Ras Laffan Industrial City, Courtesy of QATARGAS
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Doha in summer. The mercury is flirting with 50 degrees Celsius, and sand dunes surround tall skyscrapers. When looking at the sparse vegetation of the peninsula, one can seriously wonder if Qatar is actually located on one of the Earth's richest locations in terms of natural resources. Qatar was blessed by the discovery of abundant natural gas resources after its independence in 1971, and quickly switched from a pearl-fishing economy to being the rising star of the Gulf, soon becoming one of the smallest, but richest countries on earth. Located between Iran and Saudi Arabia, Qatar has managed to create one of the region's most stable business environments, attracting the best partners. While some people will think the rise of this tiny state is presumptuous , Qatar boasts the world's highest GDP per capita and has achieved the fastest economic growth worldwide.
Ras Laffan Industrial City, Courtesy of QATARGAS
But one wonders if Qatar will manage to plan a sustainable and long-term growth without being infatuated by its admirable success in the field of energy. Qatar already is trying to mitigate the collateral risks of its booming natural gas industry by implementing new measures that are part of Qatar Vision 2030, a vast visionary program imagined by the Emir of Qatar, His Highness Sheikh Hamad bin Khalifa Al Thani. Qatar Vision 2030 "envisages a vibrant and prosperous country in which there is economic and social justice for all, and in which nature and man are in harmony. We need to galvanize our collective energies and direct them toward these aspirations." said the country's ruler. The main pillars directly related to the energy industry are managed growth and uncontrolled expansion; the size and the quality of the expatriate labor force; the selected path of development; economic growth; social development; and environmental management. Those measures will require substantial change, and will shape the oil and gas industry of tomorrow in Qatar.
H.E. Dr. Mohamed Bin Saleh Al-Sada, Minister of Energy & Industry of Qatar, Chairman and Acting Managing Director of Qatar Petroleum
The new promised land
The fast pace at which Qatar achieved its enviable performances and stood out as a world class LNG producer is astounding. But that fast pace is not a coincidence, according to His Excellency Dr. Mohammed Bin Saleh Al-Sada, Minister of Energy and Industry, Chairman and Acting Managing Director of Qatar Petroleum (QP). "Qatar's LNG journey to become the largest exporter of the product in the world in a short span of time is a saga of transformation of a powerful vision into reality," he said.
Khalid bin Khalifa Al-Thani, CEO of QATARGAS
According to the Minister, Qatar managed to utilize its bountiful hydrocarbon resources through sustainable investment in the energy sector and helped raise the global standards of the liquefied natural gas (LNG) market. "Today, we can say with confidence that we have taken the LNG business to an entirely new level and it is up to others to emulate our model," Al-Sada said. In 2000, the energy sector contributed $11 billion to Qatar's GDP, while in 2010 it reached $100 billion, thanks to development of the country's world-class oil and gas industry. State-owned QP, which holds 51% of every joint venture in the country, has attracted the most prestigious international oil companies (IOCs) as partners, enabling the country to achieve the fastest success story in the history of natural gas production and become the world's leading exporter of natural gas with 77 million tonnes per annum (tpa) in 2011.
Better, Faster, Harder, Stronger
"In the Gulf, economic growth and change have always come from the oil and gas industry. It is the incubator, not only for the oil and gas economy but also for the national knowledge economy," said Paul Navratil, Energy, Utilities and Mining Leader for PricewaterhouseCoopers (PwC) Middle East. Knowledge has certainly been the driver of the world-class ambitions of the country, as the technology existing in Qatar is one of the most advanced in the world. ExxonMobil, the country's largest American investor, has a privileged role with Qatar Petroleum and the State of Qatar in the fast growth of the country, participating in 12 of Qatar's 14 LNG trains. Qatargas 2, the largest integrated LNG project of Qatar, in which ExxonMobil was the major shareholder, required $12 billion in financing, 52 lenders and some 50,000 contractors. Qatargas was established in 1984 and stands as a pioneer in the LNG industry in Qatar. It is now the largest LNG producing company on earth, supplying long-term customers worldwide.
