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Shell to Build LNG Plant in Qatar for $6 Billion

From Bloomberg News

Royal Dutch/Shell Group, Europe’s second-largest oil company, will build its first liquefied natural gas plant in Qatar for about $6 billion to help meet surging demand for the fuel, Qatargas Managing Director Faisal M. Suwaidi said Sunday.

Under an agreement with state-run Qatar Liquefied Natural Gas Co., or Qatargas, the plant will chill natural gas for export in tankers, producing enough -- 7.8 million tons a year -- to power almost 8 million homes.

Companies are importing gas in tankers from Africa and the Middle East as supply falls from the North Sea and elsewhere. U.S. domestic and imported supplies of the most widely used heating fuel is likely to fall short of demand by 2006.

In 2003, U.S. Energy Secretary Spencer Abraham and Federal Reserve Chairman Alan Greenspan called for an increase in LNG imports to help offset declining North American gas production.

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For Shell, “gaining access to Qatar’s LNG is critical for their long-term business,” said Frank Harris, vice president of global LNG at Wood Mackenzie Ltd. in Edinburgh, Scotland. Shell executives in Doha, Qatar’s capital, declined to comment on the project before the signing of the contract.

The Anglo-Dutch company beat ConocoPhillips and three others for the contract in Qatar, where Exxon Mobil Corp. leads foreign investors in tapping the nation’s gas reserves, the world’s third-largest.

“Exxon still appears to be the favored son in Qatar, but they are giving others a seat at the table,” Harris said.

Qatar is building the world’s biggest LNG plants and ships as it seeks to overtake Indonesia to become the top exporter of the fuel. The Persian Gulf state’s LNG output will almost quadruple to 77 million tons a year by 2012 from the current 20 million tons a year, Qatari officials have said.

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Irving, Texas-based Exxon, the world’s largest publicly traded company, holds stakes in five Qatari plants but lags behind Shell globally.

Shell, the largest producer of liquefied natural gas, sold just over 11 million tons of LNG worldwide last year. BP sold 8.7 million tons, and Exxon 5.7 million tons.

Shell participates in projects that account for 33% of 148 million tons a year of the gas that is chilled and compressed for shipment by tankers.

Qatar’s offshore Persian Gulf North Dome field, the world’s largest natural gas reservoir, is known to hold 900 trillion cubic feet of gas, of which about 130 trillion cubic feet is already earmarked for use in LNG projects, according to Wood Mackenzie.

It takes 1 trillion cubic feet of gas to produce 1 million tons of LNG annually, according to the firm.


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