ASIANECONOMIC problems and 1998`s plunge in oil prices threw a dash of cold water on the Emirate of Qatar`s once sizzling boom.
None of the upstream and downstream projects, which are primarily tied to production from the world`s largest nonassociated natural gas field, had been cancelled by yearend 1998. However, except for a world class LNG plant headed for completion in 1999 and a major refinery upgrading, some announced projects were still under study, in a "memo of understanding" status, or in pre-engineering. The emirate`s oil income, a dominating element of its national budget, was down sharply in 1998.
Korea and Japan were the primary outlets for most of the 11 million metric tons/year (mty) of LNG capacity that were to be available from Qatar by mid-1999. Those markets were expected to be able to absorb much of that output, but alternate takers were being solicited for spot LNG deals at low prices in 1998. The contract sales price of LNG is generally tied to world crude oil prices. When they drop, LNG does too.
Financial markets and Moody`s Investors Service took note of these developments. Moody`s said in August 1998 that the 35% decline in oil prices since year-end 1997 was cutting into Qatar`s gross domestic product growth, the health of government finances, Qatar`s external payments, and its banking system`s liquidity-further stressing a financial position that was already strained by massive investments in the gas sector, including the two LNG projects.
But, Moody`s reported, the gas sector projects should eventually reduce Qatar`s dependence on oil and narrow the large financial imbalances. But if oil prices remained soft, the government was going to have to respond with corrective fiscal measures to contain "unsustainably high" budget deficits. (See the accompanying box for background information on the emirate`s government and leadership.)
Following is a review of the resource base and status of important developments as 1998 drew to an end.
Natural gas
The mother lode for Qatar`s natural gas is the huge North field, with 380 tcf or 10.64 trillion cu m of recoverable reserves, according to Qatar General Petroleum Corp. (QGPC). This volume is equivalent to almost 65 billion bbl of oil. The field provides industrial gas, elemental sulfur, NGL for petrochemicals and export, copious amounts of condensate for refining and export, and dry gas for LNG.
As Fig.1 shows, the field covers an area of some 6,000 sq km and is nearly half the size of the emirate.
In addition to North field reserves, there are some 6 tcf of associated gas reserves in the onshore Dukhan field and 5 tcf in marine fields.
There are two offshore production complexes in North field. A third will be completed in 1999. They are shown on Fig. 1 as North Field Alpha (NFA), QatarGas (QG), and RasGas (RG).
North Field Alpha
The NFA offshore platform complex is designated Stage 1 of North field development. It is 80 km off Qatar in 52 m of water and has nothing to do with the LNG projects.
Designed to produce 800 MMscfd of wellhead gas, NFA in 1998 yielded about 750 MMscfd of lean gas and 5,000 metric tons/day, or 50,000 b/d, of condensate and LPG. NFA consisted of six platforms, two bridge supports, and seven connecting bridges.
The wellhead fluid is processed at NFA through two 400 MMscfd process trains into dry gas and condensate streams. The gas and condensate are sent to shore at Ras Laffan through, respectively, 34-in. and 12-in. OD subsea pipelines. As Fig. 1 shows, the gas and condensate are piped 130 km farther to the Mesaieed industrial area and treated in NGL plant No. 3, adjacent to two plants (NGL 1 and 2) processing onshore and offshore associated gas.
At plant No. 3, the condensate is stabilized and stored in tanks for shipment to international markets or to the adjacent state-owned National Oil Distribution Co. (Nodco) refinery for processing.
The gas stream is processed into propane, butane, and gasoline components; treated; and marketed with products from the other gas processing plants. Ethane is cracked to olefins in a steam cracker.
The remaining lean gas is used to supply Qatar`s industrial and power generation requirements. Surplus gas is transported to Dukhan and injected into the Khuff reservoir for future use.
QatarGas complex
Stage 2 development began with the North field Bravo complex, which in 1998 produced 1,378 MMscfd at peak feedstock flow for the Qatar Liquefied Gas Co. (QatarGas) LNG plant in Ras Laffan Industrial City. The complex is about 10 km southeast of NFA.
The dehydrated gas and dewatered condensate are transported 80 km to onshore reception facilities at Ras Laffan in a 32-in. OD pipeline operated in the two-phase mode. Some 1.9 million mty of condensate for export is extracted at the shore facilities. Sulfur was recovered.