It is certainly a proud achievement for the charismatic QatarGas CEO Khalid bin Khalifa Al-Thani. For him, what matters most is that, "Qatargas becomes the world's premier LNG Company by 2015, when we will be known for our people, innovation, operating excellence, environmental responsibility and corporate social citizenship."
Qatar also owes its prosperity to the contribution of RasGas, another successful national company. Established in 1993, RasGas has been supplying the local market with some 2 billion cubic feet per day of gas or about two-thirds of Qatar's domestic demand. That figure will soon rise on completion of the giant Barzan project, which will be devoted entirely to the domestic market.
Gas-to-Liquids: the Pioneer and the Giant
Driven by innovation. That's how officials of South Africa's cutting edge Suid Afrikaanse Steenkool en Olie (Sasol) like to describe their firm. That's especially true of Marjo Louw, the President of Sasol Qatar, which jointly owns ORYX GTL with Qatar Petroleum (QP). Based in Qatar's Ras Laffan Industrial City, ORYX GTL uses Sasol's innovative gas to liquids (GTL) technology to convert natural gas into liquid fuel products. Marjo Louw comments on the success of Sasol's operations:
OGFJ: QP and Sasol launched ORYX GTL, which is Qatar's first-ever GTL project. What were your main challenges and successes in this project?
Louw: We faced many challenges and we had to mobilize a large number of skilled personnel. The plant has now been running for five years and there are up to 40 nationalities working there. The safety record is absolutely world-class; for the last few months it has been operating with reportable case rates of 0.00, which is world-class. The final results show that everything has been well executed, and much of our success is directly due to our good cooperation and strong relations with QP.
OGJF: Given the success of ORYX GTL, do you see it as a model that you can apply to other GTL facilities abroad?
Louw: We believe it is our global GTL flagship and we have started developing a similar GTL plant in Nigeria with confidence. We are working on a similar project in Uzbekistan and we are looking at Canada and the USA. Our success in Qatar helps our company with our future vision and with implementing strategies. It acts as an ambassador of our vision and for what we can do elsewhere.
OGJF: What's the future of GTL in Qatar, and how is Sasol contributing to it?
Louw: The future for GTL is starting to shine. Sasol's technology was unique to Qatar and to the world. It was in some ways experimental, but the strong vision and strategic foresight of H.H. the Emir and H.E. Abdullah Bin Hamad Al Attiyah, former Minister of Energy and Industry, and currently supported by H.E. Dr. Al-Sada, Minister of Energy and Industry, established Qatar as the GTL capital of the world with ORYX GTL.
After ORYX GTL's bright success, the reputation of this new Eldorado of GTL spread rapidly. Royal Dutch Shell, which already had launched a GTL project at Bintulu in Malaysia in 1993, decided to continue the GTL adventure with a giant step forward: the Pearl GTL project. Inaugurated in late 2011, Pearl GTL makes Shell the single largest foreign investor in Qatar, with up to $21 billion. "The significance of Qatar for us is the evolution from no operations in 2002 to making it one of the highest value countries for the Shell group a decade later, with roughly 10% of the overall value for the group," explains Qatar Shell Chairman Wael Sawan.
Fast, not furious
While many countries could be dazed by the abundance of resources, the outstanding production performances and the investment in cutting-edge technology, and feel the urge to utilize the resources as fast as possible, Qatar chose a more prudent approach. Indeed, the country decided in 2005 to establish a moratorium on the North Field, fearing that faster production could damage the reservoir. Qatar does hold the world's third-largest gas reserves, but it is determined to use them reasonably. It wants to use them at a pace that can be slowed down or put on hold, regardless of investments made by IOCs at the time of gas discovery. The big question facing companies that have already invested or those wanting to do so, is to know whether the moratorium will be lifted in 2014 or extended by the government, putting on hold all operations and future developments. The gas Eldorado is currently reduced to very few upstream developments, allowing room for potential niches such as enhanced oil recovery but leaving most companies disillusioned about the possibility of rapid development.
