Qatargas II Project to supply gas to the UK

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27 February, 2005

In one of the keenly watched developments in the global energy industry, Qatar Petroleum and Exxonmobil today announced the groundbreaking of the world’s largest liquefied natural gas (LNG) project. The US$12.8 billion project is owned and managed by an incorporated joint venture, Qatar Liquefied Gas Company Limited (II) or Qatargas II.

The foundation stone for the project was laid at Ras Laffan by H.H. Sheikh Tamim Bin Hamad Al-Thani, Heir Apparent of the State of Qatar, in the presence of H.R.H. Prince Andrew, the Duke of York. Also attending the ceremony were Qatar Prime Minister H.H. Sheikh Abdullah Bin Khalifa Al Thani, and Second Deputy Prime Minister and Energy and Industry Minister H. E. Abdullah Bin Hamad Al-Attiyah, in addition to Qatargas CEO Faisal M. Al Suwaidi, Exxon Mobil Corporation President Rex Tillerson and a gathering of international media.

With more than US$7.6 billion in international financing in place, Qatargas II involves the delivery of 15.6 million tonnes annually (MTA) of LNG to the UK for 25 years, with the first deliveries expected in winter 2007/08. Qatargas II, which has established several affiliates to manage the various elements of its integrated project, is a joint venture between the state-run Qatar Petroleum (QP) with 70 per cent and ExxonMobil with up to 30 per cent.

The scale of the project dwarfs any previous global LNG developments. Qatargas II will further commercialise the large gas reserves of the Qatar North Field, which has estimated recoverable natural gas resources in excess of 900 trillion cubic feet (9.3 per cent of the world’s proven resources). Qatargas II will process 30 billion cubic meters of gas per annum and will produce 15.6 MTA of LNG, 6 MTA of condensate and 1.7 MTA of propane and butane.

Addressing a press conference, His Highness Sheikh Tamim pointed out that the Qatargas II project was of enormous significance to Qatar, the United Kingdom, and the international LNG market, while further emphasizing Qatar’s stature as the world leader in the LNG business.

“Given its significance to the world gas market, the Qatargas II project reflects a major milestone in our capacity to meet the growing international demand for natural gas and hydrocarbons,” Sheikh Tamim said. “This milestone venture will help us to harness the abundant natural gas resources available at our North Field and will go a long way in meeting the growing international demand for natural gas..”

The Qatargas II project will involve the construction of two of the largest LNG liquefaction trains in the world (Trains 4 and 5). The two new trains will be installed along side the three trains of Qatar Liquefied Gas Company Limited or Qatargas I and therefore will benefit from the existing infrastructure in the Qatargas I plant.

A dedicated receiving terminal is currently being constructed at Milford Haven, West Wales, United Kingdom. A fleet of 16 state-of-the-art LNG carriers will be constructed to transport the LNG to the UK terminal. These carriers will be 40 to 70 per cent larger than conventional LNG ships, providing additional project economies-of-scale.

The Milford Haven Terminal will be owned and operated by South Hook LNG Terminal Ltd, a UK company owned jointly by Qatar Terminal Company Ltd (70 per cent), and ExxonMobil Qatargas II Terminal Company Ltd. (30 per cent). South Hook LNG Terminal Ltd. will manage the terminal operations. The gas will be sold to ExxonMobil Gas Marketing Europe, which will then sell the gas into the market.

Qatar’s Second Deputy Premier and Minister of Energy & Industry His Excellency Abdullah Bin Hamad Al-Attiyah, who is also the Chairman of Qatargas II, welcomed the development as a crowning moment in Qatar’s well-established natural gas industry. “The establishment of Qatargas II allows us to push the boundaries of the LNG industry and provide the United Kingdom with a significant additional source of natural gas,” he noted. “This project will incorporate leading step-out technologies to capture economies of scale and allow Qatar to compete successfully in more distant markets.”

Top Qatargas II officials pointed out that the record US$7.6 billion in financing for the project was raised from 57 different institutions, including Islamic financial institutions, making it the world’s single largest energy financing ever. In December 2004, Qatargas II entered into agreements to secure US$6.5 billion in debt while South Hook LNG Terminal Ltd. secured US$1.1 billion.

Qatargas CEO and Vice-Chairman Faisal M. Al Suwaidi pointed out that the establishment of Qatargas II was an important part of an aggressive effort to increase the company’s continuing operations capacity. “Through our new ventures – Qatargas II, Qatargas 3, refinery and other facilities – we will be able to increase our annual LNG capacity to over 33 million tonnes and considerably decrease unit costs,” he noted. “Our aim has always been to utilize the most modern technologies to maintain the company’s leading position in the LNG industry.”

"Through our affiliate, ExxonMobil Qatargas (II) Limited, we are profoundly pleased to be able to join with our partner, Qatar Petroleum, in helping develop Qatar's important energy industry. The QatarGas II project is a landmark achievement in which ExxonMobil has been able to bring its technology, execution capability, and financial strength to bear. The realization of this major step forward in LNG efficiency will be especially important in providing a source of new energy for the United Kingdom," said Rex Tillerson, President of Exxon Mobil Corporation.

While significantly enhancing the deep-rooted relationship between Qatar and the United Kingdom, the Qatargas II project is a landmark project that is international in scope. The offshore facilities will be built by National Petroleum Construction Company, a UAE-based company, the onshore liquefaction plant by Chiyoda / Technip, a joint venture of French and Japanese companies, the receiving terminal by the US-based Chicago Bridge & Iron company, and ships by the South Korean shipyards of DSME, Samsung, and Hyundai.

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