RISING COSTS END EXXONMOBIL GTL PROJECT

UNCLAS DOHA 000202 SIPDIS SIPDIS E.O. 12958: N/A TAGS: ECON EPET QA SUBJECT: RISING COSTS END EXXONMOBIL GTL PROJECT REF: A. DOHA 00174 ¶1. (U) On February 21 Exxon Mobil and Qatar Petroleum (QP) terminated plans to build a gas-to-liquids (GTL) plant because of increasing costs to build the facility. The plant was supposed to be become the world's largest GTL plant, producing 154,000 barrels per day of base oils and synthetic fuels. While there is no report of how high costs rose, the plant was originally estimated at USD 7 billion. ¶2. (SBU) This announcement comes as a surprise to Post. Emboffs met with Mark Tressler, ExxonMobil's GTL manager on February 7 but no mention was made of this decision. He told Emboffs that the company planned to use the products from the GTL plant to make lube stocks to sell themselves internationally. ExxonMobil would have also produced the 1.6 billion cubic feet of feedstock for the plant indicating that the company would have controlled the entire process of the natural gas development. -------------- COMMENT -------------- ¶3. (SBU) This recent development confirms Sasol Chevron's comments (ref A) that constraints in the construction sector were increasing costs of GTL plants. ExxonMobil was slated to pay 100% of the capital costs for the project which probably contributed to the decision to end it. Minister al-Attiyah's public statement that "GTL technology is expensive and very technical" is an indication that it will be quite some time until Qatar fulfills its aspiration to become the GTL capital of the world. ExxonMobil's presence is unlikely to decrease as the company has numerous other projects in Qatar, including a project to develop a new gas field for domestic Qatari use which was announced concurrently with the termination of the GTL project. UNTERMEYER