Value added: Increasing the output of petroleum products

Having steadily invested in developing a growing industry of downstream petroleum products, the country has created an industrial base that adds value to the significant hydrocarbons output that is a core part of the country’s strategy to diversify the economy and to drive growth. Qatar Petroleum (QP) oversees or has played a role in almost all petroleum products developed in the country and has helped build a significant portfolio of refined petroleum, petrochemical, chemical and fertiliser products. These have grown to form a substantial part of the country’s economic base.

Expansion

Qatar has developed a number of refineries and is investing in building more plants. According to the Oil and Gas Journal, Qatar had 338,700 barrels per day (bpd) of refining capacity as of January 2013. One of Qatar’s first downstream investments was in building QP Refinery in 1958. In the 1970s QP Refinery installed technology to produce low-sulphur gasoline. The company went through a major expansion between 1995 and 2001 to increase refining capacity to 137,000 barrels per stream day (bpsd), adding a condensate refining facility with a capacity of 57,000 bpsd, in addition to equipment and facilities to upgrade lowvalue fuel oil into higher value products. The expansion included kerosene hydrotreating and diesel hydrotreating units to produce low-sulphur jet fuel and diesel.

The company has grown rapidly and has facilities to produce a variety of petroleum products by refining crude oil and condensates. According to QP, the refinery’s main products include liquefied petroleum gas (LPG), petrochemical naphtha, premium gasoline, super gasoline, jet fuel, diesel, marine fuel oil, decant oil and straight run fuel oil. Investments have also included technology to reduce gas flaring. The 2001 expansion added a sulphur recovery unit to allow the refinery to end acid gas flaring. More recently QP invested in the 138, 700-bpd Ras Laffan condensate refinery, which began operations in September 2009. Qatargas operates the plant, which is owned by a consortium of QP, ExxonMobil, Total, and four Japanese companies: Idemitsu, Cosmo, Mitsui and Marubeni. QP owns a 51% stake in the refinery. According to QP, the refinery has the capacity to produce 60,000 bpd of naphtha, 50,000 bpd of jet fuel, 25,000 bpd of gasoil and 10,000 bpd of LPG. There are plans to double capacity at the plant by 2016.

QP signed a joint venture agreement in May 2013 with France’s Total and Japan’s Idemitsu, Cosmo Oil, Marubeni and Mitsui to build Laffan Refinery 2 (LR2), a condensate refinery. QP will be a majority shareholder with an 84% stake in the refinery. LR2 is expected to have a processing capacity of 146,000 bpd of condensate, and will produce an estimated 60,000 bpd of naphtha, 43,000 bpd of jet fuel, 24,000 bpd of gas oil and 9000 bpd of LPG. The $1.5bn refinery will draw supplies of condensate from Qatar’s North Field. The plant will sell diesel into local as well as international markets. LR2 will include a diesel hydrotreater to process gas oil into a refined diesel that could be exported into markets in Europe, which have more stringent standards.

Qatar International Petroleum Marketing Company (Tasweeq) manages the sales and marketing of the country’s petroleum products. The company started its operations in 2008, and it exported 167m tonnes of associated petroleum products, including LPG, naphtha, condensates and refined products, between 2008 and 2012. Tasweeq also manages all of QP’s crude oil production, which totals 550,000 bpd out of Qatar’s total of 730,000 bpd. International oil companies manage the remaining crude oil production.

The Largest Exporter

According to Tasweeq, Qatar exports 44m tonnes of associated petroleum products on annual basis in comparison to 77m tonnes of liquefied natural gas (LNG). Tasweeq manages this entire output, selling 99% of the associated products to Asia.

Japan is the biggest market, purchasing up to 55% of the products, with India, China, Korea, Vietnam, and Thailand rounding off the bigger clients. The remaining 1% mainly consists of LPG sales to Jordan, Egypt and Morocco. Tasweeq is the largest exporter worldwide.

Saudi Aramco produces more petroleum products but uses a larger portion of its output domestically. Qatar is increasing the share of products used locally, with plans to sell 1m tonnes of propane and ethane to the Al Kahraana petrochemical project, and 2.5m tonnes of butane and naphtha to the upcoming Al Sejeel petrochemical plant in Ras Laffan.

Other Projects

QP has also partnered with Sasol and Shell in order to develop two gas-to-liquids (GTL) plants. The company has a 51% stake in the ORYX GTL plant, and started production in 2007. ORYX GTL has a capacity to produce a total of 32,400 bpd of liquids, including 26,000 barrels of GTL diesel, 6000 barrels of naphtha and 400 barrels of LPG.

Shell’s $19bn Pearl GTL plant has a total capacity of producing 140,000 barrels of GTL products each day. The plant started production in 2011 and currently produces GTL gasoil, kerosene, naphtha, and normal paraffin and base oils for lubricants, which are sold both locally and into global markets. The Pearl GTL plant also produces jet fuel, which is supplied to Qatar Airways. Tasweeq is responsible for selling all GTL naphtha and GTL-blended jet fuel output from the Pearl GTL and ORYX GTL. The company reported exporting 1.5m tonnes of GTL products in 2013.

Qatar is increasingly developing a strong petrochemicals industry. Industries Qatar, a subsidiary of QP, has a stake in 18 companies that drive industrial output, including the Qatar Petrochemicals Company (QAPCO) and the Qatar Fuel Additives Company (QAFAC). QAPCO was established as a joint venture with France’s Total Petrochemicals in 1974 and has three joint ventures, including Qatofin, Qatar Vinyl Company and Qatar Plastic Products Company. QAPCO currently produces ethylene, which is used to produce low-density polyethylene (LDPE). The company opened a third QR2.3bn ($629.9m) LDPE plant in 2013 with a total capacity of 700,000 metric tonnes of LDPE per annum.

QAFAC produces methanol, which is exported to Asia and Europe or used as feedstock for methyl tertiary butyl ether, which is used to produce gasoline. The company’s revenues in 2012 were close to $1bn. QP and Shell are currently in the process of developing the Al Karaana Petrochemicals Complex, which will include a steam cracker, a mono-ethylene glycol plant, a linear alpha olefin unit and an oxo alcohols unit. Other companies in the field include Q-Chem and Q-Chem II, which produce high-density and medium-density polyethylene amongst other products. Q-Chem II and Qatar Petroleum established the world’s largest ethylene cracker unit, with a total capacity of 1.3m tonnes per annum.

There are several new developments that will increase Qatar’s output of petroleum products. Qatar Petroleum’s RasGas is developing the Al Khaleej Gas 2 Project, which is expected to enable the development of an additional 200m tonnes of associated petroleum products each year, according to Tasweeq. Similarly, the Barzan Gas Project will add another 800m tonnes per year. Tasweeq sees tremendous potential for growth, particularly in the sales of gasoline, as the Ras Laffan project nears completion. The company points to GTL products as a strong driver of growth going forward.