C-TN6-01921: SASOL CHEVRON FIRST OF MANY IN QATAR

UNCLAS SECTION 01 OF 03 DOHA 000174

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: ECON EPET QA EINV
SUBJECT: C-TN6-01921: SASOL CHEVRON FIRST OF MANY IN QATAR
GTL

REF: A. 05 DOHA 934


B. 04 DOHA 1323


1. (U) Summary. Sasol Chevron's Qatar Country Manager and
Public Relations Executive told Emboffs February 6 that the
GTL industry is in the phase that liquefied natural gas was
15 years ago, and they expect GTLs will follow the same
course. Sasol's Oryx plant will produce 34,000 barrels per
day (b/d) of liquids while Shell's upcoming Pearl project
will produce 140,000 b/d and ExxonMobil's plant is expected
to produce 154,000 b/d. Sasol Chevron officials described
their efforts to employ Qataris and enhance Qatar's knowledge
base in GTL technology. Future GTL projects are currently on
hold for Sasol Chevron as Qatar has paused additional gas
development and officials are waiting to compete not only
with other international companies, but also with neighboring
GCC countries. Sasol Chevron officials told Emboffs that the
company intends to be patient in securing additional projects
because they see a viable future for Qatar and GTL in the
energy markets. End Summary.


2. (U) Sasol Chevron was founded in 2000 with the 50/50
merger of South African alternative fuel specialists, Sasol
and U.S. oil giant, Chevron. Sasol Chevron officials told
Emboffs that Chevron was looking for new businesses and saw
potential in the gas-to-liquid (GTL) arena. Chevron sought
out Sasol's expertise in GTL because of Sasol's work in
Nigeria. The company combines Chevron's upstream knowledge
and technology with Sasol's downstream skills. Sasol utilizes
a proprietary process called the Slurry Phase Distillate
Process to convert synthetic gas into a state to be "cracked"
into marketable products. Sasol Chevron is a separate entity
from the parent companies and is pursuing GTL projects apart
from Sasol. For example, the recently-completed Oryx GTL
project in Ras Laffan Industrial City is a Sasol venture, but
Sasol Chevron officials work closely with the Oryx management
because of their intentions to have expansion projects under
Oryx.

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NATIONALS CONTRIBUTING FROM START
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3. (SBU) Pat Butcher, Sasol Chevron Country Manager, told
Emboffs on February 6 that Qataris have been part of the Oryx
project from engineering, procurement, and construction (EPC)
stage, with about 25 percent of the workers from the national
population. The original goal was 50 percent but because of a
lack of qualified workers and cultural limitations, this has
not been achieved. Qataris are involved in all aspects of the
project from senior management to actual operators at the
plant. According to Butcher, the company welcomes this
transfer of technological expertise and has no concerns about
intellectual property rights violations.


4. (U) Butcher also said that in recruiting Qataris to work
with Sasol Chevron and on the Oryx project, women are some of
the best candidates. The top graduates from the engineering
programs at Texas A&M-Qatar and Qatar University are female
and Sasol Chevron would like to hire them, but because Qatari
culture has not caught up with the idea of women in authority
positions in technical fields, this process has been slow.
Sasol Chevron has an outreach program with Qatari female
engineering students in the hopes of hiring them in the
future.

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MORATORIUM ON FUTURE PROJECTS
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5. (SBU) Currently, feedstock for the Oryx plant comes from
ExxonMobil's Al Khaleej project in the North Field. Sasol
Chevron wants to expand production in the Oryx plant from
34,000 barrels per day (b/d) to 100,000 b/d but their plans
are on hold, as Qatar Minister of Energy and Industry
Abdullah bin Hamad Al-Attiyah has placed a moratorium on
negotiating new natural gas projects until 2009 (ref A). At a
conference last week in Abu Dhabi, Minister Al-Attiyah
confirmed that the moratorium would be lifted in 2009, and
that thereafter Qatar hopes to boost its output and exports.
During the moratorium period, the Qataris will complete a
resource review of the North Field. The review is meant to
more accurately determine oil and natural gas reserves in
order to formulate a prudent plan for production and
allocation of these resources. Butcher told Emboffs that in
the review, Qatar Petroleum is also looking below the North
Field to more gas and oil resources, perhaps even doubling
the current oil reserve numbers. The driver behind the
resource review is Mr. Saad al-Kaabi, the U.S.-educated Qatar
Petroleum Director of Oil and Gas Ventures. Mr. Ali

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al-Sadiqqi will head the downstream portion of the review.
Over the long-term, Qatar plans to become the "GTL Capital of
the World," according to Minister al-Attiyah (ref B).

