Special report: Dolphin Energy

Conceived in the early 1990s by the governments of the UAE and Qatar, the project was brought through to fruition by a private company, Dolphin Energy, 51% owned by Mubadala, Abu Dhabi’s investment arm.

Key to bringing the best technical abilities to the project were IOC giants, Total and Occidental, each holding a minority stake. As the economies of Dubai, Abu Dhabi and Oman boom, energy demands have followed suit, and it is the need for greater electricity generation that has spurred the project on.

The 364km pipeline runs from Ras Laffan, on the upper tip of the Qatar Peninsula, to Taweelah in Abu Dhabi, one of the capital’s primary electricity and desalination plants. From there, gas is piped overland to Dubai, Al Ain, Fujairah and Oman.

In the last year, Dolphin Energy achieved its target production rate of two billion cubic feet per day (bcfd), roughly equivalent to 350,000 barrels of oil – each day.

“In the 1990s, I was begging people to buy gas from Qatar. Now my problem is how to say no!” said Qatar’s deputy premier and minister of energy and industry, Abdullah al Attiyah at the launch ceremony last year.

Qatar’s vast North Field is the largest gas deposit in the world, with about 900 trillion cubic feet of reserves.

Abu Dhabi itself has huge gas reserves, but production of its sour product is an expensive undertaking, and importing Qatar’s sweeter natural gas remains attractive.

Oil and Gas Middle East met Adel Al Buainain, general manager – Qatar, Dolphin Energy, one year after the historic inauguration, to uncover what has been going on behind the scenes across the project, but with a focus on the host nation and resource owner.

Al Buainain is responsible for all of Dolphin Energy’s activities in the State of Qatar, including the 24 offshore gas wells and twin production platforms, the twin sealines to Ras Laffan and the Dolphin Gas Processing Plant at Ras Laffan Industrial City. “The project has been rolled out in stages, so it has been a very successful year,” he begins. “The launch last summer was followed by the first commercial deliveries of gas to Oman in November last year, so we have not been static. We’ve also spent the last few years trying to optimise and fine tune the operations, and making sure the plant is delivering to the potential it was designed for,” says Buainain.

Core infrastructure aside, construction still continues for Dolphin, which has been charged with developing additional condensate storage in Qatar. “There are a number of common facilities shared by a number of operators in Ras Laffan, and we are managing the condensate tank storage facility. We are supervising the construction of these new facilities. There is also a common sulphur processing facility, being operated by QatarGas, and we are responsible for the connection from our plant to that facility, which is still under construction.”

These facilities are scheduled to be completed by mid-2010, but as far as the sulphur plant is concerned, QatarGas has the operational timeframe is in its hands.

“The condensate expansion is to meet the requirements of Qatar GTL. They are now in the construction phase and are expected to be on line later this year. As soon as they start producing the condensate they will store it in these tanks. Originally we had three tanks for Dolphin use, now to meet Qatar GTL’s requirements we are adding another three tanks,” he says.

The whole project will be finished by year-end 2011. Phase one is the construction of two tanks, which is on track to finish sometime next year.

The Barzan project, reported earlier this year as cancelled by newswire Reuters, has in fact just been delayed for a year, but Al Buainian says Dolphin Energy is not altering its own project schedules. “It’s been a rolling development, and we were selected to manage the contractor for this part of the overall grand plan, and sticking to our costs and schedules is our priority.”

Qatar has delayed the large-scale Barzan natural gas field project to be developed with ExxonMobil to benefit from a drop in construction cost, the country’s oil minister said after cancellation reports emerged.

“We delayed on purpose,” Abdullah bin Hamad Al Attiyah said. “We decided to delay due to costs because the price trend (of construction) has changed since 2008.”

The minister said the “strategic decision” would ensure that Qatar and its partners Exxon Mobil and Qatar’s RasGas to get the best value for money and build out at the lowest costs possible.

Collaboration

The company was established over a decade ago, back in March 1999 as a joint venture between French oil major Total, and subsequently joined by US-owned Occidental Petroleum. With any major collaboration there is likely to be differing opinions and processes on how things should be done, and the gas business is of course no exception.

However, Buainain says that the gelling of skills and staff has been as slick an operation as the owners could have wished for.

“From day one Total and Oxy employees were fully integrated into Dolphin Energy. We have Total and Oxy staff who are seconded to Dolphin, but when they are here everyone works under the same team umbrella.”

Right from the beginning all parties brought their own expertise and specialty skill sets, so project managers, technical management, designers and administration experts came from all of the shareholding companies. “Oxy had some particularly valuable experience with regard to the drilling, offshore and pipeline operations, and Total had the process plant and onshore experience we needed, and the plant technology was based on Total know-how,” explains the general manager.

