MINISTER OF ENERGY ON GAS INVESTMENTS AND RESERVES

UNCLAS SECTION 01 OF 02 DOHA 001158

SIPDIS

SENSITIVE

DOE FOR MOLLY WILLIAMSON AND JOHN BRODMAN

E.O. 12958: N/A
TAGS: EPET EINV PREL QA
SUBJECT: MINISTER OF ENERGY ON GAS INVESTMENTS AND RESERVES


1. (SBU) Summary. Energy Minister al-Attiyah welcomed a
possible visit by Secretary Bodman in November, telling
senior officials from the Department of Energy "we will plan
a good trip for him." Attiya discussed Qatar's investment
plans with the DOE delegation and noted that Qatar expects to
supply 30% of natural gas needs in the U.S. He said Qatar's
gas is currently fully allocated, with no room for new
projects in the next five years. He complained about the
difficulty in obtaining approval for new LNG terminals in the
U.S. and about state-to-state specifications for gasoline. He
said there was enough oil on the market and the problem lay
in refining capacity. At a lunch hosted by the Ambassador and
in individual meetings, U.S. oil and gas executives expressed
their satisfaction with Qatar Petroleum as a business partner
and about Qatar's overall investment climate, which they
rated as excellent. End Summary.


2. (SBU) Abdulla bin Hamad al-Attiyah, Second Deputy PM,
Minister of Energy, and Chairman of Qatar Petroleum,
discussed Qatar's energy investments with the Secretary of
Energy's visiting Senior Foreign Policy Advisor, Molly
Williamson, DOE DAS for International Energy Policy, John
Brodman, and the Ambassador. Attiya characterized
ExxonMobil's projects in Qatar as "big" and "interesting,"
noting that a new condensate refinery and a gas-to-liquids
(GTL) facility total approximately $17 billion. Investments
in Ras Laffan Industrial City over the next five years will
top $50 billion, he said. Qatar's strategic plan includes
supplying 30% of U.S. natural gas needs. Qatar has plans to
purchase 75 LNG tankers, the largest ever built, to ship its
product to Asia, Europe, and North America. He noted that
several years ago, he had not expected that Qatar would be
supplying the U.S. and Europe. Technology, however, helped
reduce production costs and allow Qatar to expand its trains
(LNG processing plants).


3. (SBU) U.S. companies investing in Qatar whose executives
met with DOE officials -- ExxonMobil, Occidental,
ConocoPhillips, and Anadarko -- were upbeat about the
investment environment and the business outlook. All agreed
that Qatar's growth makes investing here attractive. Conoco
Phillips decided to locate its regional headquarters in Doha
because doing so means "looking forward." Country managers
described the investment climate as "healthy" and the outlook
as "all good." They also agreed that business partnerships
with QP are highly professional, better than with most other
state-owned companies. They praised al-Attiyah for his
efforts to institute transparency and intolerance for fraud
or influence-peddling. The minister told Williamson that he
is "trying to preserve ethics" in the industry, never deals
with local agents or middlemen, and is on the lookout for
corruption.

Security
--------------


4. (SBU) QP provides "tight security" but only "on our area,"
Attiya said. The security of Persian Gulf waters are an
international responsibility. He is not concerned about an
attack in the Gulf, he said, because even Iran wants it to be
secure. He said piracy in the vicinity of Indonesia was a
greater concern. "History shows the Gulf was always safe," he
concluded, because Gulf states are big oil and gas suppliers.
U.S. oil and gas firms were comfortable with the level of
security at Ras Laffan, the industrial site; they had also
increased personal security procedures following the March 19
terrorist attack in Doha. But they acknowledged that they are
in others' hands when it comes to security at offshore
facilities.

Gas Reserves
--------------


5. (SBU) Al-Attiyah said that QP had postponed several GTL
projects in order not to draw down the North Field gas
reserves too quickly. "We have to be careful," he said. QP is
conducting a "professional study" of the field that will be
ready in two years. The study will provide information on
state of the gas in different parts of the field and will
help chart its flow. He claimed that the North Field might
have more gas than the 900 trillion cubic feet currently
estimated. U.S. executives agreed with this assessment,
saying that the pace of investment would have been difficult
to maintain for a variety of reasons and that it was prudent
for Qatar to slow down and carefully monitor its resource.

