Qatar Gathers CEOs to Mark LNG Capacity Milestone, Expects Further Gains

Qatar gathered chief executives from the biggest energy companies to celebrate reaching an annual production capacity of 77 million metric tons of liquefied natural gas, underscoring its rank as the largest LNG exporter.

The Persian Gulf state may further increase its capacity by as much as 10 million tons a year if it can improve efficiency at its production units, Energy Minister Abdullah al-Attiyah told reporters. Exxon Mobil Corp.’s Rex Tillerson, Royal Dutch Shell Plc’s Peter Voser and ConocoPhillips’s Jim Mulva were among the executives attending the ceremony at the Qatari industrial city of Ras Laffan yesterday.

“If in the future we want to expand, we will expand as a revamp” by making existing facilities more efficient, al- Attiyah said yesterday. Building new LNG units would be a costlier option, he said.

While Qatar is recognized as the biggest LNG exporter and holds the world’s third-largest natural gas reserves after Russia and Iran, its gas fields also supply rising volumes of natural gas liquids such as propane, butane and condensate. These products, collectively known as NGLs, have commercial uses similar to crude or refined oil products, boosting Qatar’s overall energy sales.

Qatar will be able next year to pump 1.19 million barrels of NGLs a day, according to a forecast by the Paris-based International Energy Agency. The country’s NGL output will for the first time exceed its production capacity for crude, which the IEA estimates will be 1.02 million barrels a day in 2011. Qatar’s combined capacity for producing NGLs and crude will overtake that of its OPEC partners Algeria and Libya, according to the agency’s forecast.

Higher Ranking

“It very clearly pushes Qatar up the ranks of oil producers and also — because of the semi-refined nature of some of these — the rankings of the refined-product producers as well,” Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York, said in a telephone interview in November.

The tiny nation of 1.6 million people is the second- smallest producer of crude in the Organization of Petroleum Exporting Countries. Ecuador is the smallest. OPEC quotas only cover crude, not NGLs.

Qatar’s transformation into a major producer of natural gas liquids has implications for OPEC, supplier of 40 percent of global crude, and the group’s ability to influence energy markets. Qatar was the only one of OPEC’s 12 members to see its combined output of crude and NGLs rise last year, after the group cut its production target in December 2008. By next year, Qatar will be the only member capable of producing more natural gas liquids than oil, the IEA says.

Flagship Plant

Shell is building a $19 billion gas-to-liquids plant that will add more NGL capacity. The Anglo-Dutch company expects its Pearl plant to become fully operational in early 2012 and to begin converting gas into kerosene, diesel, lubricants and naphtha in the second quarter of that year.

Qatar may expand gas-to-liquids output still further once Pearl is completed, al-Attiyah said yesterday.

Other OPEC members are producing more natural gas liquids of their own. By 2015, the group’s NGL output may equal as much as 20 percent of its combined production of oil and natural gas liquids, up from 14 percent in 2009, IEA data show.

“Although OPEC NGLs are a growing competitor to OPEC crude, it’s difficult to see how they could be brought within the quota system,” said Robin Mills, a Dubai-based oil analyst and author of ‘The Myth of the Oil Crisis,’ in an interview in August.

Early Celebration

Qatar exported its first cargo of liquefied natural gas in 1996. The country will have the capacity to produce an annual 77 million tons of LNG, or about 3.75 trillion cubic feet of pipeline gas, once Qatar Liquefied Gas Co. brings its seventh and final liquefaction plant into operation early in 2011. Qatari officials organized yesterday’s event in anticipation of this achievement.

Qatar Liquefied Gas, known as QatarGas, is a venture between state-run Qatar Petroleum, Exxon Mobil, ConocoPhillips, Total SA and Shell. Another company, Ras Laffan Liquefied Natural Gas Co., started its seventh and final LNG production unit earlier this year. RasGas, as this company is known, is a venture between Qatar Petroleum and Exxon Mobil.

A moratorium on Qatar’s North Field gas reservoir precludes the development of additional LNG projects. The North Field has the world’s largest gas reservoir, with an estimated 900 trillion cubic feet of the fuel.

The moratorium won’t be lifted before 2014, if at all, Saad al-Kaabi, Qatar Petroleum’s director of oil and gas ventures, said last year. HSBC Holdings Plc said on Dec. 7 that Qatar may need to develop the North Field to generate enough electricity to stage the 2022 World Cup soccer championship.

Malaysia was the second-largest exporter of LNG after Qatar last year, followed by Indonesia and Australia, according to data from BP Plc. The chilled fuel can be transported by specialized ships to markets not accessible by pipeline.