Bob Tippee
Editor
ABU DHABI, Oct. 12 -- While LNG dominates shipment of natural gas from producing areas of the Middle East, two other methods of international transportation are gaining momentum.
Presentations at the Abu Dhabi International Petroleum Exhibition and Conference described progress in pipeline and gas-to-liquids (GTL) projects based on gas from supergiant North field off Qatar.
Ahmed Al Sayegh, CEO of Dolphin Energy Ltd., Abu Dhabi, said construction soon will begin on his company's project to develop North field reserves, process the gas in Qatar, and carry it by pipeline to Taweelah, Abu Dhabi.
Dolphin project
Early this year, Dolphin signed engineering, procurement, and construction contracts with JGC Corp. for a gas processing and compression plant at Ras Laffan, Qatar; with J. Ray McDermott for two production platforms; and with Rolls Royce Energy Systems for the gas plant's six compression trains.
The platforms will support production of 2.6 bscfd from 24 wells. The 48-in., 264-km marine pipeline from Ras Laffan will have capacity of as much as 3.2 bscfd.
The UAE and Qatari governments in September signed a pipeline agreement confirming Dolphin as the pipeline owner and operator. Dolphin will produce the gas under a development and production sharing agreement with Qatar.
Dolphin operations began in January with commissioning of a 24-in, 182-km gas pipeline connecting Al Ain, Abu Dhabi, with a complex in Fujairah that generates 656 Mw of electric power and desalinates 100 million gpd of water. The pipeline carries an average of 135 MMcfd of gas from Oman, which it receives at a tie-in near Al-Ain. Dolphin says it's the first flow of gas from one Gulf Cooperation Council member country to another.
Gas shipments from Oman to Abu Dhabi for the Fujairah complex are to continue for as long as 5 years. Dolphin and the Omani government in April signed a memorandum of understanding envisioning a flow reversal and sales of Dolphin gas to Oman, which is expected within a few years to need the gas now flowing to Fujairah and more for its petrochemical and industrial projects at Sohar on the Arabian Sea. Negotiations for an agreement are under way.
Gas for Oman after the pipeline reversal would come from the pipeline from Qatar.
Al Sayegh said Qatari gas will supplement Abu Dhabi's production, much of which is committed to the emirate's petrochemical industry and gas injection for its massive oil fields.
He called the Omani link the "foundation for a regional gas grid" and in a nod toward long-standing questions about gas prices in the complex arrangement, added, "We will not be selling gas at a loss."
Mabudala Development Co., wholly owned by the government of Abu Dhabi, owns 51% of Dolphin. Total and Occidental Petroleum Corp. each hold 24.5%.
GTL projects
In a separate presentation, Osama Abdul Rahman and M. al Maslamani, both with Qatar Petroleum, said GTL projects are now comparable in profitability with LNG projects and can be preferable.
Qatar has two LNG plants in operation, one GTL plant under construction, and four GTL plants planned or under consideration by various operators.
Rahman said investment costs for GTL plants are $25,000-30,000/b/d of capacity. Operating costs, excluding depreciation and feedstock, are $4-6/bbl.
With a gas price of 50¢-$1/MMbtu and capital costs of $11-14/bbl to yield a 15% return on investment, the total production cost of GTL is $20-30/bbl of GTL product, mainly diesel fuel and naphtha.
Rahman compared economics of a plant liquefying 650 MMscfd of gas into 4 million tonnes/year of LNG with a GTL plant handling gas at the same rate to produce 44,000 b/d of diesel, 17,000 b/d of naphtha, and 4,000 b/d of LPG. He put the investment cost of the GTL plant at $28,000/b/d of product.
For the LNG plant he assumed an investment cost of $200/tonne/year of capacity ($800 million total), which with $840 million for six LNG ships and $240 million for a regasification plant yields a total investment of $1.88 billion.
He estimated operating costs of the hypothetical LNG plant at $375 million/year and of the GTL plant at $145 million/year.
Assuming a crude price of $19/bbl, average product margins above crude, and what he called quality premiums for naphtha of 50¢/bbl and for diesel of $1/bbl, he estimated product revenues of $20/bbl for naphtha, $30/bbl for diesel, and $180/tonne for LPG.
He asserted the product premiums because of quality advantages the GTL products have over diesel and naphtha from crude, especially their absence of sulfur.
Rahman's calculated revenue from the GTL plant of $515 million/year fell short of the $730 million/year he estimated from the LNG plant assuming a gas sales price of $3.50/MMbtu.
But the lower operating costs of the GTL plant make profitability very similar, he said.
GTL can be preferable for gas reserves unserved by pipelines that are too small to support LNG projects and in countries, such as Qatar, that have enormous gas reserves and benefit from diversification of product offerings.
Contact Bob Tippee at [email protected].