QatarGas 3-4 JVs Contract Chiyoda/Technip For $4 Bn, 15.6M T/Y LNG Trains.

The message that the tiny Arab Gulf emirate of Qatar was well on its way to having the status of the world's biggest exporter of LNG came last week, as Trains 6&7 of the QatarGas series of ventures were contracted. This project, the biggest in the LNG business, is to produce 15.6 million tons/year later in this decade. The first of the two trains should be completed in the second half of 2008.

By 2014 or before Qatar will be able to export up to 83m t/y of LNG (equivalent to 2m b/d of crude oil) and its crude oil exports would then exceed 1.2m b/d. It will be the world's biggest exporter of ultra-clean fuels from GTL plants. Qatar will also become the world's biggest exporter of LPG.

Engineering companies Chiyoda Corp of Japan and Technip of France on Dec. 21 signed the EPC contract worth more than $4 bn to jointly build the two trains in Ras Laffan - an ever expanding set of LNG facilities at the northern end of the Qatari peninsula which is the nearest point to the offshore North Field. This is by far the biggest field of natural gas in the world, with Qatar estimating its proven reserves at more than 910 TCF.

The North Field extends to Iranian waters, where it is known as South Pars. But Iran is yet to get at least one of its four major LNG export projects off the ground. None of the Iranian projects would be bankable unless Tehran manages to get the US liquefaction technology on which potential buyers of the LNG insist.

Tehran, however, has been complaining repeatedly that those recoverable reserves of natural gas which are on the Iranian side are being drawn to the Qatari side by the latter's more speedy extraction rate. With no response from the Qatari side, Iran has proposed joint exploitation of both the North Field and South Pars. This is a complicated geological issue compounded by geo-politics, as Qatar has a strategic alliance with the US. The US military HQ in the Middle East and the main American air base are located in Qatar, with Bahrain being the HQ for the US naval forces.

Qatar's emergence at the main global supplier of LNG and gas liquids comes at a time when the world's energy consumers are looking for alternatives to costly oil. Qatar intends to become the world's capital for ultra-clean fuels from GTL.

Yokohama-based Chiyoda's Senior Executive VP, Hiroshi Kobayashi, on Dec. 21 told a news conference construction of the two trains would begin in February or March. He said: "My understanding is that the project of 500 bn yen (over $4 bn) is the biggest project in our business. The Technip side has the same understanding". A statement said that, with the EPC contract, "the Chiyoda/Technip joint venture is now responsible for building the world's six largest LNG trains, all of which are key to Qatar's strategic plan to become the largest global LNG supplier".

The contract was signed with Qatar Liquefied Gas Co. (QatarGas-3 for Train 6 and QatarGas-4 for Train 7), with Chiyoda holding 60% stake and Technip having 40%. Chiyoda said it foresaw growing demand for LNG in the decades to come, with production not only in the Middle East but in South America and Africa. "To give a sense of the changing demand", Kobayashi said, "the global trend is that the demand for gas is increasing by nearly 10% per year and that for LNG is higher. It won't be a big mistake to say that in 10 and 20 years, the current [global] supply of 130m tons [a year]...could increase to 200m tons [a year] in 2010 and 300m tons [a year] in 2020".

Qatar has seen growing interest amid skyrocketing prices for the region's better-known commodity, oil. Last month US Energy Secretary Samuel Bodman signed with Qatar a 25-year accord starting in 2008 under which Washington would import 25-30% of its LNG needs from the emirate.

QatarGas-3, for Train 6, is a joint venture between the state-owned Qatar Petroleom (QP), 68.5%; ConocoPhillips, 30%; and Mitsui & Co., 1.5%. All its output will be for the US market, where ConocoPhillips is having a receiving and re-gasification terminal. QatarGas-4, for Train 7, is an integrated gas E&P/LNG venture between QP with 70% and Shell with 30%. Most of its output will go to the American market and the rest will be sold in Europe.