Qatar Review

QP ... teaming up with Exxon on the Barzan gas project

QP ... teaming up with Exxon on the Barzan gas project

Launching Barzan JV

QP has completed the financing of its Barzan gas project despite a difficult economic climate

QATAR Petroleum (QP) and ExxonMobil have launched the Barzan Gas Project, at a cost of $10.3 billion, to supply the local Qatari market with natural gas with first-phase production of 700,000 million cubic feet per day (mmcfd) due to come online in the third quarter of 2014.

A second phase will start up in the first quarter of 2015, taking total capacity to 1.4 bcfd, designed to supply the local market with gas in time to meet accelerated local demand. The project was initially due to be operational in 2012.

Qatari Oil Minister Mohammed Al Sada puts the total cost of the project at $10.3 billion, making it one of the most expensive projects in the tiny oil and gas producing state. The number cited by Sada in the official Qatar News Agency (QNA) is higher than the original estimate of $8.6 billion.

QP holds 93 per cent in the project, with the US major holding the remaining stake through its ExxonMobil Barzan subsidiary.

The project, located at Ras Laffan Industrial City, will be operated by the RasGas Company to produce and process gas from Qatar’s North field, the world’s largest non-associated natural gas reservoir, in order to supply sales gas to power stations and industries in Qatar, ethane to the petrochemicals industry in Qatar, and associated liquid hydrocarbons to local and international markets.

Sada was quoted as saying by the QNA that the Barzan project would also produce 23,000 bpd of gas condensate, 1,900 tonnes per day of ethane gas as well as liquefied petroleum gas – 860 tonnes per day of propane and 680 tonnes per day of propane – and 6,000 bpd of other liquid fuels.

Qatar, which is the world’s biggest LNG exporter with current capacity of 77 million tonnes per year, is witnessing rapid economic growth and is expected to register GDP growth of 18 per cent this year, Sada says. This requires an expansion of power generation capacity to meet demand from an expanding industrial sector and new infrastructure, including a new international airport and port as well as plans for the soccer World Cup that Qatar will host in 2022.

Qatar is currently producing 2 bcfd of gas for domestic consumption from the Al Khaleej gas project, another QP-ExxonMobil joint venture.

Meanwhile, QP has completed a $10.4 billion financing of its Barzan gas project even though a difficult economic climate has put a freeze on global syndicated lending. The project will be funded with up to 30 per cent equity and the remainder through a syndicated loan expected to total $7.2 billion, the company says.

The financing includes a commercial bank facility of $3.34 billion, a $850-million Islamic facility and $2.55 billion of export credit agency financing, the statement says. ExxonMobil , QP’s partner in the project, also provided a portion of the senior debt.

“Despite the challenging market conditions, we were able to bring a large number of commercial banks into the deal with big ticket sizes,” QP Finance Director Abdulrahman Al-Shaibi says.

“We had a major participation from all the Islamic banks in Qatar, which allowed us to create the largest ever Islamic tranche in QP’s financing history.”

Qatar, the world’s richest nation per capita, recently defied global gloom by raising $5 billion in a sovereign bond issuance, capitalising on investors’ appetite for safe havens as the European debt crisis destabilises global markets.

The Barzan project will help meet growing domestic energy demand in the world’s top liquefied natural gas exporter. It is Qatar’s most expensive since Royal Dutch Shell launched a $19 billion Pearl gas-to-liquids plant in 2006.

In addition to feeding power plants, it will supply natural gas to fuel water desalination plants and other industrial users in Qatar, while processing propane and butane for export.

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