Middle East

Natural Synergy

Traditional Chinese Medicine

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The Middle East holds around 40% of world gas reserves with Iran, Qatar, Saudi Arabia and United Arab Emirates holding the largest volumes. Gas reserves in Iran and Qatar alone account for nearly 30% of the world total. Yet, despite a rising trend in production in recent years, these two countries together account for only 5% of global production and the region as a whole for less than 11%, suggesting strong potential to boost supply in the long term, particularly in Iran. Production in the Middle East is expected to grow more than in any other region. In the Reference Scenario, we project Middle East output will jump from 318 bcm in 2007 to 480 bcm in 2015 and to 1 tcm in 2030.

Iran remains the region's biggest gas-producing country in the Reference Scenario, its production rising from an estimated 107 bcm in 2007 to over 350 bcm in 2030 - on the assumption that the required investment can be mobilised. The lion's share of the country's reserves, and the expected source of much of the production growth in the medium term, is in the Iranian part (South Pars) of the South Pars/North Dome gas/ condensate field. The combined structure is the world's largest gasfield, with 40 to 50 tcm of reserves. More than one-third of these reserves are in the Iranian sector. South Pars currently accounts for about one-quarter of Iran's total gas production and just under half of the country's 28 tcm of proven reserves.

The government has, for many years, had ambitious plans to boost production from South Pars and other fields to supply the rapidly growing domestic market and to export (by pipeline and as LNG), but developments have been delayed for technical and political reasons. New upstream awards have slowed markedly since 2004, due to changes in political priorities and the international isolation resulting from trade embargoes imposed in response to the country's nuclear programme. A growing proportion of wellhead gas supplies has been re-injected to maintain oil production in some old fields which are faced with high natural decline rates (see Chapter 10). As a result, production growth is likely to slow significantly through to the middle of the next decade. Boosting capacity thereafter will depend on a resurgence in awards and the clearance of other obstacles in the next few years. A large-scale internal pipeline construction programme is underway to accommodate higher production to meet domestic demand.

Increasing domestic demand for re-injection, power generation and end uses, however, is likely to mean further delays in planned gas-export initiatives. In mid-2008, Iran officially postponed two of the three LNG developments at South Pars planned for the 2010-2013 period, leaving only the domestic LNG development in place. Shell and Total are now discussing the prospect of LNG development linked to later phases of the 8 South Pars field. China's CNOOC and Malaysia's SKS have held intermittent talks on LNG <

development of other fields, but no firm investment commitments have been made as §

c yet. In addition, prolonged negotiations about gas deliveries to the Iran-Pakistan-India (IPI) pipeline mean that the start date for this project is now 2013 or beyond, rather than the original date of 2011.

Qatar, with proven reserves of 26 tcm, is far and away the biggest gas exporter in the Middle East and the region's fastest-growing producer. We project its production to rise from 54 bcm in 2007 to almost 170 bcm in 2030, driven mainly by LNG exports. Projects currently being developed by Qatar Petroleum with foreign partners will boost the country's LNG export capacity to 105 bcm per year by 2011, up from 40 bcm at end-2007 (Table 12.5). Qatar became the world's biggest LNG exporter in 2006 and looks set to retain that title well into the future. The world's largest trains, of 10.6 bcm per year each, are under construction in the Qatargas and Rasgas ventures, as well as the world's largest gas-to-liquids plant at the Shell/Qatar Petroleum Pearl project (70 kb/d). The world's biggest GTL plant, Oryx, with a capacity of 34 kb/d, was commissioned in Qatar in 2006. The current raft of projects, however, has been hit by technical problems and cost escalation, resulting from difficulties in securing materials and services. This has contributed to delays of more than six months in the commissioning of the first train at Qatargas 2 and the postponement of Rasgas 3 to early 2009 (delays which are by no means unique to Qatar). Project participants believe that this will have a knock-on effect through the project chain.

