Global oil majors help lift Qatar’s production capacity

by Jasim H. Ali

In 1995, Qatar's proven oil reserves were put at 3.7 bn barrels. However, BP's Statistical Review of World Energy estimated Qatar's reserves at 13.2 bn barrels in 2001, sufficient to last for some 50 years based on current production level.
The credit for this achievement primarily goes to exploration works carried out by international oil firms in Qatar's offshore oilfields. Over the last ten years, Qatari authorities signed a series of production sharing agreements (PSAs) with American and European oil companies.
These firms undertook to devote the know-how, technology and funds to invest in exploring and developing fields promising reserves of commercial quantity. Serious interest in PSAs dates back to 1991 when the then Elf Aquitaine of France discovered Al Khaleej field with potential reserves of 1 bn barrels. But PSAs became the cornerstone policy of the government since His Highness Sheikh Hamad bin Khalifa Al Thani, Emir of Qatar, assumed power in 1995.

Oil production capacity has increased substantially over the past years. Oil was discovered in Qatar in 1939 in the Dukhan area, southwest of Doha, the capital. Output averaged as low as 290,000 bpd in the mid-1980s. According to International Energy Agency (IEA), Qatar's output amounted to 640,000 bpd in May. But production capacity stands at 850,000 bpd, and is set to exceed 1 mm bpd by year-end.
In 2001, oil production capacity was at oilfields operated by Occidental Petroleum of the US and TotalFinaElf of France, but Qatar Petroleum (QP) has asked operators to delay putting on new stream. The order stemmed from a rare government desire to honour its output restraint commitment to OPEC. For years, Qatar has ignored its OPEC quota -- the current production level is nearly 14 % over assigned allocation.

State-controlled QP operates the onshore Dukhan, which produces some 330,000 bpd, besides offshore fields of Bul Hanine and Maydan Mahzam with installed capacity of 68,000 bpd and 47,000 bpd respectively. International oil companies operate the other five oilfields: Occidental Petroleum of the US operates Idd Al Shargi North Dome plus South Dome with combined capability of 180,000 bpd.
Al Shaheen Maersk Oil of Denmark operates Al Shaheen, which has capacity of 112,000 bpd. TotalFinaElf of France operates Al Khaleej with capacity of 60,000 bpd. Anadarko of the US majority controls Al Rayyan field with 23,000 bpd capacity. The level of interest in further developing the oil industry remains strong. In June, TotalFinaElf had committed to invest some $ 150 mm to explore for oil at new offshore acreage close to Al Khaleej oilfield, for which it already has a concession.

Also, a number of international oil companies had made offers to explore for oil in waters previously disputed with neighbouring Bahrain, but confirmed as part of Qatar in March 2001 following a verdict by the International Court of Justice. Recently, the Minister of Energy, Industry, Electricity and Water, Abdullah bin Hamad Al Attiyah, revealed a desire to invest 13 bn riyals in oil expansion as part of QP's five-year plan.
In 1999, Sheikh Hamad added electricity and water to Al Attiyah's portfolio in recognition of his success in the energy sector. Oil revenue is essential for the Qatari economy. In part, it contributes to the high per capita income of $ 27,000, ranked amongst the highest in the world.

Also, oil income helps to pay for debts undertaken to finance the development of gas and petrochemicals industries -- external debt is estimated at $ 13.2 bn against a GDP of $ 16 bn. For fiscal year 2002-03, the budget envisages total revenue of 18.2 bn riyals, of which 10.2 bn riyals is projected to come from oil proceeds.
Thanks to stronger oil production capacity, Qatar is well placed to benefit from a possible hike in oil prices. By welcoming investments from multinational corporations, the Qatari economy has emerged as the main beneficiary.

Bahrain-based analyst Dr Jasim H. Ali is an expert on GCC socio-economic affairs.