Qatar upstream profile

Despite being a minor onshore producer, Qatar is a major offshore oil and gas player. Oil was first discovered in 1938 by Petroleum Development Qatar, now Qatar Petroleum Company (QPC), at the onshore Dukhan field – and production reached 40,000 bpd before the onset of the Second World War. Onshore production started in the same year and is believed to have reached peak production at around 368,000 boe/day in 2008 – around 25 times less than Saudi Arabia.

Shell’s discovery and development of the Idd-al-Shargi field by Shell in 1960 marked the beginning of a significant period of offshore activity. In 1972 the Idd-al-Shargi, Maydan-Mazham and Bul-Hainne fields were brought into production and, for the first time, offshore production levels exceeded those onshore.

Production and export of gas and LNG from Qatar is driven in the main by the giant offshore North field. It was discovered in 1979, and covers over 6,000km2. With estimated non-associated gas reserves of 14 Tcm, it is one of the world’s largest gas fields, and accounts for 98% of Qatar’s gas production. In 2004 Qatar Petroleum and Qatar Shell GTL Limited signed terms for the Pearl GTL project. The project involved installing upstream gas production facilities and an onshore GTL plant that would allow production of up to 140,000 bpd of GTL products – as well as significant volumes of associated condensate and LPGs. The continued exploitation of the offshore North field should see Qatari oil & gas production climb rapidly over the coming years and reach 4.7 million boe/d by 2015.

Much of the gas will be liquefied for export in facilities such as Ras Laffan.

Today, Qatar boasts one of MENA’s most rapidly growing offshore markets, which is set to see a substantial increase in expenditure over the next five years and beyond. An estimated $403 million was spent on focus segments in 2005 and this had more than tripled by 2008. 2009 saw some decline as oil price and service pricing pressure impacted negatively on the rig market. Recovery, however, is expected and strong visibility for rig contracts will enable expenditure growth to reach just under $2 billion by 2014 – average annual growth of 8.7% over the forecast period.

Like many other countries in the region, Qatar has initiated policies aimed at increasing oil production and locating additional oil reserves before existing reserves become too expensive to recover. It is also investing in advanced oil recovery systems to extend the life of existing fields. To accomplish this, in recent years the government has improved the terms of exploration and production contracts and production sharing agreements (PSA). The improved terms are designed to encourage foreign oil companies to improve oil recovery in producing fields and to explore for new oil deposits. Excluding the North field, Qatar has six offshore producing fields: Bul Hanine, Maydan Mahzam, Id al-Shargi North Dome, al-Shaheen, al-Rayyan, and al-Khali.

Almost all wells drilled off the shore of Qatar are deviated and wellstock growth is healthy, driven strongly by flourishing drilling volumes. Some of the growth expected over the next five years can be directly attributed to completion of the first phases of the Pearl project. Annual growth in producing wellstock is estimated at 7.3% and this will significantly boost the requirement for offshore workover including fracturing and perforation over the coming years.

Onshore production

Given relatively limited prospects and fluctuating drilling activity, onshore drilling expenditure is relatively volatile in Qatar, although expenditure has seen a general upward trend over the last five years to exceed $46 million per annum. It is likely that fluctuations will continue over the coming years, although expenditure will be above $35 million for the forecast period. It is not expected that directional drilling or MWD to take a significant proportion of this expenditure as vertical wells dominate Qatari onshore activity.

A relatively small base of active development wells leads to only a minor onshore work-over market.

It is estimated that expenditure of between $25-30 million a year is likely within the focus segments – of which fracturing & perforation will take the lion’s share. Fracturing is driven particularly strongly by gas-dominated wells and Qatar will become a very significant region in this respect over the coming years. Within focus segments, work-over expenditure of an estimated $166 million in 2005 will grow to reach $1.3 billion by 2014 – an average of 15.6% annual growth. By this point, Qatar will be MENA’s primary centre for offshore fracturing & perforation expenditure – greater than neighbouring Saudi Arabia by over $200 million per year.

LNG in Qatar

Qatar is the LNG capital of the world, with healthy export markets to India, Japan, Korea, Spain, UK, and the US. In addition, the country has the world’s third largest proven natural gas reserves, estimated at 25.46 Tcm (899.3 Tcf), 13.8% of the world’s total. Much of its gas reserves are located in the North Field. The low cost of gas gives Qatari projects a major cost advantage over all other LNG sources.

Qatar aims to complete all of its current LNG developments by 2011, which would then boost production to 77.10 mmtpa. Beyond 2011, the increase in Qatar’s capacity is expected to flatten because no new trains are planned due to a 2005 moratorium. The primary LNG JV companies in Qatar are: Qatar Liquified Gas (Qatargas) and Ras Laffan Liquified Gas (RasGas) and they own and operate multiple LNG trains. By 2011, Qatargas will be responsible for 53% and RasGas will be responsible for 47% of total Qatari
capacity.

Maersk Oil Qatar

Maersk Oil Qatar announced in March the successful installation of the last of 15 new platforms and other offshore facilities as part of the Al Shaheen Field Development Plan (FDP).

The firm, along with Qatar Petroleum, is developing Qatar’s largest offshore oil reservoir under a complex development plan at an investment of around $6 billion.

“We are very pleased to have reached this important milestone within the project, safely and on schedule. We are now able to focus on optimising production from the Al Shaheen field, supporting Qatar in its vision to become one of the world’s major energy players,” Maersk Oil Qatar acting managing director Sheikh Faisal Al Thani said.

“The size and vast technological scope of the project has made a significant contribution to the growth of Qatar’s knowledge-based economy, offering unparalleled learning opportunities to local talent, as well as some of the industry’s best engineers,” he added.

The FDP encompasses the installation of new platforms and associated facilities totalling 131,000 tonnes, and the drilling of a vast network of oil production and water injection wells. That target is less than a year away from coming to fruition. “We expect to achieve our target of 160 wells by the end of Q1 2011,” Peter Balslev, head of drilling engineering, Maersk Oil Qatar told Oil & Gas Middle East.

Data for this article is taken from Douglas-Westwood’s Middle East & North Africa Oilfield Services Market Report 2010-2014 Report and World LNG Market Report 2010-2014. —Analysis and statistics in this report were authored by Rod Westwood, senior analyst and Lucy Miller, lead LNG analyst at Douglas-Westwood. The company is leading provider of business research, strategy and commercial due diligence on the global energy services sectors. For more information please visit www.douglas-westwood.com