Qatar Gas III and IV LNG Project

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). In June 2006, the offshore EPC and installation contract was awarded to McDermott International. As of 2010, the construction of both the projects is underway.

The EPC contract with CTJV covered the engineering, procurement, and construction of onshore facilities for two large-scale LNG trains, each with a capacity of 7.8m tons 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 is being implemented through a joint venture between QP (70%) and Shell (30%). The Qatar IV joint venture named as Qatar Liquefied Gas Company (4) was announced in 2007. During the announcement, both partners entered into a sale and purchase agreement that agreed to sell all the LNG produced by Qatar IV to an affiliate of Shell.

The two projects are being constructed 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 closed in July 2007. Qatar Gas IV attracted a significant amount of interest from potential lenders.Qatar Gas 4 secured more than $4bn in loans and letters of credit, This is the second largest funding raised for projects developed by Qatar Petroleum after Qatargas II. The funding is being provided by 30 banks, including, regional, Qatari and international banks. A Shell affiliate is also a co-financer to the project.

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

For Qatar Gas IV, Citigroup is acting as the Security Trustee and Account Bank. Barclays Capital and RBS are the international bookrunners, while local bookrunners include APICORP and Qatar National Bank. The project is being advised by RBS and White & 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 2010. 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.

Construction progress

Both the projects comprise offshore facilities that are located 65km north of Ras Laffan in Qatar’s North Field. The facilities include three 2,200t platforms, 33 gas wells, and two 65km pipeline, which are shared by Qatar Gas III and Qatar Gas IV. Installation of the third of the three topsides and pipeline risers was done in October 2009, marking a major milestone towards the completion of Qatar Gas 3 and Qatar Gas 4. The first and second wellhead platform topsides were installed in June and August 2009 respectively.

The offshore installation of wellhead platform jackets for Qatar Gas 4 and Qatar Gas 3 was undertaken in September and November 2006.

Transport

Both the projects will deliver LNG through ships or carriers. Qatar Gas III will have nine ships while Qatar Gas IV will have 10. By 2009, total 14 ships for both projects were delivered. Each ship can carry up to 210,000m³ of cargo.