Energy QOpportunitiesatar In a special report from Oil and Gas Investor and Global Business Reports ENERGY OPPORTUNITIES IN QATAR: AN OVERVIEW Big Power in a Small Package y any standards, the state of Qatar is small. With a pop- joined Kuwait, Bahrain, Saudi Arabia, Oman and the United ulation barely over 800,000 and a land area (11,430 Arab Emirates in forming the Gulf Cooperation Council Bsquare kilometers) roughly three times smaller than (GCC) in 1981. Belgium, this barren, sandy peninsula jutting out like a raised Though Qatar was slowly finding its place in the world, thumb into the Persian Gulf, north of Saudi Arabia, would development was being gravely hampered by the continuous still be hidden in the shadows of anonymity if it were not for diversion of the country’s oil revenues into the personal its immense hydrocarbon reserves. coffers of the ruling emir. In a move to change this, the Despite its reduced size and ungrateful topography, Qatar current emir, Sheikh Hamad bin Khalifa Al-Thani, took is currently making a big splash due to a combination of over the reins of power from his father in a bloodless easily accessible gas reservoirs and visionary leadership. This overthrow in 1995 that won the support of the ruling family, young nation is rubbing shoulders with the big boys of the the Qatari armed forces and Qatar’s international allies, hydrocarbon world and this has bought a taste for ambition. Qatar became independent on September 1, 1971, following a period of British protectorate status that began in 51”00’ 51”30’ 1916, after the Ottomans pulled out. The ruling family that Persian Gulf was officially put in place by the Anglo-Ottoman agreement of 1913 (but had ruled virtually since the mid-1800s) Ar Ru’ays remained in power and Sheikh Khalifa bin Hamad Al-Thani became Qatar’s first emir in the newly formed independent BAHRAIN Al Khuwayr emirate. 26”00’ 26”00’ Qatar’s economic tradition was built on trade and a prosperous, albeit rather primitive, pearling industry. The Gulf of discovery of oil in the early 1940s revolutionized this and in Bahrain parallel with the changes occurring in the whole region, the bulk of national income quickly became dependent on the HAWAR ISLANDS extraction of hydrocarbons. (BAHRAIN) Al Khawr Oil revenues provided for a solid power base, particularly after 1973’s first major world oil crisis, and this should have led Qatar on the path to increasing development as this Umm newfound prosperity spurred immigration and substantial 25”30’ Salal ‘Ali 25”30’ social progress. However, the region was still young and far from stable. Border disputes with both its neighbors, the Dukhan Umm Salal island of Bahrain to the west and Saudi Arabia to the south, Muhammad were minor issues in comparison with the threat that Iran DOHA posed to stability in the Gulf States in the aftermath of the Ar Rayyan 1979 revolution. Umm Bab Dawbat Al Wakrah Partly out of concern for their safety and partly to Salwa coordinate trade and economic development efforts, Qatar QATAR Umm Sa’id 25”00’ 25”00’ This special report was prepared by London-based Global Business Reports, after meeting with several Qatari oil and gas players. It covers development of this country that is blessed with abundant hydrocarbon resources Tuwayyir al and how it intends to capitalize on this Hamir SAUDI Persian underground wealth. Authors are Ayse Hazir, Gulf project and marketing coordinator ARABIA 24”30’ 24”30’ ([email protected]), and Guillaume De 0 10 20 km Bassompierre, oil and gas reporter, Global 0 10 20 ml Business Reports ([email protected]). The island of Halul is not shown. Cover photo of the Ras Laffan LNG plant courtesy of RasGas. Q-2 Oil and Gas Investor ▪ September 2004 A serene desert covers a wealth of hydrocarbon assets. (Photo courtesy Guillaume de Bassompierre.) spearheaded by the U.S. into industry and services, while a focuses will therefore be the famed The threat of a counter-coup was highly prioritized focus on education North Field, whose 6,000-square- short-lived as father and son were ensures that all this wealth will not be kilometer surface area containing reconciled the following year, with put to waste. reserves estimated in excess of 900 Sheikh Khalifa bin Hamad Al-Thani The following report will attempt to trillion cubic feet of gas, make it the officially withdrawing his claim to the analyze in detail what kind of largest single concentration of natural throne and conceding the leadership of opportunities this modernized, dynamic gas on the planet. Qatar formally to his heir. Qatar offers and how its oil sector, gas With dwindling oil reserves, how this As shown by the quick progress sector, the related downstream gas reservoir is exploited, industrially achieved by Qatar in the past decade, industries and services are structured and commercially, will play a major the change of power proved to be