Qatar Petroleum, ExxonMobil delay Qatar cracker project

12 July 2010 18:03  [Source: ICIS news]

General view of Doha, QatarLONDON (ICIS news)--Qatar Petroleum and ExxonMobil have delayed their petrochemicals project in Ras Laffan, Qatar amid suggestions that the US group could exit the scheme, sources said on Monday.

The project, which centres on a 1.6m tonne/year gas cracker, was scheduled to start up in 2015 but delays in the award of engineering contracts and a possible change in partner for Qatar Petroleum could push the start-up date until 2016, said an industry source familiar with the project.

ExxonMobil “has been looking at options for some time,” said Graham Hoar, Bahrain-based Middle East director at global consultancy Nexant. If the group did decide to exit the project, that would most likely be because the economics were not sufficiently attractive, he observed.

“The gas is not as cheap as you might think and the economics are not as attractive as you might expect,” Hoar added.

He dismissed suggestions that France’s Total or Anglo-Dutch group Shell would rush to replace ExxonMobil in the project as part of efforts to expand their positions in Qatar. “If the deal was no good for ExxonMobil, why would it be attractive for Total or Shell?”

ExxonMobil would not be the first company to exit a petrochemicals project in Qatar, he noted. Earlier this year, South Korea’s Honam Petrochemical backed out of a plan to build an ethane- and naphtha-based petrochemical complex in Mesaieed, Qatar with Qatar Petroleum.

Qatar Petroleum and ExxonMobil have delayed the awarding of engineering contracts for their proposed project. Contracts for the front-end engineering and design (FEED) and project management consultancy (PMC) were expected to be awarded this year, but are now not expected to be awarded until next year, said the industry source. This would push the start-up date for the project to 2016, he added.

Engineering companies that had pre-qualified to bid for the contracts had expected to receive a formal invitation to bid (ITB) in May, but have now been informed that the ITB will not be released before the autumn, he explained. No reasons have been given for the delay in the release of the ITB, he added.

ExxonMobil would only say that it was continuing to work on the project. “We signed a heads of agreement with Qatar Petroleum in January 2010 to progress the joint development of a world-scale petrochemical complex and we continue to work with Qatar Petroleum on the project,” a company spokesman said in a written statement to ICIS.

Qatar Petroleum said in January that the project would include a 1.6m tonne/year steam cracker, two 650,000 gas phase polyethylene (PE) plants and a 700,000 tonne/year ethylene glycol (EG) plant. The project would use feedstock from gas development projects in Qatar’s North Field, where Qatar Petroleum and ExxonMobil have been expanding their liquefied natural gas (LNG) facilities.

A further threat to the Ras Laffan project is Qatar’s decision to extend the moratorium on projects based on gas from the North Field to 2014. However, if the project was economically viable, ExxonMobil would be likely to wait, remarked Hoar.

“It’s possible that the economics do work but that ExxonMobil is fed up with waiting for the moratorium to be lifted,” he said. “But, fundamentally, the gas is there. So I would think that, if the economics stacked up, that ExxonMobil would say we’ll wait a couple more years and do it then.”

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By: Anna Jagger
+44 20 8652 3214



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