THE NEW YORK TIMES: Investment in Qatari Gas Signals Approval: “Tiny Qatar… sits on a bubble containing 10 percent of the world's known gas reserves…”: “The $6 billion venture with Shell will bring 8.6 million tons a year to U.S. and European markets beginning as early as 2010.”(ShellNews.net) Posted 1 March 05
By THE ASSOCIATED PRESS
DUBAI, United Arab Emirates (AP) -- Even in the cash-heavy energy business, $19 billion is a lot of money.
Sunday's colossal investment in Qatar's liquefied natural gas projects signals a broad endorsement of the fuel and the ultra-cold storage technology used to deliver it in ships, rather than through traditional pipelines.
Tiny Qatar, which sits on a bubble containing 10 percent of the world's known gas reserves, has taken the lead in tapping huge potential markets in Europe and North America. But other gas producing countries are clamoring to join in.
``This is an exploding market,'' said Jonathan Stern, director of Gas Research at Oxford Institute for Energy Studies in England. ``We've really had a breakthrough in technology, and therefore price, in the last five years.''
Improvements in liquified natural gas, or LNG, shipping and storage technology have brought together countries like Qatar, with gas reserves that they never dreamed of being able to sell, with customers like Britain, that lie beyond pipeline reach, Stern said.
The new state of affairs was illustrated on Sunday, when Qatar Petroleum signed LNG joint ventures with Exxon Mobil Corp. and rival Royal Dutch/Shell Group.
The Exxon Mobil deal, valued at $12.8 billion, will send 17.2 million tons of supercooled gas annually to Britain over 25 years starting in 2007.
The $6 billion venture with Shell will bring 8.6 million tons a year to U.S. and European markets beginning as early as 2010.
Qatar Petroleum, which holds a 70 percent stake in both deals, called the Exxon Mobil venture -- dubbed Qatargas II -- the world's largest-ever LNG development.
In midday trading Monday, Exxon Mobil shares fell $1.02, or 1.6 percent, to $62.24 on the New York Stock Exchange -- near its 52-week high of $63.69. Shell shares fell 59 cents, or 1 percent, to $56 on the NYSE -- also not from its 52-week high of $56.69.
Until recently, LNG shipments were chiefly a Pacific Ocean business, with ships tanking up at terminals in Australia, Malaysia, Brunei and Indonesia -- the world's largest exporter -- and delivering liquid gas to Japan, South Korea and Taiwan, Stern said.
The deals launched Sunday reflect the surging demand in Europe and North America, markets usually served by local supply pipelines that have been unable to keep pace with demand.
By decade's end, Qatar is expected to become the world's top LNG exporter, industry officials say.
Russia, Algeria, Nigeria, Oman and others are also exporting LNG. Iran, with huge gas reserves, is looking to get involved, Stern said.
The business is expensive and complex to set up. It requires multi-decade sales contracts and huge investment in LNG liquefaction ``trains,'' consisting of gas production, liquefaction and export facilities, tankers and receiving-end plants that reconvert LNG to a gas.
Despite the trouble, the money is good.
Top supplier Shell, which says it handles a third of the world's LNG shipments, saw sales jump 9 percent in 2004, earning the European giant $2.2 billion. Shell expects sales to increase by 14 percent in each of the next four years.
``This project will come onstream at a very good time, with global demand for LNG predicted to more than double during this decade,'' London-based Shell spokeswoman Susan Shannon said.
The industry expects LNG shipments to North America to triple -- or perhaps quintuple -- by 2010.
In 2004, exporters sold 1.8 billion cubic feet of LNG in North America. By decade's end that figure will leap to between 6 billion and 10 billion cubic feet, according to industry figures provided by Shell.
Depending on natural gas prices, Qatar Petroleum and its joint venture partners could recoup their investments in as little as five or six years, Stern said.
Qatar is using capacity-boosting technology to leap into the market, he added.
``Everything has gotten bigger and cheaper,'' Stern said. ``The liquefaction plants, tankers and re-gasification plants have been scaled up and unit costs have fallen.''
Gas pipelines longer than 2000 miles aren't economically viable, said Shell's Shannon. And they are often blocked by neighboring countries for political reasons. Thus, much of the world's gas has been unable to reach high-demand markets.
Now, North America and Europe, where gas is traditionally delivered by pipelines, are seen as the next big LNG markets. The United States, Mexico, Spain, Italy, Britain have built or are building LNG importing terminals, officials say.
At the moment, Shell uses a single North American LNG receiving terminal, in Cove Point, Maryland.
But the company and its partners are constructing five more, three in the United States and two in Mexico. All are expected to be complete by the time Qatar's LNG shipments begin, in 2010 at the earliest.
http://www.nytimes.com/aponline/business/AP-Qatar-Natural-Gas.html
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