RasGas complex
The third complex (RG on Fig. 1) to exploit the massive North field received its designation from Ras Laffan LNG Co. (RasGas), which was to complete Qatar`s second LNG plant. The sour gas/condensate stream from the complex was to go to shore in a 92 km long, 32-in. diameter, two-phase pipeline.
Natural gas needed to supply its two-train, 5 million mty LNG plant was to be produced initially. Based on QatarGas requirements, that was to amount to about 1,500 MMcfd of natural gas, which would yield 45,000 b/d of stabilized condensate plus elemental sulfur.
According to initial plans, the first gas was to come to shore in March 1999, with first LNG due in July 1999.
More industrial gas
A fourth offshore producing complex was considered in 1998 to be likely. In November 1997 QGPC and Mobil Oil Qatar signed a memo of understanding to evaluate a $1 billion project to bring ultimately 1 bcfd of North field gas ashore for industrial purposes.
LNG
Before the Asian economic crisis, forecasts of LNG demand were heady. The executive vice-president of Korea Gas Corp. in March 1997 put Korean LNG demand at 20.2 milllion tons in 2001 and 28.5 million tons in 2010.
In 1998, with Asia in a steep economic slide, this pace of demand growth seemed doubtful.
But it was on the basis of this and similar forecasts that the two worldscale LNG projects were launched in Qatar. The 11 million mty of 1999 due from QatarGas and RasGas in 1999 equated to 275,000 b/d of crude oil. And further construction was assumed. The LNG port at Ras Laffan was designed to handle shipments of 30 million mty of LNG.
Ownership
QGPC owns 65% of QatarGas, with the rest divided among France`s Total SA and Mobil Qatar Gas Inc.(10% each) and Mitsui & Co. Ltd. and Marubeni Corp. (7.5% each).
QatarGas signed an agreement with Japan`s Chubu Electric Power Co. to export 4 million mty to Japan for 25 years. The first shipment went out late in December 1996. Subsequently, QatarGas signed agreements with seven Japanese utilities and gas companies to export 2 million mty of LNG. This 6 million mty would cover output of the QatarGas trains.
QGPC is operator for the gas production complex feeding QatarGas LNG.
Also, QGPC holds 66.5% of RasGas, Mobil 26.5%, Itochu Corp. 4%, and Nissho Iwai 3%. The RasGas North field offshore production system is not structured like QatarGas Upstream but integrated into the entire project.
Shipments, contracts
Low oil prices and sluggish demand in Asia cast a cloud over Qatari LNG economics in 1998.
Korea Gas Co. said it would take the first RasGas LNG in 1999. Deliveries were to start at the rate of 600,000 mty and increase to 4.8 million mty by 2002. The contract covers 25 years.
In addition, RasGas was reported to have been "selected as supplier" to India`s Petronet LNG Ltd., a consortium of Indian state-owned companies.
The amount of RasGas LNG slated for India, according to QGPC, was 7.5 million mty. It was reported that RasGas and Mobil Corp. were required to take equity positions in the Indian receiving terminals. Such volumes would exceed RasGas capacity. However, the timing of deliveries was not stated in the vague official announcement.
Also, Enron Corp. was negotiating with Qatar about building the third LNG plant there.
Crude oil
Somewhat overlooked in the excitement over huge gas reserves and LNG projects were major increases in Qatar`s oil production capacity.
According to the U.S. Energy Information Administration, Qatar produced 700,000 b/d of crude oil and condensate in 1997. Despite an Organization of Petroleum Exporting Countries quota and depressed prices, crude production moved up to 779,000 b/d the first quarter of 1998, the EIA reported. Of this, 693,000 b/d was crude oil. Longer term projections had Qatar producing about 800,000 b/d.
Fig. 2 shows existing fields and concessions of all the companies with production sharing agreements in Qatar. A number of the companies had aggressive development programs.
Following is a look at their positions and what they planned as of the start of 1998.
QGPC
QGPC`s venerable Dukhan field, the emirate`s only onshore field, began production in 1949. QGPC said the field`s processing facilities can handle up to 280,000 b/d of crude oil. An upgrade of facilities was to have allowed production of as much as 335,000 b/d by 1999.
