x Abu Dhabi, UAEWednesday 26 July 2017

Qatar in talks over $6bn plant

Total and Shell seek entry to Qatar's petrochemicals sector as ExxonMobil prepares to leave.

European petroleum groups such as Total and Royal Dutch Shell may be seeking entry to Qatar's emerging petrochemicals sector just as the US company ExxonMobil prepares to leave.

The two European petroleum groups are among several companies reportedly in talks with the Gulf state's energy ministry over a US$6 billion (Dh22.03bn) petrochemicals project that ExxonMobil has probably decided to abandon.

"We are discussing it with several [parties]," Abdullah al Attiyah, the energy minister and deputy prime minister of Qatar, said in Doha on Wednesday. "We will take the best offer."

Analysts consider the proposed development of facilities at the emirate's Ras Laffan gas hub to produce feedstocks for plastics from natural gas liquids as pivotal to Qatar's industrial development strategy.

The emirate is nearing the end of a huge programme to develop its side of the world's largest gasfield, which straddles the maritime border between Qatar and Iran. The deposit is known as the North Field in Qatar and South Pars in Iran.

The state-owned Qatar Petroleum (QP), through joint ventures with international partners, has also created a large cluster of sophisticated gas-processing plants with the combined capacity to produce and export more than 1.5 million barrels per day of liquid fuels. Products include the super-chilled liquefied natural gas (LNG) and synthetic fuels similar to diesel and jet fuel.

On the back of those developments, Qatar has become the world's leading LNG exporter and could soon become the biggest exporter of ultra-clean transport fuels made from gas. On December 13, Qatar will hold national celebrations to mark achieving its LNG capacity target of 77 million tonnes per year.

At the same time, the government is planning the next phase of economic development, initially focusing on petrochemicals. The planned chemicals complex was viewed as a foundation project that would catalyse further investment in bulk chemicals plants and factories making plastic products.

In January, QP and ExxonMobil signed a deal to build the world's largest "steam cracker" for converting up to 1.6 million tonnes per year of natural gas liquids such as ethane, propane and butane into products that are sold on the global petrochemicals feedstock market. Additional plants were planned to produce up to 700,000 tonnes per year of ethylene glycol, used in antifreeze, and 1.3 million tonnes per year of polythene plastic.

"Successful development of the venture would allow Qatar to add significant value to some of its exports as well as having a large output stream of intermediary petrochemical products on which it could draw for any additional petrochemical or chemical projects," Samuel Ciszuk, the senior Middle East oil analyst at IHS Global Insight, said in a research note this week. For international oil producers, the project offers access to some of the world's cheapest natural gas feedstock at subsidised prices as low as 75 US cents per million British thermal units, which is about a fifth of the recent price of gas traded on the New York Mercantile Exchange.

Mr Ciszuk said ExxonMobil and QP may have disagreed on a long-term marketing strategy, with Qatar intent on targeting Asia-Pacific buyers while ExxonMobil saw a strategic fit with its European project portfolio.

"Being a cautious player, this seems to be enough for the company to change tack and abandon a project viewed by some as a cornerstone for future Qatar petrochemical industry growth," he said.

Total recently said it was in the early stages of talks with QP about taking over ExxonMobil's stake.

The French company already holds interests in four LNG plants in Qatar.

Shell and ExxonMobil are among QP's other partners in LNG joint ventures, while Shell has teamed up with QP on a $19bn gas-to-liquids project.

Neither QP nor ExxonMobil have commented on the future of the chemicals project. If ExxonMobil has decided to quit the venture, it would be the second flagship development in Qatar that it has abandoned.

In 2007, QP scrapped a gas-to-liquids project that would have been the world's largest, after ExxonMobil walked away.

A change in the ownership structure of the chemicals joint venture could hold up Qatar's industrial development programme just as the global economy was starting to recover, Mr Ciszuk said.

tcarlisle@thenational.ae