Qatar's Oil and Gas Industry: An Overview
Like the other Gulf states, Qatar's economy depends on the energy sector. According to Qatar National Bank (QNB) data, oil and gas revenue accounted for 49% of total government revenue in 2014, a share that had already declined over the previous four years.
On 2013 figures Qatar was the world's fourth largest dry gas producer, after the United States, Russia and Iran, and it has been the world's largest LNG exporter since 2006, holding 31% of the global market in 2014. Qatar is also a leader in gas-to-liquids (GTL) products and operates the world's largest GTL facility. Since 2000, rapid growth in gas production has also increased output of by-products such as associated gas condensate, natural gas plant liquids and other petroleum liquids.
In 2014 Qatar produced 2.1 million b/d of oil and other liquids, of which 1.5 million b/d was crude and the rest non-crude liquids. Although Qatar is an OPEC member, its crude output ranks second lowest among the twelve members. Its abundant gas output is more than enough to cover domestic energy demand, and with a small population consumption is limited, so most liquid fuels are exported.
1. Institutions and organisations
Qatar Petroleum (QP) controls every aspect of the Qatari upstream and downstream oil and gas industry, from exploration, production, transport and storage to the marketing of gas, natural gas liquids, LNG, GTL products, refined products, petrochemicals and fertilisers.
Qatargas operates four large LNG ventures, Qatargas I to IV, in which QP, Total, ExxonMobil, Mitsui, Marubeni, ConocoPhillips and Shell all hold shares.
RasGas operates three large LNG ventures, RasGas I to III, and leads the Qatari LNG sector. QP holds 70% and ExxonMobil 30%. Although QP holds at least 65% of Qatargas and RasGas, each company operates independently.
Nakilat, the Qatar Gas Transport Company, handles the shipping of Qatari LNG.
International oil companies include ExxonMobil, Shell and Total, which bring both capital and advanced technology and expertise from large integrated projects.
2. Oil resources
Qatar's crude output is the second lowest in OPEC, but growth in non-crude liquids, most of them by-products of gas production, has lifted total liquids output year after year. According to Oil & Gas Journal, as of January 2015 Qatar's proven crude reserves were 25.2 billion barrels, ninth in OPEC, thirteenth in the world and sixth in the Middle East. Its crude and associated condensate output ranks seventeenth globally, and most of it is exported.
Qatar produced 2.1 million b/d of oil and other liquids in 2014, including crude, condensate, natural gas plant liquids and other liquids, slightly less than in 2013 but 64% more than in 2005.
In 2012 Qatar's non-crude liquids output exceeded its crude output for the first time. Recent growth has come mainly from strong gas production, because producing gas also yields many heavier hydrocarbons. As gas output rises year on year, non-crude liquids supply is expected to stay high. At the same time, natural decline at mature fields has reduced crude output, which accounted for only 35% of Qatari oil and other liquids in 2014, down from 44% in 2010.
Exploration and development. Three fields, Al Shaheen, Dukhan and Idd al-Shargi, account for more than 85% of Qatari crude output.
Qatar has been less aggressive than some producers, but exploration has never stopped. The most recent major discovery was the Al Rayyan field in 1994, so in the near term output can only be supported by enhanced oil recovery. Operators already apply EOR at several fields, including Al Shaheen, Dukhan, Bu Hanine and Maydan Marjam.
Investment by international oil companies helps to raise, or at least maintain, crude production, but the earlier government target of 1.2 million b/d of crude capacity is clearly no longer feasible, and the production levels in QP's development plans have barely changed. In the current price environment, further investment in crude projects lacks economic justification.
Fortunately, growth in gas production has significantly increased non-crude liquids output. According to QNB, non-crude liquids, meaning condensate and LNG, accounted for 65% of Qatar's oil and other liquids in 2014, and that share is expected to rise further as crude output declines and condensate output keeps growing. QNB reported in August 2013 that Qatar holds more than 22 billion barrels of condensate reserves, although their commercial value is not yet clear.
Imports and exports. In 2014 Qatar ranked third lowest among OPEC members for crude exports, above only Ecuador and Libya. According to the OPEC Annual Statistical Bulletin 2015, Qatar exported 595,000 b/d of crude and 522,000 b/d of refined products in 2014. OPEC estimates that all Qatari refined products were exported to Asia in 2014, with more than 60% of refining output going to Japan.
Qatar's production and refining capacity exceed domestic demand, so the country imports no crude and only occasionally imports some oil products. Because gas covers most of its energy needs, Qatar exports most of its crude and oil products. There are three main export terminals, Umm Said, Halul Island and Ras Laffan. QP's offshore pipeline network delivers crude from offshore fields to Halul Island for processing and export, while most onshore crude goes to the Mesaieed (Umm Said) terminal for refining and export.
Qatar has three main crude grades: Qatar Land, Qatar Marine and Al Shaheen. Qatar Land and the Qatar Marine blend are light crudes, while Al Shaheen is slightly heavier. Qatar Marine and Al Shaheen have higher sulphur content, while Qatar Land is slightly sweeter.
Refining and consumption. Qatari oil consumption rose from 82,800 b/d in 2004 to 230,000 b/d in 2013. Refining capacity nevertheless exceeds domestic demand for oil products, so most refined products are exported.
According to Oil & Gas Journal, Qatar has two refineries with a combined crude distillation capacity of 338,700 b/d. Both are close to the main oil export terminals, one at Umm Said and one at Ras Laffan. The Ras Laffan refinery has been slated for expansion with a 146,000 b/d condensate splitter.