Production from offshore Maydan Mahzam and Bul Hanine fields, also operated by QGPC, was expected to peak at 65,000 b/d and 95,000 b/d respectively by the year 2000. Qatar split the 30,000 b/d of production from Al Bunduq field with Abu Dhabi.
Occidental
Occidental Petroleum of Qatar Ltd. applied state-of-the-art technology to its Idd El-Shargi North Dome (ISND) development and production sharing agreement. Dome is a favorite field name word in Qatar, but none of the oil there is associated with salt domes.
Oxy`s production in Qatar was 96,300 b/d in 1997 and was expected to hit 150,000 b/d in 1999. The 1997 figure represented some 25% of the company`s worldwide production on an oil equivalent basis.
Oxy entered another development and production sharing agreement covering Idd El-Shargi South Dome field in December 1997. QGPC said the agreement called for Oxy to spend about $440 million. Within a few years production was expected to plateau at 50,000 b/d.
An Occidental spokesman, however, said in late 1998 that low oil prices could temper investment in Qatar.
Elf
Elf Petroleum Qatar found the first oil field in Qatar in 20 years with its 1991 discovery of the Al Khalij field. Italy`s Agip Qatar BV also has a stake in the field.
Early in 1998 Elf was expecting to raise production to 30,000 b/d from 27,000 b/d in mid-1997.
The oil from ISND, Al-Khalij, Al-Shaheen, and Bul Hanine moves by pipeline to Halul Island for blending, storage, and export. The blend is a crude of 34° API with 1.5% sulfur. The 1 km by 1.5 km island has 3.4 million bbl of storage.
ARCO
ARCO Qatar Inc., as operator for a consortium of Germany`s Wintershall and Preussag, British Gas Co., and Gulfstream Resources Canada Ltd. of Calgary, had done the next best thing to making a discovery. It took a hydrocarbon accumulation discovered by Wintershall in 1976 and evaluated as being noncommercial at the time and made it commercial.
Using horizontal well technology and low invasion fluids, ARCO drilled the QMB-4 well and tested 10,000 b/d of liquids. After being designated economic, the structure was named Al-Rayan field. It is in Block 12 (Fig. 2).
QGPC expected production to reach 30,000 b/d by the beginning of 1998. A full field development plan was expected to be issued. Gulfstream said the Qatar Consortium was committed to a larger scale development.
The ARCO group also holds a concession in Block 12 in an area in dispute with Bahrain. Activity in 1998 was in limbo pending resolution of the issue.
Maersk
Maersk Oil Qatar Co. produces from Al Shaheen field in Block 5. It signed the EPSA for this area in mid-1992 and drilled and completed 11 successful wells by mid-1997. Production was 100,000 b/d in 1998. Maersk has drilled long horizontal wells to produce the field, which, according to QGPC, had not reached full development in 1998.
Maersk was installing permanent oil and gas gathering facilities in the field in 1998.
Pennzoil
Pennzoil Qatar Oil Co., with 25% partner Novus Petroleum Ltd., had an EPSA for Block 8. It shot a 2D seismic survey and drilled one hole with minor oil and gas shows and planned further drilling in 1998.
In October 1998 QGPC approved an application for Pennzoil to enter a second stage of exploration near QGPC`s undeveloped 1976 discovery, Najwat Najem.
Chevron
Chevron Overseas Petroleum (Qatar) Ltd. and its partner MOL, the Hungarian Oil & Gas Co. Ltd., in 1998 were newcomers to Qatar. The joint venture, 60% held by Chevron, had an EPSA for Block 1 NW. Exploration studies had been conducted to pick the location for the first well.
Early in 1998, Chevron was awarded another EPSA that covered the entire land area of Qatar except for the Dukhan field. Chevron planned to conduct a 2D seismic survey and gravity-magnetic survey by the end of 1998. The company intended to do exploratory drilling in 1999-2001.
Nearly 20 rigs were at work, the majority offshore, in Qatar early in 1998.
Refining
Qatar`s National Oil Distribution Co. planned to upgrade its simple 57,500 b/d hydroskimming refinery at Messaieed with a 20,000 b/d fluid catalytic cracker. In addition, a 27,000 b/d condensate refinery was to be added along with a 30,000 b/d condensate fractionator.
