Qatar Gas II Project, Ras Laffan, Qatar

The Qatar Liquefied Gas Company Limited (Qatar Gas), a joint venture company set up by Qatar Petroleum and ExxonMobil Corporation, has expanded its facilities at the Ras Laffan industrial city natural gas liquefaction plant in Qatar.

The Qatar Gas II project is split between Qatar Petroleum (65%), ExxonMobil (18.3%) and Total (16.7%). The project provides a further two gas liquefaction trains each capable of processing in excess of 7.8mtpa of natural gas for export by LNG tanker.

In late 2004 ExxonMobil's determination to be the sole foreign partner in this key venture got a blow. Qatar Petroleum negotiated with the French oil and gas company Total for a stake in train B.

A $3.5bn deal was signed in February 2005, under which Total was to pay $1bn for a 16.7% stake in train B and to buy up to 5.2mt/y of LNG from Qatar Gas II for 25 years. Total is to market its share of the LNG in Europe.

INVESTMENT AND PROGRESS

The project investment has been estimated at $12.8bn and will exploit the large gas reserves of the Qatar north field, which has estimated recoverable natural gas resources in excess of 900 trillion ft³ (9.3% of the world's proven reserves). The contracts for the work were awarded in late 2004 and construction work was started in early 2005.

The Pre-FEED (Front End Engineering and Design) activities for the project were completed in 2002 and FEED started in June 2003. At the production end of the project, where the gas wells are drilled, data and appraisal wells commenced in May 2004.

QATAR GAS PROJECT CONSTRUCTION

The integrated project involves the construction of two of the largest LNG trains in the world (trains four and five). Train four was commissioned in the fourth quarter of 2005 and train five will be commissioned in mid-2007. Each of these trains will equal the combined production of the existing trains one, two and three of Qatar Gas phase one.

The LNG will be exported to a dedicated receiving terminal still being constructed at South Hook Terminal in Milford Haven, West Wales, UK. Gas delivery is scheduled to start by the winter of 2007–2008. The project will process 30 billion cubic metres of gas per annum and will produce 15.8mtpa of LNG, 6mmta of condensates and 1.7mmta of propane / butane.

QATAR GAS II PROJECT CONTRACTORS

The $4bn contract for the engineering and construction of the LNG train portion of the project was awarded to a joint venture company consisting of Technip SA of France, Snamprogetti of Italy and Chiyoda Company of Japan.

The two new trains (LNG four and five) are being installed in the confines of the existing Qatar Gas facility and so will benefit from the existing infrastructure from the Qatar Gas phase one plant. Qatar Gas II will use the latest LNG technology from Air Products of the US which, by taking advantage of better economies of scale, will cut plant unit and shipping costs by 30%.

Three wellhead platforms and two 36in pipelines are also required to produce and transport the 2.8bscfd of gas along with the associated condensate. These facilities are being constructed under a $500m contract awarded to the National Petroleum Company of the UAE. The total fluids and gas will be transported to the Ras Laffan onshore facilities in a wet scheme.

Invensys Singapore were awarded an $8m automation contract for the LNG train five production and utilities units in Qatar, using Foxboro and Triconex systems with options for expansion of the storage and loading facilities.

The project scope includes Foxboro-brand I/A Series process control systems, Triconex TMR safety instrumented systems and fire and gas protection systems, plus associated project engineering services.

LNG RECEIVING FACILITIES

The contract for the construction of the facilities at the receiving terminal in Milford Haven, UK, was awarded in mid-November 2004. The Chicago Bridge and Iron Company (Woodlands, Texas) was awarded a lump sum turnkey contract for an estimated $700m to build a grassroots LNG import terminal.

The facility will be operated in a 70/30 split by South Hook LNG Terminal Company Ltd, a British company owned by Qatar Terminal Company and ExxonMobil Qatar Gas II Terminal Company. The Qatar Petroleum Gas Development Group is also involved in project management.

Invensys has previously successfully implemented the process control systems, safety systems, and many additional systems for Ras Laffan LNG trains one and two, and was awarded the expansion project for LNG train three, train four and associated projects.

SHIPPING CONTRACTS

A fleet of 16 to 18 LNG carriers are being constructed to support shipping of the lean LNG to the dedicated UK terminal. The orders for new LNG tankers were placed in mid-November 2004.

Three South Korean shipyards were commissioned to build eight state-of-the-art tankers that will be 50% larger than conventional LNG ships. Daewoo Shipbuilding and Marine Engineering will produce four 210,000m³ tankers at a cost of around $875m, while Hyundai Heavy Industries and Samsung Heavy Industries took orders estimated at $450m to build two vessels each.

The remaining eight LNG transport ships will be provided under a series of 25-year time charters with two consortiums, ProNav-Commerzbank-Qatar Gas Transport Company and Overseas Shipholding Group-Anglo Eastern-Qatar Gas Transport Company.

These state-of-the-art vessels will range in size from 209,000m³ to 216,000m³ and will be on average 50% larger than conventional LNG ships, thus making transportation more economical.

FINANCIAL ARRANGEMENTS

Qatar Liquefied Gas Company Ltd and South Hook LNG Terminal Company Ltd both signed financing documents securing funds to execute the project in November 2004 ($6.5bn and £600m respectively).

In total, $7.6bn was raised from 57 financial institutions, which is the first ever financing on a full LNG chain-integrated basis.

Financing the agreement involved a bank facility, an Islamic finance facility, export credit funding and an ExxonMobil facility. It is likely that as the project nears completion, the lenders may refinance the loans and investors will see some bond issues coming from the project.

Part of the process involved the formation of a new company (South Hook LNG Terminal Company Ltd) to manage the LNG importation, terminal operations and sales of natural gas to ExxonMobil Gas Marketing Europe (100% ExxonMobil owned) which will resell the gas to UK markets. Qatar Petroleum owns 70% of the new company, with ExxonMobil holding the remaining 30%.

At the end of December 2004 Total entered into the project having negotiated a stake in the capacity of the new liquefaction facility (trains four and five) at Ras Laffan. Total would like to secure 5mtpa of the 15.6mtpa.