Qatar's gas supply for local use only

Exports to neighbours will not proceed with home demand put to the fore as the second phase of the Al Khaleej project comes online.

DOHA // The second phase of a gas project in Qatar that was conceived as a source of exports to Arab neighbours has been inaugurated, but Gulf states short of gas will be lucky to receive any of its output. "Al Khaleej 2 will be fully for the local market," said Abdullah al Attiyah, the deputy prime minister and energy minister of Qatar.

But a senior official of Qatar Petroleum left the door open to intermittent exports if any gas became available on a seasonal or short-term basis. "Basically, when we get into a project we tie in a buyer for every molecule of gas we supply," said Saad al Kaabi, the director of oil and gas ventures for the state petroleum company. "So, as far as additional supplies are concerned, these are short-term supplies. This is one of the avenues that can be looked at. But there is nothing of a long-term business that you could consider."

That could still be good news for Abu Dhabi's Dolphin Energy, the consortium led by Mubadala Development - a strategic investment company owned by the Abu Dhabi Government - that developed the GCC's first and only successful cross-border pipeline project. The group's pipeline network, which includes an undersea line from Qatar to Taweelah on Abu Dhabi's Gulf coast, supplies 2 billion cubic feet per day (cfd) of gas from Qatar's biggest gasfield to customers in the UAE and Oman. But the import line's capacity is 3.2 billion cfd.

Since the imports started in late 2007, Dolphin has been trying to secure more gas from Qatar. Last year, it struck a deal to buy gas that sometimes becomes available in summer, when Qatar's biggest international customers for liquefied natural gas (LNG) have their lowest seasonal requirements for the fuel. Al Khaleej 2 will supply up to 1.25 billion cfd of gas to Qatar's domestic market, bringing the total capacity of the two-phase project to 2 billion cfd.

"This is the most important project for gas to supply the majority of industries in this area," Mr al Kaabi said. "It's a huge boost to the economy." Mr al Attiyah said: "Since signing the development plan on the 10th of July 2006, I have been delighted by the sheer speed and implementation of this second phase." But in 2004, four years after Qatar Petroleum had signed a production-sharing agreement for the project with ExxonMobil, more than 1 billion cfd of the proposed production from Al Khaleej had been designated for export to the UAE and Kuwait.

In the end, Dolphin received gas only from the first phase of the project. As in the rest of the GCC, Qatar's domestic gas demand has grown faster in recent years than originally projected as the emirate has ploughed revenues from its growing stream of oil and gas exports into industrial projects to diversify its economy. That means its domestic market can now absorb all the new supplies from Al Khaleej and more.

By 2014, Qatar expects to complete another project, Barzan, to provide gas to local consumers. That development would supply between 1.5 billion and 1.8 billion cfd of gas, Mr al Kaabi said. @Email:[e-mail]