Qatar Gas: Returns Vindicate Energy Policy
Owen, Tom, The Middle East
In the North Field Qatar has the world's largest natural gas reserves after Iran and Russia, and the largest non-associated gas reservoir in the world. Yet this has been a mixed blessing: while natural gas is a fashionable fuel, burning cleanly and efficiently, it is also awkward to transport and exploit commercially compared to oil. If gas is to be sold internationally, there are two options, either liquefaction (LNG) or the construction of a pipeline. Either option is expensive, slow to commission and inflexible compared to oil. But after investments of $12 billion over 10 years, funded by international loans and bond issues that have made the tiny Gulf state a celebrity in the City and Wall Street, Qatar's gas industry is starting to return a profit. LNG output in 2000 was 10.4 million tonnes, having started from zero in 1996. Not only are RasGas and QatarGas, the country's two LNG projects, getting into their stride, but oil prices remain strong, and gas prices are strongly correlated with oil prices.
The Ras Laffin Natural Gas Company, or RasGas, is now securing financing for trains III and IV, which should see $1billion- $2billion raised on the international markets. The magnitude of the financing will depend on exactly what expansion option is decided on, but both trains should have a capacity of approximately 4-5 million tonnes/year (m t/y). This will bring the total capacity of Ras-Gas to around 16 m t/y. Most of the output of the expansion is earmarked for India, whose growingg energy deficit Qatar is well-placed to serve. In particular, the Indian government-led Petronet consortium has signed a deal for 7.5 m t/y for terminals in Gujurat and Kerala. A second Indian deal is in the offing, with Bharat Energy Consortium having signed a preliminary agreement with RasGas in late 2000. This would provide for 1.8 m t/y to be delivered to the Tamil Nadhu Industrial Development Corporation (TIDCO) terminal in south-east India.
On 24 June RasGas announced a further Gas Sales Commitment, for 3.5m t/y to Edison of Italy. The deal is for 25 years, with deliveries scheduled to start in 2005.
After Qatargas signed a roughly 1m t/y deal with EDI, also of Italy, the Edison deal marks only the second-ever Gulf LNG sale to the west of Suez. This is an important development, as European gas demand is growing rapidly. While the greater part of this can be met from Siberian gas, there is unease in some European capitals at allowing Russia a stranglehold on Europe's energy supply. Qatari gas, as well as gas from other middle Eastern suppliers, will help to diversify sources, and reduce the Russian risk. …