FINANCIAL TIMES: Shell signs $7bn gas supply deal with Qatar: “The project, called Qatargas-4, represents a significant boost to Shell as it tries to convince sceptical investors that it can secure new energy reserves to replace the oil and gas it has pumped. Shell was forced to slash its proved reserves five times last year, prompting a wide-ranging shake-up of the company.” (ShellNews.net) 28 Feb 05
By Thomas Catan,
Feb 28 2005
Royal Dutch/Shell, the Anglo-Dutch oil giant, on Sunday signed a deal with state-owned Qatargas to build a new liquefied natural gas project worth up to $7bn that will send 7.5m tonnes a year to the fast-growing markets of Europe and North America.
The project, called Qatargas-4, represents a significant boost to Shell as it tries to convince sceptical investors that it can secure new energy reserves to replace the oil and gas it has pumped. Shell was forced to slash its proved reserves five times last year, prompting a wide-ranging shake-up of the company.
Linda Cook, head of gas and power at Shell, said the company should be able to start booking the Qatar gas deposits by 2006 or 2007. She expected 2bn barrels of oil equivalent to be produced over the life of the project. Shell will own 30 per cent of the new project; Qatargas will own the remainder.
The deal will also help Qatar in its quest to become the world's largest supplier of LNG, perhaps as early as next year. The country has sought to bring in a new international player to open new international markets for its gas and reduce its dependence on ExxonMobil - its long-standing partner.
On Sunday, the first stone was laid in the world's largest LNG project, Qatargas-2, of which ExxonMobil is 30 per cent owner. When it is complete in winter 2007, the $12.8bn project will send 15.6m tonnes of LNG a year to the UK and could eventually supply one-fifth of the nation's gas. The French oil company Total was also on Sunday finalising a deal to buy into the Qatargas-2 project and is expected to be given the right to market up to 5m tonnes a year. The final agreement is set to be announced on Monday.
Energy multinationals have been converging on Doha to win stakes in a string of huge projects to exploit the country's gas resources. LNG is one of the fastest-growing segments of the global energy business, as markets like the US and Britain start to run-out of domestic natural gas supplies and are forced to look abroad. Super-cooling the gas into a liquid allows it to be shipped on tankers like oil, eliminating the need to build expensive pipelines across unstable parts of the world.
Qatar is particularly attractive for the oil majors because of its political stability and vast gas reserves estimated to be the world's third-largest. Qatargas-4, which officials said would be the last LNG plant it would commission for the foreseeable future, attracted intense interest from oil majors. The chief executives of BP and Shell have both flown in to Doha in recent weeks, meeting with the ruling family.
Total, ConocoPhillips and Norway's Statoil are also understood to have been interested. Faisal Al Sawaidi, chief executive of Qatargas, told the FT that one-third of the LNG from the project would go to the east coast of the US, another third to the Iberian peninsula and the remainder most likely to Mexico. A portion could then be piped into the US. Startup is expected between 2010 and 2012.
Shell, the world's largest private supplier of LNG, has made clear how important the sector is to its long-term plans. It plans to double sales by the end of the decade. It already has major LNG projects in Nigeria and Australia and is seeking fresh supplies in places like Libya and Iran. Shell discovered Qatar's gas deposit in 1971.
Additional reporting by James Boxell in London