Offshore platform, courtesy of TOTAL E&P QATAR
Some choose to listen to the voice of wisdom to grin and bear it, such as Stéphane Michel, Managing Director of Total: "The message about Qatar is to think long-term and not to take this transition period as a slow-down, Qatar has the biggest gas field in the world and when you are a contractor, it is during those phases of transition that you build your future," said Michel.
From gas to crops
Khalifa Abdullah Al-Sowaidi, CEO of Qafco, Qatar's leading player in the fertilizer industry, tells Focus Reports about the opportunities for Qatar to diversify its economy.
FOCUS REPORTS: Qafco was the first joint venture in Qatar and acted as a pioneer for joint ventures. Can you tell us about the success story of a company that started as an SME?
Al-Sowaidi: After Qafco VI, our sixth urea plant, we will have 5.6 million tons of urea ready for export. That makes us the number one exporter in the world and will contribute to 12.5% of the world-traded urea. It also puts Qatar as the fourth country in terms of production of urea, after China, India, and Indonesia. It also makes Qafco the largest single fertilizer producer in the world.
FOCUS REPORTS: How do you assess your strengths compared to those of your competitors?
Al-Sowaidi: We are a large-scale company, operating a huge plant with less manpower. With proximity to the sea, Qafco being located just on the shore and having its dedicated jetties, we do not do double handling of our products. So, it makes the quality much higher than our competitors'.
FOCUS REPORTS: How would you define Qafco's contribution in diversifying the economy of Qatar?
Al-Sowaidi: We do a lot of work that involves many local companies like mechanical SME's. We contribute to the development of the downstream sector and we help increase export earnings.
FOCUS REPORTS: How do you forecast the future of the fertilizer industry?
Al-Sowaidi: The existence of mineral fertilizer today allows people worldwide to be able to eat. Today, more than 60% of the total food production depends on mineral fertilizers. Fertilizers have created all this food for the last century and that has saved the world from famine. A lot of people mistake us for a pesticide producer. But we do not harm the planet. We feed the planet.
A knowledge-based economy
Some oil and gas companies decide to make the best use of their time left by the moratorium to heavily invest in research and development (R&D). Carl Attalah, President of Chevron Qatar Ltd., says his firm is, "taking the long view on Qatar, staying in the course for potential future opportunities once the Moratorium is lifted."
Nakilat flagship Mozah Courtesy of NAKILAT
Chevron symbolizes the relationship companies are eager to have with the state of Qatar, helping the country shape its future through research on renewable energy. Chevron's current main activity is around energy efficiency and solar technology research. The company signed an agreement in 2009 to create the Center for Sustainable Energy Efficiency (CSEE) located at Qatar Science and Technology Park, the country's hub for research.
"Our solar and energy efficiency projects are part of a Corporate Social Responsibility (CSR) project, aligned with His Highness the Emir's vision 2030. The Solar Test Facility aims to test different commercially available photovoltaic technologies in the Qatar environment. This information will help us select the best technologies to use in this environment going forward," said Attalah. And Chevron is being visionary, too. Qatar has natural gas, but it also has another natural and unlimited resource: the sun.
The CSEE at Qatar Science and Technology Park will aim at educating people on simple behavioral changes at home to cut CO2 emissions, and it will research components on efficient lighting technology.
For better, for worse, for richer, for poorer, in sickness and in health
Finbarr Sexton, Energy Partner at Ernst & Young Qatar, shared his expertise on Qatar's oil and gas Industry and on Qatar's strategic position, especially with Asia and Japan, ensuring long-term growth. "With Qatar's reserves, Japan identified back in the 90s the potential that Qatar had in being a reliable supplier. It was easy to conclude 25-year contracts, knowing that it could easily be extended to a 200-year relationship. The security of supply is amongst the key attractions that Qatar holds in the eyes of Japan and South Korea," Sexton said.