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THE GTL CATCH-22
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6. (SBU) The Oryx plant cost USD 1 billion in 2003 to
construct-- mostly via project finance --but the same plant
would cost USD 2-3 billion today because of the tight
contracting market, according to Butcher. He also noted that
the Shell's 140,000 b/d Pearl GTL project is expected to cost
somewhere between USD 12-18 billion to build because of its
magnitude and Qatar Petroleum says ExxonMobil's 154,000 b/d
plant will cost USD 7 billion. The increased attention to
alternative fuels and the booming energy market have
generated numerous projects in Qatar and throughout the
region which in turn is squeezing the contracting industry,
resulting in larger EPC costs. While Butcher stated that
higher energy prices and technology improvements make GTL
projects more commercially viable at this time, he
acknowledged that this might not have been the case in a
quieter market. Nonetheless, Butcher told Emboffs that GTL is
in the phase that liquefied natural gas was 15 years ago and
that they expect GTLs to follow the same course.

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ORYX'S GTL MARKET
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7. (U) Butcher said there is a strongdemand for "clean"
fuels such as GTL, especiallyin Europe where the entire Oryx
product is expored. Europe has a huge demand for diesel
because 0 percent of the cars there run on diesel fuel.
Btcher claimed that vehicles run on GTL diesel enjo much
better performance than those un on regular diesel.
Currently world diesel usage is estimated at 12 billion
barrels per day, but only a small fraction of this is
GTL-based diesel. Butcher noted that old diesel refineries
are not meeting the new higher standards for diesel
production and GTLs may help them meet the new operation
specifications and keep the older refineries in operation
longer. While the primary end-product of GTL is diesel fuel,
some naphtha and liquefied petroleum gas is also produced.

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SECURITY & POLITICAL CONCERNS
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8. (SBU) Butcher did not express any concerns about security
at Ras Laffan and appeared generally pleased with the level
of protection. He also did not express any worries about
political and business instability in Qatar. Butcher did
acknowledge that Iran is a worry and that with big U.S.
energy companies heavily involved in Qatar, Ras Laffan is a
prime target for terrorists or Iranian agents to destabilize
the Gulf. He also voiced some worry over who--GCC neighbors
or foreign investors--would receive priority for Qatar's
additional gas resources once the review is complete. Sasol
Chevron is competing not only with other international energy
companies but also the United Arab Emirates, Oman, and
Bahrain for Qatar's gas. According to Butcher, the Shell and
ExxonMobil GTL projects will receive their feedstock because
those agreements were signed before the hold was in place.

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SUCCESSOR TO AL-ATTIYAH?
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9. (SBU) Butcher opined that if the powerful Minister of
Energy and Industry Al-Attiyah ever stepped down, QatarGas
Chairman and CEO Faisal al-Suwaidi is a likely replacement.
Mr. al-Suwaidi has gained prominence in high circles of the
Qatari government. He sometimes accompanies the Energy
Minister on international visits and frequently appears in
the media discussing major energy projects.

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COMMENT
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10. (SBU) Just as Qatar has begun to diversify its liquefied
natural gas (LNG) customer base it is looking to GTL -- along
with piped natural gas -- as ways to diversify its product
line. Qataris believe that they can help create new markets
and shape the industry, as they have done with LNG. In
addition, Post agrees with Butcher's thought that Mr.
al-Suwaidi is a potential candidate for future Minister of
Energy and Industry, because of his knowledge of the energy

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industry. However, al-Attiyah has been more than a CEO. He
has been a veritable statesman on the world energy scene,
helped by a highly engaging personality. Whenever he retires,
the Amir of Qatar may seek someone broader - based than Mr.
al-Suwaidi. End Comment.
UNTERMEYER