The primary challenge has been optimising the process of working together over a hugely diverse project, and a wide and varied geography. To lubricate the decision making at the Qatar end, an executive committee was appointed which includes operational and general managers of all of the stakeholders in Ras Laffan, including Shell, Dolphin, QatarGas and supporting players.

“We always meet at least on a quarterly basis to discuss how we can create synergies and ultimately optimise the costs of shared services. We are always trying to explore more areas where we can work and integrate together. Especially nowadays everyone is very aware of being cost-effective.”

SHUTDOWN

The company announced in February that it was undertaking a five week routine maintenance and inspection program of its production and processing facilities at Ras Laffan in Qatar.

The partial shutdown allowed essential maintenance work to be carried out on the Stream 1 facilities of the Dolphin gas processing plant and one production platform at Ras Laffan in Qatar.

Following the inspection, a gradual increase in the supply of natural gas through the export pipeline linking Qatar with the UAE took place. The company gradually ramped up production and returned operations to its regular maximum throughput of 2 billion standard cubic feet of natural gas per day (bcf/day) at the start of March.

“We have two streams, and after one year of operations we shut down one of them for a planned warranty inspection. This allowed us to build a database for us to use as a benchmark for future shutdowns and inspections. We checked that there was no deterioration or fouling in the system. As far as the contractors are concerned, they need to be released, so equipment had to be thoroughly checked for deficiencies, or operational issues.”

Al Buainain says that the inspection was completed within the allotted time, and threw up no real surprises. “Every three years we will shutdown one stream which is perfectly normal, for inspection and maintenance purposes. For us, ensuring environmentally sound operations is absolutely critical. We must maintain our record to keep the license to operate.”

“In Qatar the compliance rules are very strict on the environmental front. Right form the design stage at the start, Dolphin Energy took the decision to be open and transparent whatever the cost. The consent to operate is conditional and its requirements have to be met. This is reviewed every two years and granted from Qatari authorities,” explains Al Buainain.

“Qatar is a small country but is taking every step to ensure operations there are of absolute world class quality. The plant was designed to be environmentally sound, which was important for us, and we ultimately want our operations to have the smallest footprint possible.”

Of course, the additional motivation is also a traditional one, any waste for Dolphin, is a loss for the firm, so economic drivers play an inescapable role in the drive for efficiency.

Benchmarking

Efficiency and optimisation are buzz words of our times, and more so in the current upstream climate than perhaps ever before. As a useful tool, I put it to Al Buainain that similar projects around the world must be studied, in order to benchmark performance and cost issues. He disagrees.

“I think we are quite unique – honestly. Connecting three countries in this region with a technically advanced, highly integrated set of operations might be unparalleled. We have offshore operations, sub-sea and overland pipelines, processing plants and receiving stations. The whole supply chain is our responsibility through from drilling operations through Abu Dhabi, Dubai, Sharjah, Fujairah and Oman. It’s hugely challenging.”

Dolphin currently operates the only 48 inch diameter export pipeline in the Middle East, so looking for local comparisons is out of the question. “Of course, we have been in discussions with operators in Ras Laffan, but it will be a case of them learning from us, not us learning from them, as we have the largest pipeline and most advanced operations,” he proudly adds.

RAMPING UP

Operations are yet to scale the full capacity of the pipeline, with a spare capacity of 1.2bn cf/d of gas built on top of the contracted flow of 2bn cf/d. That said, ramping up production from start-up to the target levels brings challenges and quality control issues aplenty.

“Yes, we had areas of specific interest in this ramping up phase, and safety is number one. The plant is well protected with systems and procedures. When we started the second, third and fourth trains the start-ups were very quick compared to the first, because we learnt a lot, and the staff had the skills to manage this very simply.”

The future availability of the extra gas sits with the Qatari authorities, but Al Buainain is keen to see the pipeline handle its full load. “For us, and the UAE, we are very eager to receive more gas. Qatar Petroleum is in the process of studying the capability of the north field to build projections for the next 25 years. This is perfectly normal to check the health of the field. There is huge demand for gas in the UAE and the commercial appetite is certainly there.”

Despite the fact that 350,000 barrels of oil equivalent in energy is flowing each day, Dolphin still only reaches 30% of the energy requirements and demand in the Emirates.

The price structure for the allotted flow of gas was agreed in 2002, and following a hugely volatile six years in energy markets, was officially launched to the fanfare of “Deal of the century” by many energy journalists. The additional gas will no doubt be priced in accordance with prevailing energy prices, but again, the decision and allocation conditions sit with the resource owners in Qatar.