Keiichi Yoneyama, General Manager of Chubu Electric Power, said that Qatar and Japan were like a married couple, always together, for better or worse. Indeed, Qatar has been present when Japan most needed it. Qatar was among the first countries to support Japan after the devastating 2011 earthquake, donating $100 million on behalf of the government. As a sign of goodwill among bilateral trade relations, Qatargas 1 signed an agreement in June 2012 to deliver one million tpa of LNG, under a long-term contract with Tokyo Electric Power Company (TEPCO). The agreement came as a response to Japan's need for LNG to compensate for the loss of the 50 or so nuclear plants put on hold after the Fukushima Daiichi tragedy in March 2011.
Finbarr Sexton, Partner, Ernst & Young Qatar
In the context of economic uncertainty in Europe and the self-sufficiency of North American markets due to shale gas, Asia appears as the partner of choice for the future of Qatar. Still, according to Sexton, there are a few concerns over competition with Australia, which "probably represents the biggest threat to the Qatari LNG industry, being much closer to the Far East markets than Qatar. So there are inherent challenges with Australia bringing on supply."
Essa Bin Hillal Al Kuwari, President of Qatar General Electricity and Water Company (KAHRAMAA), gives his insight on energy efficiency and regional integration.
OGFJ: What were the main difficulties inherent to Qatar's fast growth that you had to face?
Al Kuwari: The booming growth of Qatar over the last five years was a challenge for us. All real estate or infrastructure projects need electricity and water. Not a single project can start without them. But we succeeded.
OGFJ: What is KAHRAMAA doing at its operational level towards energy efficiency and reducing its impact on the environment?
Al Kuwari: We are trying with all our stakeholders to be a pioneer in renewable energies, the most economic renewable source in Qatar being solar. There is another initiative to cover one of our mega reservoirs with photovoltaic panels to produce electricity.
OGFJ: What are you doing at your level to educate people on how to consume more responsibly?
Al Kuwari: We have launched a campaign called Tarsheed, aiming to reduce consumption of water and electricity. There are two goals: reducing the consumption of electricity by 20% per capita and water consumption by 35% per capita.
OGFJ: What is the role that KAHRAMAA plays in the cooperation with Gulf Countries Council (GCC) countries?
Al Kuwari: Interconnection in water and electricity is very important and it will lead to something even bigger in terms of regional integration. This is the beauty of it: we are now interconnected with the five GCC countries and Oman will come soon. Such interconnection has proved to be successful and all countries have enjoyed the benefits of it.
There's time enough, but none to spare.
If Qatar has built the backbone of its LNG industry with technology, investment and research, the country must ready itself to exploit its resources in the most sustainable way possible, taking into account human and environmental factors that are under the risk of being pushed aside in the face of such brisk growth. Qatar holds the first place for three different rankings. One is outstanding: holding the world's highest GDP per capita. Two rankings are less glorious: the highest pollution rate per capita and the second highest power consumption rate in the region. In terms of actual volume of CO2 emission, Qatar contributed about 0.23% of global CO2 emissions and ranked 47th among UN members. However, the ratio per capita appears very high, given its small population of only 200,000 Qatari nationals – out of 1.7 million inhabitants. The calculation also seems to be unfair as Qatar produces natural gas and transforms it into LNG, an industrial process that emits a lot of CO2. As natural gas is the cleanest fossil fuel, its usage enables many countries to reduce their CO2 emissions, while production emissions are still registered in Qatar.
Aware of the risks for the environment of such a fast-pace use of natural resources, The Qatari state and many companies are taking concrete measures to reduce their impact on the environment.