3. Natural gas resources
Natural gas is the centre of Qatar's energy industry. Although output has plateaued in recent years, Qatar remains the world's largest LNG exporter. According to Oil & Gas Journal, as of January 2015 Qatari proven gas reserves were 872 trillion cubic feet, the third largest in the world. Almost all of them lie in the North Field, which together with Iran's South Pars forms the world's largest gas deposit.
New projects in the North Field are currently on hold. The moratorium was originally due to end in 2008 but has been extended several times and is now expected to last until 2016 at the earliest, so gas production has plateaued and will soon begin to decline. The only project with near-term potential to add supply is Barzan, the last project approved before the moratorium, with capacity of 1.4 Bcf/d; it was due on stream in 2016 and to reach full capacity in 2017, but is expected only to offset future decline.
Qatar spent years developing its gas resources, particularly in the North Field. By 2013 its dry gas output ranked second in the Middle East and fourth in the world. Because domestic energy demand is relatively low, Qatar exports almost all of its gas and has been the world's leading LNG exporter since 2006.
Exploration and development. Qatari dry gas output reached 5.6 trillion cubic feet in 2013, up from 1.1 trillion cubic feet in 2003. Most output comes from the North Field, with smaller fields contributing as well.
The USD 10.4 billion Barzan gas project will lift North Field output in the near term. It includes both onshore and offshore development, with offshore platforms, pipelines and gas processing units; it started in 2011, was due to enter operation in 2016 and is expected to produce 1.4 Bcf/d.
No one expects another North Field to be found as it was in 1971, but commercially viable gas fields may still be discovered. In May 2013 QP announced a gas discovery in Block 4 (North) offshore Qatar, with recoverable reserves possibly exceeding 2.5 trillion cubic feet.
Faced with lower gas and oil prices, QP began a restructuring in 2015 to adapt to the new environment facing oil and gas production. The changes have visibly affected the Qatari energy industry: the German company Wintershall was excluded, and Maersk's position as QP's sole partner at Al Shaheen may also come to an end.
Gas-to-liquids. Qatar is the global leader in GTL technology and operates two production facilities. GTL uses refining processes to convert dry gas into liquid fuels such as low-sulphur diesel and naphtha. Although other countries are running pilot projects, Qatar is one of only three countries with GTL production facilities, the others being South Africa and Malaysia.
The Oryx GTL plant, owned 51% by QP and 49% by Sasol-Chevron GTL, started up in 2007 but, after early problems, only reached full production in early 2009. At full load it processes about 330 million cubic feet per day of gas feedstock from the Al Khaleej field to produce 30,000 b/d of GTL products; an expansion is possible if North Field development resumes.
The Pearl GTL project, owned 51% by QP and 49% by Shell, converts 1.6 Bcf/d of gas into 140,000 b/d of GTL products plus 120,000 b/d of natural gas liquids and LPG. Its first phase started in early 2011 and shipped the first cargo in June 2011; after the second phase started up, Pearl GTL reached full capacity in October 2012. It is not only the world's largest GTL plant but also the first integrated GTL operation, combining upstream gas production with onshore conversion.
Consumption. As the economy grows, Qatar's overall energy demand is rising and gas consumption with it. Consumption grew rapidly over the past decade, almost tripling between 2003 and 2013, in line with gas production, which more than quadrupled over the same period. In 2013 Qatari gas consumption reached 1.2 Bcf/d, 46% more than in 2010, with the power and water desalination sectors accounting for most of it.
Exports. Qatar has been the world's largest LNG exporter since 2006. In 2014 it was the world's second largest gas exporter, shipping nearly 4.3 trillion cubic feet, of which 83% was LNG. Most of the gas goes to Asian markets as LNG, and smaller volumes are delivered to the UAE and Oman through the Dolphin pipeline.
Qatari LNG exports are handled by Qatargas and RasGas, which added five trains between 2009 and 2010 and now operate fourteen. The newest, Train 14 (Qatargas IV Train 7), entered service in January 2011 with a capacity of 380 billion cubic feet a year, equivalent to 7.8 million tonnes.
After its recent expansion the Dolphin pipeline has a capacity of about 3.2 Bcf/d; according to Dolphin Energy Limited it currently carries 2.0 Bcf/d. In 2014 about 1.8 Bcf/d of LNG went to the UAE and the remaining 0.19 Bcf/d to Oman.
Contract models. QP owns and operates the onshore Dukhan field and the offshore Maydan Mahzam and Bul Hanine fields; the other offshore fields are operated by international oil companies under production sharing agreements. In recent years, to raise output and reserves and reduce gas-related capital expenditure, QP has offered more attractive terms under those agreements.
Foreign investors in Qatar generally enjoy the following incentives:
1) Exemption from corporate income tax and from personal income tax on expatriate employees for a number of years.
2) Preferential credit, including low-interest or interest-free loans.
3) Complete infrastructure, low-cost power and water, and favourable land rents.
4) Exemption from import duties on raw materials and equipment.
5) Free convertibility of currency, with no restriction on currency exchange or profit repatriation.
6) Priority for local products in government procurement.
7) Duty-free access for Qatari products to other Gulf Cooperation Council markets, provided the product has at least 40% domestic value added and more than 51% of the equity of the processing company is held by Qatari nationals.
8) Duty-free import of machinery and equipment for construction contracts, which need not be re-exported when the project ends, although duty becomes payable if such equipment is later sold. Construction contracts generally also require priority purchase of locally produced building materials.
Republished from the Zhihu account “Dr. Oil Talk”; copyright remains with the original author.
