatar that would convert the its non-associated natural gas reserves, concentrated in the super-giant North Field offshore, into raw materials that can be used to lubricate car engines. Attiyah says the proposed lube refineries, still under discussion with QP, would "produce quality products suitable to meet high environmental standards". He adds: "Lubes are a big product and we want to industrialise them". Lubes are a byproduct in the process of converting natural gas into into zero-emission diesel and other ultra-clean fuels.

ExxonMobil and Shell are to spend over $10 bn on JV in Qatar to convert gas into ultra-clean fuels. The GTL plants to be built at the Ras Laffan industrial city, a tip of the Qatari peninsula close to the North Field and where the LNG trains are located, will be almost 10 times bigger than any other such facilities.