Engineers at work, Courtesy of KAHRAMAA
Although the border between environmental CSR and green-washing can sometimes seem unclear, the environment appears to be a true concern for companies such as Dolphin Energy, the Emirati project that produces and processes natural gas from Qatar's offshore North Field. Dolphin plotted a subsea pipeline route to the United Arab Emirates and Oman that avoided important turtle breeding grounds and protected marine habitats. Dolphin also initiated a flare reduction program to help reduce emissions.
Qatar is determined to show the world it is not a careless polluter by actually positioning itself under the spotlight for environment-related events. Qatar is hosting COP 18, the UN conference on climate change in December 2012. That decision is considered quite ironic by green activists, who accuse Qatar of trying to buy its way to environmental respectability . But the act is symbolic of the efforts made by the government to improve the situation by taking action. The major priority will then be to raise awareness among the local population, especially regarding power consumption, as Florence Verzelen, General Manager of GDF SUEZ Qatar explains. "Energy efficiency is Qatar's major issue," said Verzelen. "Qatar has the second highest power consumption rate in the region, mainly because of cheap electricity. Reducing the consumption will require strong political will to change local habits".
Now hiring: skilled, smart and fast-learning manpower
"Having a qualified, motivated, high performing workforce is perhaps this industry's biggest challenge. It's a regional problem, which Qatar is experiencing, given the scarcity of national resource," said Peter Gordon, Senior Manager at PwC, about the human resources challenge. While technology and facilities can be implemented at a fast pace, human resources are a much slower issue that Qatar had left behind until Qatarization was included in Qatar Vision 2030, a measure aimed at reaching a target of 50% of Qatari nationals working in the energy sector. As companies might be craving for expertise to harmonize with the pace of the booming industry demanding know-how, the gestation period between advertising for a position to getting the right person can take up to a year, having an effect on day-to-day operations, compelling companies to implement long-term human resources planning ahead of time. As Saudi Arabia and the United Arab Emirates are facing the same needs, Qatar needs to imagine a strategy to raise awareness and empowerment among their local population, to train them as fast as possible to turn them into the next energy leaders of tomorrow. Oil and gas companies are contributing substantially to this initiative due to the approaching deadline of having half of their staff composed of nationals by 2030, and they are willing to take action to solve the human resources challenge. But organic changes in human resources should always come from the root: education. Qatar University and Texas A&M University have been very dynamic implementing measures and training sessions together with companies.
We are the champions
In 2022, Qatar will once again be under the spotlight, as it will be hosting the 2022 Football World Cup. Meanwhile, a colossal amount of work needs to be done to meet the deadlines and requirements for construction of stadiums, hotels, and railways. Qatar won the bid thanks to its commitment to organize a carbon neutral world cup. For Carl Atallah of Chevron, it will be a good opportunity to implement solar panels, but he explains that "The World Cup is a summer event, therefore, achieving a carbon neutral World Cup is a big challenge," bearing in mind that the temperatures might be up to 50 degrees, requiring air-conditioning in the stadiums.
Essa Hilal Al-Kuwari of KAHRAAMA foresees the challenges but is ready to cope with them: " It is a huge and hot issue, if not the hottest. We don't foresee any problems on the generation and transmission side and we need to make sure that the distribution network will be able to support such a big event. We will be ready!"
Not in the same basket
Qatar seems always to want to take action at a speed that is often noted: investing abroad through the acquisition of football clubs, Italian luxury brands, historical buildings in London and Paris, or international bids for sports. But if the country is so eager to expand its presence abroad and strategically use its petrodollars, it is also because the State of Qatar realizes the need to diversify its economy away from reliance on the oil and gas industry. The rapidity with which Qatar is investing is just a symbol of its immediate willingness to continue its path to reach the leading position in global LNG production and to plan its long-term future, by attracting the right international partners and creating trade relationships with the most reliable markets. Prudently fast. Eager, but patient.