Potential Customers on Hold
--------------


6. (SBU) Al-Attiyah told the delegation that Qatar's gas has
been allocated through the next five years and that QP cannot
accommodate any additional customers or orders. "Upstream,
everything is committed," he said. The Chinese "came late,"
and gas earmarked for them has gone instead to Australia. Gas
earmarked for the Al-Khaleej Kuwait pipeline project was
re-allocated to other markets, and in fact, according to U.S.
executives in Qatar, QP would have difficulty honoring its
agreement with Kuwait if Saudi Arabia were to remove its
objections and allow the pipeline to Kuwait to go forward
through its waters. Minister al-Attiyah said that the Qatari
government, the Kuwaiti government, the USG and ExxonMobil
did not spare any effort with the Saudis to convince them to
approve the route of the pipeline, but this effort was in
vain. Al-Attiyah added that just recently he raised the issue
with Saudi Oil Minister Al-Noaimi, who said that there was no
technical problem and that he will look into the matter. The
Kuwaiti Oil Minister, Sheikh Ahmad Al-Fahd Al-Sabah, told
al-Attiyah that there is no political will from the Saudi
government to approve the project. Minister al-Attiyah
connected Saudi disapproval of the project with
dissatisfaction with the Al-Jazeera News Channel and liberal
policies adopted by the Qatari government which embarrass the
Saudis. Regarding the proposed pipeline to Bahrain,
al-Attiyah's office director said that no gas is available.
According to him, the Bahrainis did not respond to Qatar's
proposals. If any pipeline were to be built, gas would have
to be shifted from other projects that are already firmly
agreed upon.

Terminals in the U.S.
--------------


7. (SBU) Terminal capacity in the U.S. and numerous gasoline
specifications were concerns for al-Attiyah. He said QP has a
contract with Shell to supply gas to California through Baja
California; he said it was not wise for California to become
dependent in this way on its southern neighbor. California
would be better served by its own offshore terminal. He also
discussed his unsuccessful efforts with ExxonMobil to get a
permit for a terminal in Florida to supply Electric Power and
Light. Another option was to pipe gas to Florida from the
Bahamas, but that had not been approved. Williamson told
Attiya that the Energy Bill currently under discussion in
Washington could resolve many of the difficulties surrounding
permitting and various states' "boutique" gasoline formulas.
ExxonMobil officials in Doha said that they were working
closely with the Federal Energy Regulatory Commission to
obtain a license for the "Golden Pass" terminal near Texas's
border with Louisiana. The deadline for the deliberations is
June 30.

Constraints on Business
--------------


8. (SBU) U.S. firms operating in Qatar noted however that
resource costs were increasing. In particular, steel and
cement prices are rising rapidly, and along with them
engineering and construction costs. Housing is becoming
increasingly scarce and rents are rising out of control. The
demand for services driven by the billions of dollars being
invested in Qatar is the root cause. While problematic for
the oil and gas companies, executives were aware that service
firms also operate cyclically and are now enjoying an upswing
after some tough years. Foreign firms are also grappling with
the requirement for "Qatarization" of the workforce. While
employing only up to 10% Qataris, firms had mixed results. In
many cases, they were impressed with the skills of the Qatari
managers. However, they noted that for new Qatari graduates,
"training" is expected to be at the senior levels of
management. Firms also have trouble finding, in the Qatari
population of only 150,000, those recent graduates who have
the proper degree and are in the job market.

Comment
--------------


9. (SBU) Although Qatar does not currently supply the U.S.
with any energy products, it has positioned itself to become
an important energy partner. Qatar's strategy is to diversify
in both investments and customers: it plans to supply North
America, Europe, and Asia with roughly one-third of its gas
each; it discusses investing in foreign oil projects such as
Venezuela's, and it encourages reputable oil companies not
yet in Qatar to invest. Qatar is also single-handedly
changing the world natural gas market by making LNG a
more-easily traded commodity like oil.
UNTERMEYER