Energy City Qatar

Energy City Qatar – a US$2.6 billion project located within the prestigious Lusail development in Doha and near the headquarters of Qatar Petroleum (QP), the state-owned company in charge of all energy sector activities in Qatar – will be the first oil and gas industry hub in the Gulf region.

Planned as an integrated business energy centre, it will consolidate a range of industry and marketing services under one roof, and is intended to attract oil and gas production companies, national and international oil companies, as well as support services for the energy sector. Energy City will provide not only office space and research facilities, but also residential and retail services, schools and other amenities. In order to minimise energy consumption, Energy City is designed to use 20-30 per cent less energy than a normal business community, and will feature insulated glass and energy-efficient lighting, among other green concepts. Energy industry executives predict that Energy City will be of great economic

value to Qatar, contributing to the country’s progress and development on the back of a forecasted rise in demand for energy products, despite the global economic slowdown.  

Energy projects on hold

In light of the widespread unfavourable market conditions, however, some key energy projects in Qatar have recently been put on hold. In December 2008, it was reported that a multi-billion dollar joint venture petrochemical plant is to be delayed by one year due to international market turbulence. The project was to be implemented by QP (a 70 per cent partner in the venture), and Honam Petrochemical Corp of South Korea (a 30 per cent partner). QP will supply ethane and naphtha for the petrochemical plant, which will have a combined production capacity of 900,000 tonnes of propylene and polyproylene per year. First announced in 2005, the plant was to have commenced operations in 2009. The project is currently under review, and the plant is now scheduled to come on stream in 2012.

QP has also recently delayed the tendering process of key contracts for its proposed Al Shaheen refinery due to financial issues. Project finance has been a major issue for many companies in the current economic climate, which has resulted in the process being pushed back by approximately six months. The refinery was originally scheduled to come on stream by the first quarter of 2012 and is now slated for commissioning in 2013. The project will include a grass roots refinery that will produce diesel oil, gasoline and jet fuel, as well as other hydrocarbon derivatives.

Exploiting Qatar’s oil and gas reserves

Even with the economic slowdown, projections for Qatar’s energy market still look favourable.

Oil was discovered in Qatar in 1939 and crude oil production began in 1949. Since that time, Qatar has steadily increased its levels of crude oil production, both directly and by entering into production sharing agreements with leading international oil exploration and production companies, including Maersk, Total and Occidental Petroleum. Qatar is estimated to be the 20th largest global oil producer. Although Qatar has historically been dependent on crude oil production, in the early 1990s Qatar developed a multi-directional and fast-track strategy to accelerate the commercialisation of its substantial natural gas reserves as a means to diversify and ultimately modernise Qatar’s economy. In 2008, for the first time, revenues from gas exceeded those from oil. This shift is largely due to the fact that Qatar possesses the world’s third largest gas reserves, including the world’s largest non-associated gas field, the North Field, with total proven reserves of around 900 tcf.

Much of Qatar’s future gas earnings are projected to come from exports of LNG. Qatar has made large-scale investments across the entire value chain of LNG trains, tankers, and storage and receiving facilities, with the result that Qatar has become the leading LNG producing country in the world, according to the US Energy Information Administration, and the world’s largest exporter and trans-shipper of LNG.

As the global demand for LNG is expected to continue to grow, Qatar’s objective is to raise its annual LNG production capacity from approximately 30.8 mtpa in 2008 to approximately 77.4 mtpa in 2011, which would represent an estimated 26.7 per cent of the then-projected global market. Through its flagship Qatargas and RasGas LNG projects, Qatar has developed its LNG business by strategic partnerships with a number of the world’s leading oil and gas companies, including ExxonMobil, Shell, Total and ConocoPhillips. By investing across the entire LNG value chain, Qatar now enjoys meaningful cost advantages in the gas sector due to significant economies of scale and a low all-in cost structure. Four world-scale mega LNG trains are scheduled to start up in 2009 within Qatargas and RasGas, which are expected to double Qatar’s LNG production in the coming years.

Geographically, Qatar also has a good central location for global shipping to all major gas consuming regions of the world and, based on contractual commitments, by 2011. Qatari LNG is expected to be sold globally to customers in 11 principal countries, including in North America (Mexico and the United States), Northwestern Europe (the United Kingdom and Belgium), Western Europe (Italy, France and Spain), South Asia (India) and Northeast Asia (South Korea, Japan and Taiwan). Most of the LNG produced by Qatar’s upstream ventures is sold under long-term takeor- pay agreements that provide certainty of offtake.

Qatar has also focused on developing and exploiting its natural gas resource base prudently beyond the LNG industry, developing and implementing a downstream strategy driven by opportunities to add value to existing oil and gas production as well as the requirements of the domestic economy. Qatar Petroleum (QP) has been developing pipeline gas both for regional export markets and for domestic petrochemicals and industrial consumption. It is the majority shareholder in a number of industrial companies located primarily at Ras Laffan City and Mesaieed Industrial City, which use natural gas as feedstock and/ or fuel to produce various valueadded products in the non-oil and gas sector, such as petrochemicals and fertiliser, steel, iron and metal coating, both for domestic consumption and for export.

Even with the economic slowdown, projections for Qatar’s energy market still look favourable. Qatar has vast gas reserves, and has made largescale investments across the entire LNG value chain, with four mega LNG trains scheduled to start up this year.