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Last Updated: Tuesday, 14 February 2006, 11:15 GMT
Qatar's fortunes boom with gas
By Lucy Williamson
BBC News, Qatar

With oil prices settled above $50 a barrel and increasing concern over shrinking reserves, many countries in Asia and the West are looking to
Ras Laffan LNG plant
Qatar is set to become the world's biggest LNG supplier
alternative sources to meet a growing energy demand.

One solution many of them are buying into is liquefied natural gas - or LNG. Lucy Williamson went to the Gulf state of Qatar as part of the BBC's Fuelling the Future week to look at why it's suddenly proving so popular.

Twenty years ago, you wouldn't have noticed anything special about Ras Laffan. Then, it was more or less just a patch of desert 80km (50 miles) north of the Qatari capital. Now it's home to what will become the world's largest liquefied natural gas plant, supplying a quarter of the world's future LNG.

Construction work has already begun on a series of new production lines at Ras Laffan to supply consumers across Europe and North America.

It's like turning a beach ball of gas into a golf ball of liquid so that it becomes much more transportable
Charles Watson
head Shell gas, Middle East
But what exactly happens inside those giant strands of metal spaghetti?

The process is fairly simple. Charles Watson, the head of Shell's gas operations in the Middle East says it's a bit like the freezer part of a fridge.

"The process cools the gas down to about minus 160 degrees centigrade, turning it into a liquid. It's like turning a beach ball of gas into a golf ball of liquid, so that it becomes much more transportable."

Aiming high

In fact, it reduces the gas by 600 times, so 600 barrels of normal gas is turned into one barrel of liquefied gas. That's obviously very useful if your customers live thousands of kilometres away, and pipelines are impractical.

But the process isn't cheap. It involves building terminals in the producer country to turn the gas into liquid, and parallel terminals in the importing country, to turn it back into a useable gas. And the business of shipping LNG round the world in specially strengthened ships isn't cheap either.

But, says Charles Watson, given the world's growing demand for gas, it makes sense in a place like the Middle East, which has roughly 40-50% of the world's gas reserves.

Qatar currently produces around 23 million tonnes of LNG a year, mainly destined for markets like Japan, which has no gas reserves of its own. But new contracts from the UK, US and Europe are expected to more than triple Qatar's output within the next six years, making it the world's largest supplier.

Initial disappointment

It's a boom Qatar has been waiting for. Thirty-five years ago it discovered, off its north-eastern coast, the largest single gas reserve in the world.

I remember all the people who advised me and my country not to go into the LNG business
Qatar's Energy Minister
Abdullah bin Hamad al-Attiyah
No-one was interested. In the words of Qatar's Energy Minister, Abdullah bin Hamad al-Attiyah, it was a big disappointment.

"It was a shock, because it was gas - not oil!" he tells me.

"Thirty or 40 years ago, companies weren't interested in gas, especially when the consumer nations were so far away. So it was bad news..."

But a decade ago, Mr Attiyeh, along with oil giants like ExxonMobil, took a gamble on an expensive technology for a niche market: production of LNG.

"I remember all the people who advised me and my country not to go into the LNG business, and everyone's now coming to us saying 'have you got any spare cargo?' or 'we want to buy some LNG!' "

Many benefits

Natural gas is about twice as clean to burn as oil. And the world's demand for it is expected to increase by 50% over the next 25 years.

By that time, Europe will probably be importing around 90% of its gas, and - like North America, and major consumers in Asia - it doesn't want to rely too heavily on a single supplier. Qatar is a well-placed on the shipping lanes of the Gulf, to supply them all.

View in Qatari capital Doha
The energy boom has fuelled construction

And there are other attractions to LNG too. The large cost of projects means that long-term contracts are the norm, providing both sides with a degree of security. But unlike pipelines, tankers can be diverted, or recalled at will, depending on the day-to-day situation, which also allows for flexibility.

At Ras Laffan, plant manager Abdul Khader Houari watches the construction from his window in the offices of QatarGas.

"Everyone wants to buy LNG now," he says, "Apart from Japan, there are openings in Europe and the US. And India too. And Taiwan. China is the future, but," he smiles, "I can't say anything until a deal is signed..."

Back in Doha, local residents are taking an evening stroll along the Corniche that rings the bay. Lining it are skyscrapers and luxury hotels that weren't here 10 years ago. Many of them have been paid for by the energy boom, of which LNG is an increasing part.

And towering above even the tower-blocks are the cranes that mark the construction sites which dot the capital; signs of Qatar's impending wealth and the world's growing appetite for LNG.



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