“We don’t know what the pricing structure will be for additional gas from Qatar, a lot has changed since 2002 in energy markets, however, Dolphin is integral to the vision and economic growth of the UAE. Our offering is unique and will continue to be. Compared to the cost of transporting LNG, our product remains very competitive. The demand is high, and even when the Sour Gas field development comes on stream, there will still be demand for the gas, so we are confident about the future, and retain excellent relations with our Qatari hosts.”

Challenge

The biggest challenge, bar none, says Al Buainain is one of cost management. “It’s a big issue and a personal challenge. The gas isn’t an issue because it’s fixed in the 25 year contract, but the condensates and other by-products are linked to the crude price. Our biggest challenge, and this probably goes for every company in the region, is how to optimise cost. We focus on this constantly.”

Workforce management has become a crucial part of the role, as the project shifted from design and construction, to its normal working phase. “When we moved from development to operation mode one of the primary tasks is constantly trying to streamline the operation. Many people are required initially, in the early stages. Once operations are running smoothly, so many staff are not needed. Mobilising and commissioning stages is always the most labour intensive aspect.”

Al Buainain says the process of demobilisation is happening through a process of natural attrition. As people finish stages of a project they naturally leave and find other projects. “Sometimes they do not even wait to finish!” he adds. 

He says that staff moving around is very much the norm for both the industry and the region. “One year ago it was almost impossible to find project engineers. The market has cooled a little now, so it’s not quite the challenge it was.”

Fortunately for Dolphin, when key staff do need replacing, it is easy to attract people, largely because the opportunities remain significant in Qatar. “Our turnover is not very big compared to the rest of the industry. When people leave our projects it’s often because they’ve been approached and are being lured away to pursue a different opportunity. We’re not laying people off, and we remain as proactive as it’s possible to be with regards to recruitment. We are competitive for the employees, which has been a challenge in an overheated market, but one we are managing well with,” he asserts. 

By transporting gas to the UAE and Oman, the Dolphin project is stimulating both industrial and business investment in the region through secure, competitively priced supplies over many decades.

The achievement is all the more significant for bringing together the entire gas value chain, from development of the offshore fields to the creation of new industrial zones and projects, fuelled by the power generated from gas piped from those fields.

EXPORT PIPELINE

The subsea Export Pipeline connects Dolphin’s Ras Laffan Gas Processing Plant in Qatar with the company’s Receiving Facilities at Taweelah, Abu Dhabi in the United Arab Emirates.

This 48-inch, 364-kilometer pipeline is the largest and longest submarine gas pipeline in the Middle East. Maximum depth is 50 metres.

The contract for pipeline supply was awarded to Mitsui of Japan in 2004. Over the period 2004 to 2006 more than 440,000 tons of steel were shipped to Qatar for this pipeline and the twin sealines. Individual pipe lengths were then coated, internally and externally, before they were laid offshore in a continuous assembly and submersion operation, carried out by contractor Saipem. This operation was completed in August 2006.

The pipeline will initially carry up to a maximum of 2 billion standard cubic feet a day
(scf/day) of refined methane gas from Qatar. Its design capacity is 3.2 billion scf/day.

Quick Fact:

The pipeline was initially designed as the first part of a regional grid that could have stretched to Kuwait, and Bahrain, but early efforts to get every country to commit proved disappointing, and that network is now unlikely to take shape.

Processing & Compression Plant

The Gas Processing and Compression Plant at Qatar’s Ras Laffan Industrial City, the largest single build plant in the world, is central to Dolphin’s activities and makes up the core element in its operations.

The raw gas processing includes removal of hydrogen sulphide and other impurities. Extraction of valuable by-products for international sale is then undertaken and the resulting refined methane gas is compressed for supply to the UAE through the Export Pipeline.

When the gas is cleaned, mercury and other impurities are removed – as well as acid gases used to manufacture sulphur at the Plant. Valuable by-products taken off in Qatar include light oil condensate and the natural gas liquids (NGLs) ethane, propane and butane. The ethane is supplied on long-term contract within Qatar – the other products are sold on international term and spot markets.

Daily nominal production of by-products:
Condensate 87,000 – 112,000 tonnes
Ethane 3,600 – 4,400 tonnes
Propane 2,200 – 2,800 tonnes
Butane 1,500 – 1,800 tonnes
Sulphur 520 – 1,100 tonnes

The main product, refined methane gas, is then put through Dolphin’s gas compression system and is transported through the Export Pipeline to the UAE. JGC Corporation of Japan performed the engineering, procurement and construction (EPC) during the period 2004-7. The gas compression trains were supplied by Rolls Royce.