Qatar Gas III and IV LNG Project, Qatar

Qatar Gas III and IV LNG projects to supply the growing US market were already on the drawing board even as the Qatar Gas II LNG project was barely underway. The projects will benefit from the Qatar Gas II studies and will have shared facilities and contracts, including joint Engineering Procurement Construction (EPC) contracting, joint drilling and joint procurement of the shipping fleet.

The project contracts were awarded in December 2005 with a target commissioning date by mid 2009. The onshore EPC contracts were awarded to the Chiyoda Corporation and Technip France Joint Venture (CTJV).

The EPC contract with CTJV covers the engineering, procurement, and construction of onshore facilities for two large-scale LNG trains, each with a capacity of 7.8 million tonnes per annum.

The total price of the contract is valued at around $4bn.

Qatar Gas III is an integrated project, jointly owned by Qatar Petroleum (QP) (68.5%), ConocoPhillips (30%) and Mitsui (1.5%). Qatar Gas IV will be implemented through a joint venture between QP (70%) and Shell (30%). The two projects will be located at Ras Laffan Industrial City.

QATAR GAS III AND IV FINANCE

Qatar Gas III has successfully completed financing. The project financing consists of:

• A $1.488bn bank facility from a syndicate of 26 international, regional and Qatari banks
• A $1bn loan from the Japan Bank for International Cooperation (JBIC)
• A $340m facility guaranteed by the Export-Import Bank of the United States
• A $1.212bn co-financing facility provided by a wholly owned subsidiary of ConocoPhillips

All the facilities have a maturity of 16 years. Commercial agreements and financing for Qatar Gas IV are advancing rapidly. Qatar Gas IV, which has a similar debt requirement to Qatar Gas III, will be the next large Qatari project to engage the international financial community and is already attracting a significant amount of interest from potential lenders.

Calyon acted as the documentation bank and is also the bank facility agent and inter-creditor agent. BNP Paribas is the USEXIM facility agent, SMBC is acting as JBIC facility agent and HSBC is acting as account bank and security trustee. Qatar Gas III was advised by Société Générale, and White and Case.

PRODUCTION TARGETS AND CONSUMERS

Each project comprises upstream gas production facilities to produce approximately 1.4 billion ft³ per day of natural gas and also 70,000bbl/d of Liquefied Petroleum Gas (LPG) and condensate from the North Field over the 25-year life of the project. The first LNG cargos from Qatar Gas III are expected to be delivered in 2009. First LNG cargos from Qatar Gas IV are scheduled for around the end of 2010.

Access to growing US natural gas markets is the key element in both the LNG marketing strategies. The sponsors of the two projects have put strong emphasis on the development of infrastructure and capacity to bring LNG to these markets and both projects are now positioned to provide them with a substantial, reliable and stable supply of product.

Qatar Gas IV gas is intended for natural gas markets in the eastern US For this purpose Shell has entered into agreements with Southern LNG Inc and Elba Express Pipeline Company LLC to acquire additional capacity at the Elba Island LNG import terminal as well as in a new natural gas pipeline.

Both projects will be filed with the US Federal Energy Regulatory Commission (FERC) for approval in the third quarter of 2006. In December, Qatar Gas III executed a sales and purchase agreement with ConocoPhillips for the full train output which will be marketed almost exclusively in the US where ConocoPhillips is one of the leading marketers of natural gas. Since Conoco's acquisition of Burlington Resources, it has become the largest natural gas producer in North America.