There were also plans to build a condensate refinery at Ras Laffan Industrial City that would process QatarGas and RasGas condensate. QGPC and all the partners from QatarGas and RasGas signed a memorandum for construction of a $340 million, 80,000 b/d condensate refinery at Ras Laffan.
Petrochemicals
QGPC, which said downstream investment could eventually reach $20 billion, entered joint ventures with a number of foreign participants in petrochemical projects. None were yet in construction late in 1998.
The joint ventures include Qatar Vinyl Co. (25.5% QGPC, 31.9% Qatar Petrochemical Co. [Qapco], 29.7% Norsk Hydro, and 12.9% Elf Atochem) and Qatar Fuel Additives Co. (50% QGPC, 20% Chinese Petroleum Corp., 15% Lee Chang Yung Chemical Industry Corp., and 15% International Octane Ltd.). Qatar Vinyl was to produce ethylene dichloride and vinyl chloride monomer; Qatar Fuels Additives was to make methanol and methyl tertiary butyl ether (MTBE).
QGPC and Methanex Corp., Vancouver, B.C., signed a memorandum of understanding to do a feasibility study for up to three methanol plants to be built sequentially for a total of 3 million mty at a total cost of about $1 billion. QGPC said start-up of the first train was expected by 2002. QGPC would hold 51% in the venture, Methanex the rest.
Also, QGPC signed a joint venture with Phillips Petroleum Co. to build a 500,000 mty ethylene plant at the Mesaieed Industrial Area (Umm Said). The venture included a 467,000 mty year high density polyethylene and linear low density polyethylene plant and a 47,000 b/d hexene-1 plant. The $865 million project was expected to start production in 2002.
Qapco operates a 525,000 mty ethylene plant there and an associated 360,000 mty low density polyethylene plant.
A natural gas to liquids plant using some advanced form of Fischer-Tropsch to produce about 20,000 b/d of fuel and naphtha had been announced since 1997. The economics of gas to liquids production were difficult, particularly at low or falling oil prices, and it appeared the Qatari project was dead in the water.
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Profile: Qatar
THE EMIRATE OF QATAR IS A ROUGHLY 110 mile long by 50 mile wide, thumb-like peninsula that juts out from Saudi Arabia into the Persian Gulf. Population of the emirate is estimated at 630,000, but only 100,000 are Qataris. The rest are expatriate workers, primarily from Pakistan and India.
The ruler and head of state in 1998 was Sheikh Hamad Bin Khalifa Al-Thani, who became emir after he overthrew his father in a bloodless palace coup in June 1995. The former emir moved to Switzerland.
The emir enjoys executive and legislative powers. He promulgates laws through the advice of the council of ministers, made up of the heads of Qatar`s 15 ministries. He also consults with the parliament, described as a semilegislative body of 30 members appointed by the emir. They represent the leading families of Qatar.
Abuullah Bin Hamad Al-Attiiyah was the Minister of Energy & Industry in 1998 and chairman of the board and managing director of state-owned Qatar General Petroleum Corp. (QGPC).
The Ministry of Energy & Industry is responsible for the planning, supervision, and implementation of the oil and gas sector`s strategy.
QGPC is responsible for all phases of the oil and gas industry in Qatar and abroad, including exploration, drilling, production, refining, transportation, distribution, and export. These major programs and ventures are under the aegis of the QGPC board of directors. Its seven members include the chairman, Abdullah Bin Hamad Al-Attiyah.
QGPC also holds interests in the other state enterprises as shown in the accompanying table and in numerous joint ventures with foreign oil companies.
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These classic portals are the entrance to Ras Laffan Industrial City which is about 50 miles north of Doha. Plans are to eventually fill the 106 sq km site with plants to liquefy natural gas, refine condensate, and make petrochemicals.
QCPC shares in national subsidiaries
National Oil Distribution Co.
(Nodco).............................100%
Qatar Petrochemical Co. (Qapco)......80%
Qatar Fertilisers Co. (Qafco)........75%
Qatar Liquefied Gas Co. (QatarGas)...65%
Ras Laffan LNG Co. (RasGas)..........70%
Qatar Fuel Additives Co. (Qafac).....50%
Qatar Clean Energy Co. (Qacenco).....51%