the and where they are headed in the part in Qatar’s hydrocarbon industry breakthrough that was to firmly future. Quite logically, one of the major and economy in the years to come. establish this tiny nation on the path to Much of Qatar’s bright future now sustainable growth, development and relies on the success it has had in rapid social and political progress. securing long-term outlet markets for Indeed, Qatar is now often hailed as a gas, hand-in-hand with the inter- model within the region for the way it Much of Qatar’s bright national players. has been able to balance a conservative Another portion of the country’s traditional heritage with substantial future now relies on the income will be derived from the role of liberalization of society in political, success it has had in its petrochemical industries, also in social and economic terms. joint-venture agreements with world- At the same time, the challenge securing long-term outlet class companies. And finally, we will posed by the country’s heavy reliance look at the Qatari service sectors and on hydrocarbon resources seems to also markets for gas. financial institutions whose growth has have been confronted and transformed been fueled by the underground into a locomotive for diversification bonanza. Ⅺ Q-4 Oil and Gas Investor ▪ September 2004 ENERGY OPPORTUNITIES IN QATAR: NATURAL GAS Floating on Gas alk of Qatar’s oil should not make readers oblivious to Offshore Qatari wealth, extracted by RasGas. (Photo courtesy RasGas.) the fact that we have not really begun to analyze the Thydrocarbons in the peninsula until we have men- tioned natural gas. Proven gas reserves in the North Field alone currently stand at more than 900 trillion cubic feet, making it by far the largest single gas reservoir in the world and placing Qatar in third place in terms of gas-reserve rank- ings (behind Russia and Iran). With oil fields projected to be mostly depleted by 2023, investments aimed at dwindling oil field recovery and further discovery pale in comparison to the investment hopes that the Qatari government places in the country’s gas potential being the locomotive for its economy in the future. The government is therefore developing efforts to exploit its vast reserves to the maximum, in all possible directions. Though the so-called North Field’s potential has been known since 1971, it was not until the 1990s that this immense gas reservoir started to be exploited. Gas was not then as strategic an asset as it is now, and furthermore, oil was producing lucrative national income in any case. Thus, in the early 1970s, Qatar flared about 80% of the 16.8 million cubic meters of gas produced daily in association with crude oil extraction. It was only later in that decade that the country made progress in using its gas resources, as despite several setbacks, the proportion flared fell dramatically. This paved the way for the development of a natural gas industry that kicked into high gear with the establishment of the Qatar Liquefied Gas Company Ltd. (QatarGas) in 1984 as a joint venture of QP (65%), TotalFinaElf (10%), ExxonMobil (10%) and Mitsui and Marubeni (7.5% each). This venture aimed to market and export liquefied natural gas (LNG) from the North Field. A second company was formed with similar objectives in 1993, Ras Laffan LNG Co. (RasGas). Its major shareholders Q-6 Oil and Gas Investor ▪ September 2004 are QP (63%), ExxonMobil (25%), nothing more. Instead the emerging Korean Kogas and two Japanese partners. markets of Taiwan and India were In 1996 and 1999 respectively, these two acquired in long-term sales agreements. consortiums delivered their first Then, the picture changed. shipments of LNG to East Asian “What happened in the U.S. was markets. By then, Japan and Korea were that the amount of gas produced already major consumers and possessed a lessened at the same time that LNG mature distribution network that made supply grew; and the same thing them prime initial targets for Qatari happened in Europe,” Wolahan says. exports. This also explained the presence “The North Sea production was slowing of shareholders from these countries in down and Russia, which has a lot of gas the QatarGas and RasGas ventures as the but has to deliver it through pipelines, commercial strategic partners. could not supply demand with its Radical changes in the LNG markets infrastructure. So, the market concept in recent years have allowed for changed and we started seeing markets tremendous expansion plans for both requesting ever-higher LNG volumes companies and for Qatar. Jerry by cargo.” Wolahan, managing director of RasGas, This of course, provided a blessed says, “If the initial target was the Asia- opening for Qatari exporters RasGas Pacific market and this remained a and QatarGas into markets with high steady customer, when demand went up and increasing consumption of natural in the U.S.