The Role of OPEC - Qatar.

ExxonMobil signed an agreement with Qatar Petroleum (QP) on Oct. 16 to invest $12 bn to have two huge LNG plants - QatarGas II - built by 2008 for the US and European markets, which will help Qatar become the biggest exporter of liquefied gas by 2015. ExxonMobil will own 30% of Qatargas II and it will work on every aspect from producing the gas to the downstream LNG chain.

On Oct. 20 Shell and QP signed a deal worth more than $4 bn to develop the world's largest gas to liquids (GTL) plant with a capacity of 137,000 b/d. Shell's investment in the relatively untested field of GTL to produce environmentally friendly diesel, is similar in size to the Sakhalin-2 LNG venture in Russia, one of the major's biggest ever investments.

No one has yet established a world-scale GTL plant. The robustness of the Shell technology to low oil prices is yet to be tested. The 137,000 b/d plant, to start production by 2010, will be more than 10 times the size of Shell's 12,000 b/d facility at Bintulu, Malaysia, which is the world's largest at present.

The GTL produced in Qatar is for export markets, unlike the output from Malaysia. GTL can be used as a blend or on its own in new diesel engines. Shell has done GTL tests with buses in London and VW Golf cars in Berlin.

Producing GTL is still an expensive option and Shell is banking on the expected surge in the need for cleaner burning diesel, especially in Europe where regulations due to come into force will cut the permitted poisonous emissions by half. Sales of diesel powered cars in Europe have doubled in the past seven years and are expected to make up half the total fleet by 2006.

GTL fits into Shell's strategy to sell brand-marked petroleum products and helps support the company's drive to be seen as environmentally conscious. The agreement with QP - for which Shell's Chairman Sir Philip Watts travelled to Qatar - will bring the Anglo-Dutch giant back into Qatar after many years.

Like LNG, GTL allows energy companies to make use of vast reserves of natural gas much of which is otherwise seen as "stranded" - too far from the nearest big consuming region to be sold in its raw form.

The Oct. 20 deal with QP was important for the major, which has been trading at a large discount to ExxonMobil and BP, its closest rivals. This is partly because of Shell's inability to expand its reserves base.