Qatar Petroleum and ExxonMobil set pace for global growth in LNG

Installed 10 miles off the coast of Italy, the Adriatic LNG terminal will supply about 10 percent of the country's natural-gas needs.

Joint ventures are expanding plant and terminal capacity and applying new technology to globalize an energy resource that once was limited to regional markets.

Joint ventures involving Qatar Petroleum and ExxonMobil are expected to supply a significant amount of the world’s production of liquefied natural gas (LNG) by 2010.

Supported by ever-improving economies of scale, new technology and expanded plant and terminal capacity as well as Qatar’s significant natural gas resources, these Qatargas and RasGas joint ventures expect to increase annual LNG production in Qatar to more than 61 million tons within two years. This is the equivalent to supplying the yearly natural-gas needs for more than 30 million homes.

“The global LNG market is growing rapidly,” says ExxonMobil Chairman and CEO Rex Tillerson. “That growth strengthens world energy security by diversifying supplies. Equally important, because natural gas is cleaner-burning than other conventional energy sources, the growth also provides important environmental benefits.”

Rapid growth in Qatar
Unlike crude oil, natural gas traditionally has been delivered by pipeline to consumers relatively near its point of production. While oil can be loaded onto tankers and carried across the oceans to distant markets, moving natural gas long distances via ships is not practical when the gas is in vapor form. But if liquefied and converted to a super-cold fluid (minus 260 degrees Fahrenheit), natural gas can be safely and efficiently transported in specially designed LNG carriers.

What makes this possible is that liquefied gas occupies a space 600 times smaller than gas in vapor form. Thus, 600 cubic feet of gas as a vapor fits into just one cubic foot as a liquid.

That transformation allows a single LNG carrier to economically deliver a significant supply of energy to customers halfway around the world. When offloaded at a specially designed receiving terminal, the gas is warmed to ambient temperature and returned to vapor form. It’s then delivered to customers by pipelines, just like conventional natural gas.

Qatar Petroleum and ExxonMobil have produced natural gas from Qatar’s offshore North Field since 1996. With natural-gas resources of more than 900 trillion cubic feet, the field is the world’s largest single source of nonassociated gas (gas not associated with oil production); once ashore, it is processed and liquefied in plants known as LNG trains. Valuable products such as butane and condensate are removed (for use by refiners to make gasoline and other products) before the gas is liquefied and loaded aboard LNG carriers.

The first shipment of North Field LNG in 1996 went to customers in Japan, and exports grew rapidly as new trains began to come online.

Today, a multinational workforce of 65,000 is constructing four of the world’s largest LNG trains that will bring to 12 the total involved in processing and liquefying North Field gas. These new trains, all of which are planned to be operational in 2009, are joint ventures involving Qatar Petroleum, ExxonMobil and other energy companies. ExxonMobil holds an equity interest in each of the 12 trains.

As the number of trains has increased, technology improvements have led to much larger units with improved operating efficiencies. While the early trains produce about 3 million tons of LNG annually, the newest ones will each produce almost 8 million tons a year. Improved efficiency translates to lower unit costs, which enhances the competitive position of North Field LNG in the global energy market. It also translates into lower unit emissions.

Bigger, more energy-efficient LNG carriers
For nearly a third of a century, the size of LNG carriers has remained virtually unchanged. However, ExxonMobil, working with Qatar Petroleum, ship operators, naval architects and structural engineers, has developed a new class of LNG carrier that provides a step change in the cost of delivering LNG to distant customers.

“These new double-hulled ships are much bigger than conventional carriers,” says Neil Duffin, president of ExxonMobil Development Company. “They have significantly larger LNG tanks, onboard reliquefaction units, slow-speed diesel engines, twin propellers and rudders, and improved ship hulls. All these factors combine to reduce shipping costs by about 30 percent. That’s a huge gain because shipping represents a significant portion of the delivered cost of LNG. That makes Qatar LNG even more competitive.”

Two new categories of LNG carriers are being built. The larger Q-Max ships – more than three football fields long – will carry 80 percent more cargo than conventional carriers. The slightly smaller Q-Flex ships will carry 50 percent more cargo. Both will consume 40 percent less energy on a delivered-unit basis than conventional LNG carriers. The ships are being built in South Korea, with 27 chartered by ExxonMobil joint ventures due for delivery by 2009. Twenty Q-Flex ships are already in service, and deliveries of the Q-Max carriers have started.

New terminals in Italy, Wales, Texas
ExxonMobil, Qatar Petroleum and their international co-venturers are investing in every phase of the LNG value chain, including three new receiving terminals in Europe and the United States. Each terminal will include not only regasification facilities but also adequate storage to balance seasonal shifts in demand.

The Adriatic LNG terminal completed its 1,700-mile journey from its construction site in Spain across the Mediterranean Sea to where it was installed 10 miles off the east coast of northern Italy in September. It is the world’s first offshore gravity-based LNG terminal. When it reaches full operational capacity in 2009, the facility will be able to store, regasify and deliver the LNG equivalent of about 800 million cubic feet of gas daily, or about 10 percent of Italy’s natural-gas requirements.

In addition, the South Hook terminal in Milford Haven, Wales, is being constructed on the site of a former ExxonMobil refinery that closed in the 1980s. With a daily capacity of about 2 billion cubic feet of gas, South Hook is scheduled to begin receiving LNG cargoes this winter.

A third terminal, also capable of handling up to 2 billion cubic feet of gas daily, is being built near Sabine Pass on the Upper Texas Gulf Coast near the Louisiana border. LNG cargoes offloaded at the Golden Pass terminal will be delivered into several existing natural gas pipelines that feed Texas and much of the eastern United States. Operation startup is expected
in 2009.