Qatargas LNG Projects Break Ground

Marking the beginning of the execution phase for two of the world's largest liquefied natural gas (LNG) developments, Qatar Petroleum (QP), ConocoPhillips, and Shell bore witness Monday as Sheikh Tamim Bin Hamad Al-Thani, Heir Apparent of the State of Qatar, laid the foundation stone for the Qatargas 3 and Qatargas 4 projects. Combined, the projects are expected to generate approximately 2.8 billion cubic feet per day of natural gas, the majority of which is targeted for delivery to the U.S.

The ceremony was held at Ras Laffan Industrial City and attended by dignitaries, visitors, and guests from Qatar and abroad.

Both Qatargas 3 and Qatargas 4 have worked jointly to reach this important milestone in record pace and all the necessary resources to carry out the projects are now in place, states Quatargas. In order to capture substantial synergies, the projects jointly are executing the development of the onshore and offshore assets to enable them to be operated as a single integrated venture.

Last December, both Qatargas 3 and Qatargas 4 announced their final investment decisions and awarded the onshore engineering, procurement and construction (EPC) contract to the Chiyoda Corp. and Technip France Joint Venture (CTJV). The EPC contract with CTJV covers the engineering, procurement, and construction of onshore facilities for two large-scale LNG trains, each with a nameplate capacity of 7.8 million tonnes per year. The total price of this contract is valued at approximately US$4 billion.

Qatargas 3 has signed all definitive agreements and successfully completed financing. The project has received commitments for more than $2.8 billion from 26 commercial banks, the Export Import Bank of the United States (U.S. Exim), and Japan Bank for International Cooperation (JBIC). Commercial agreements and financing for Qatargas 4 are advancing rapidly. Qatargas 4, which has a similar debt requirement to Qatargas 3, will be the next large Qatari project to engage the international financial community and is already attracting a significant amount of interest from potential lenders.

Qatargas 3 is an integrated project, jointly owned by Qatar Petroleum (68.5 percent), ConocoPhillips (30 percent), and Mitsui (1.5 percent). Qatargas 4 will be implemented through a joint venture between QP (70 percent) and Shell (30 percent). Each project comprises upstream gas production facilities to produce approximately 1.4 billion cubic feet per day of natural gas, including an average of approximately 70,000 bbl/d of liquefied petroleum gas and condensate combined from Qatar's North Field over the 25-year life of the project. The projects will each include a 7.8 million tonnes-per-year LNG train. The first LNG cargos from Qatargas 3 are expected to be delivered in 2009. First LNG cargos from Qatargas 4 are scheduled for around the end of the decade.

Access to growing U.S. natural gas markets is the key element in both the Qatargas 3 and Qatargas 4 LNG marketing strategies The sponsors of Qatargas 3 and Qatargas 4 have put strong emphasis on the development of infrastructure and capacity to bring LNG to these markets.

Qatargas 4 volumes are intended to flow into natural gas markets in the eastern U.S. For this purpose, Shell, as a sponsor of Qatargas 4, has entered into agreements with Southern LNG and Elba Express Pipeline Company to acquire additional capacity at the Elba Island LNG import terminal as well as in a new natural gas pipeline. Both projects will be filed with the U.S. Federal Energy Regulatory Commission for approval in the third quarter of 2006.

In December, Qatargas 3 executed a sales and purchase agreement with ConocoPhillips for the full train output that will be marketed primarily in the U.S.

"On this occasion I am very proud to say that Qatar will deliver on its promise to provide energy to our customers," said Qatar's Second Deputy Premier and Minister of Energy & Industry His Excellency Abdullah Bin Hamad Al-Attiyah. "This would not have been realized without the partnership with major oil and gas companies in the world such as ConocoPhillips and Shell."

"I would like to stress that Qatargas is a very unique company from its market diversity and partnership with our shareholders," said Faisal M. Al Suwaidi, Qatargas CEO and vice chairman. "Qatargas is supplying to Asia and will reach Europe by end of 2007 and the North American market by end of 2008. Therefore our marketing will cover every corner of the world and in turn we will realize our vision to be the world's leading supplier of LNG by the end of the decade."

"This project is an important addition to ConocoPhillips' growing LNG portfolio," said Sig Cornelius, ConocoPhillips' president of Global Gas. "We are pleased to have an important role in helping Qatar reach its objective to become the largest LNG supplier in the world by the end of the decade."

"Today's event is a tribute to effective partnership and bold commitment," added Linda Cook, Shell Executive Director of Gas and Power. "We are very excited to see the Qatargas 4 project progress rapidly into the execution phase and confident in the success of its future development. This world-class venture also demonstrates Shell's and Qatar Petroleum's joint efforts to strengthen security and diversity of natural gas supply primarily to the U.S., the world's largest natural gas market."
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