Concern rises over health of Qatari gas reserves

Oct 16, 2007 02:00 AM

by Dino Mahtani

Concerns are growing in industry circles that Qatar, the world's largest exporter of liquefied natural gas (LNG), may not be able to increase its levels of daily gas exports beyond 2011.
The tiny Gulf kingdom expects to more than double its exports to 77 mm tpy by 2011 on the back of multi-billion dollar projects awaiting completion. Such increases are vital to meet the surging global demand for LNG, which will increase in importance in the overall gas market in the coming years.

But the government placed a moratorium on further expansion of LNG and other gas products in 2005 when it became clear that the North Field, Qatar's giant offshore gas field, was not as geologically sound as initially assumed. A decision on whether to lift the moratorium will only be taken in 2010 once a geological assessment of the North Field is completed, says Ibrahim Ibrahim, an economic adviser to Qatar's emir.
However, industry officials are expressing reservations now about whether the North Field could sustain additional LNG phases, or "trains", beyond those already commissioned.

"If I was to start a new train now I would think again," says Faisul Al-Suwaidi, chairman and CEO of QatarGas, a joint venture between Qatar Petroleum and multinational partners, and one of the two main consortia developing LNG projects. He says that any new projects beyond those al-ready commissioned would necessitate technologically advanced and expensive compression methods to squeeze out additional gas from the North Field.
Industry analysts point out that Qatar's current plans mean that the North Field's 900 tcf of gas reserves will be exhausted in 97 years, slightly lower than the 100-year plan set out by the country's energy minister.

If the moratorium is lifted and new production commissioned, Qatar would have to reduce its long-term reserve life estimate of the North Field even further. The compression methods needed could also render further development uneconomic, although Mr Al-Suwaidi says the moratorium is "convenient" because it gives Qatar more time to develop the technologies it would need.
The International Energy Agency estimates that by 2010 Qatar could account for as much as 20 % of the global supply of LNG, which is gaining in importance to world markets because it can be transported anywhere in tankers. The IEA estimates that LNG will account for up to 16 % of global gas demand by 2015.

While further LNG projects have been contemplated in Russia, Iran, West Africa and Australia, various political, security, environmental and capital cost impediments present a significant challenge for such projects. As such it has fallen to Qatar, which holds the world's third largest gas reserves after Russia and Iran, to buoy supplies.
"There is a powerful message for global LNG. If the growth does not come from Qatar beyond 2011 where else is it going to come from?" asks Robert Kessler, an analyst at Simmons and Co, the oil and gas consultancy. There are also signs that strong domestic economic growth in Qatar is causing a conflict of gas allocations between domestic and export-orientated projects.

Qatar is pursuing an aggressive campaign to build up gas-fired power generation capacity and therefore needs to divert additional gas to supply these projects. Pat Davies, chief executive of the South African energy company Sasol, says this has contributed to gas supply issues for Sasol's gas-to-liquids project with Qatar Petroleum, which uses a different technology to LNG.
"The truth is that gas supply has become tighter in Qatar," he says. The tight supply conditions demonstrate there is relatively little room for manoeuvre if the assessment of the North Field confirms suspicions that the reservoir is not as prolific as once assumed.

Mr Ibrahim says that only 50 % of the appraisal wells have been sunk but insists that the North Field's "reservoir availability is not in question". But there are sceptics even within Qatar's ruling elite, who believe that the North Field has been over-exploited.
"The North Field is overproducing because the multinationals want to cash it in today," says one senior official.

Source: Financial Times
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