Table 12.5 • Qatari LNG projects

Trains

Project

Start date

bcm per year

Partners

(previous target)

1997-1998

55.4

12.9

QP, ExxonMobil, Total, Marubeni, Mitusi QP, ExxonMobil QP, ExxonMobil, Total QP, ConocoPhillips, Mitsui QP, Shell

Qatargas

Qatargas 2

Qatargas 3 Qatargas 4

1997-1998

2009 (2OOS)

2010 (2009)

2011 (2010)

55.4

12.9

QP, ExxonMobil, Total, Marubeni, Mitusi QP, ExxonMobil QP, ExxonMobil, Total QP, ConocoPhillips, Mitsui QP, Shell

Qatargas 3 Qatargas 4

2009 (2OOS)

2010 (2009)

2011 (2010)

RasGas

49.4

1-2

1999

9.O

QP, ExxonMobil, Kogas, Itochu, LNGJapan

3 RasGas 2

2OO4

ó.4

QP, ExxonMobil

4

2OO5

ó.4

QP, ExxonMobil

5

2OO7

ó.4

QP, ExxonMobil

ó RasGas 3

2OO9 (2OOS)

1O.ó

QP, ExxonMobil

7

2010 (2009)

1O.ó

QP, ExxonMobil

Total capacity in 2011

104.8

The prospects for further growth in Qatari gas production beyond 2012 are clouded by 8 the uncertainty created by a moratorium on new export projects, which was imposed <

in 2005 while the effect of existing projects on North Field reservoirs was studied. §

Rather than make early commitments further to boost exports, in the form of LNG, GTL or pipeline gas (gas is already exported to the United Arab Emirates through the Dolphin pipeline), Qatar may seek first to prove up more reserves through additional exploration and appraisal, perhaps first at greater reservoir depths in the North Field. The government is also concerned about ensuring adequate supplies to domestic users, including a burgeoning petrochemical sector. In 2007, gas blocks at the North Field assigned to a cancelled GTL project (a joint venture between Qatar Petroleum and ExxonMobil) were reassigned to the domestic Barzan project, which will supply the domestic industrial sector.

Gas production in the United Arab Emirates is projected to grow less rapidly than in neighbouring states, from 46 bcm in 2007 to 72 bcm in 2030. Surging energy demand from industrial projects, power generation and desalination plants has led to shortages in the Emirates of Abu Dhabi and Dubai. Although reserves are large, totalling over 6 tcm, most existing production is earmarked for re-injection at oilfields and for LNG exports from the country's only plant, at Das Island in Abu Dhabi. Rising international gas prices have made it more attractive to develop the country's reserves, but gas-quality problems are holding back investment. For example, although two sour gas fields at Shah and Bab have been put out to tender for development with foreign contractors, negotiations on the Shah field have been hampered by high costs -estimated at between $4 and $5 per MBtu - because of the difficulties in accessing the reserves and the high sulphur content. Bab, together with an integrated gas project and the sour gas development at the Hail field, are expected to provide additional volumes, but much of these will be required for re-injection to boost production at the country's ageing oilfields.

In Saudi Arabia, Saudi Aramco's upstream exploration programme has continued to prioritise exploration for non-associated gas. Most of the 67 bcm of gas it produced in 2007 was associated with oil. It has laid out plans to increase reserves, which now stand at 6 tcm, by an average 142 bcm per year over the next ten years. Some successes have been reported, although efforts with foreign partners in the Empty Quarter have not yet yielded any new reserves. Development plans are currently focused on the offshore Karan field, which is now due to supply some 16 bcm per year into the national gas-gathering system from the end of 2011 - 5 bcm per year more than originally planned. The switch to fuel oil and crude oil in some power stations will make more gas available for domestic uses in the medium term. However, Saudi Arabia remains unlikely to consider any export of natural gas until it is certain that its own increasing needs are assured. We project Saudi gas production to reach almost 190 bcm in 2030.

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