OBG talks to Wael Sawan, Managing Director and Chairman, Qatar Shell Companies

Interview: Wael Sawan

How has the disassociation of gas and oil prices impacted the expansion of the gas-to-liquids (GTL) industry? Do you anticipate this trend continuing?

WAELSAWAN: Specifically, the disassociation in the US between The Henry Hub and oil prices is predominantly what is now helping the GTL industry to expand. Because of the low gas prices, more and more of the major resource holders who have plentiful gas supplies and are able to convert that gas economically into a liquid-based product do indeed have a certain advantage. Currently, the only proven players who have GTL are Shell and Sasol, both of which have already publicly stated an interest in looking at the US due to this dissociation that exists currently. It is difficult to predict what will happen going forward but I can say that we continue to see the three gas market blocs (the Americas, Europe and Asia) differ in terms of supply, demand, structure, profile and availability.

What factors are hindering the commercial use of GTL jet fuel? Is it a 100%-suitable alternative to standard aviation turbine fuel?

SAWAN: Nothing is specifically hindering it. The use of GTL as jet fuel will be driven more and more by supply. Pearl GTL is the producer of GTL jet fuel, and thus its use will depend on how many cargos we are able to sell, keeping in mind that we will only produce GTL jet fuel when the market is an attractive one in which to do so. It is not compulsory for us to produce GTL jet fuel to keep operating the Pearl GTL project.

There are two possible markets we can sell in right now, with the first being the domestic market. The first Qatar Airways plane from Doha to London fuelled by GTL jet fuel took off in January 2013, building on a previous consortium that started in 2007, leading to the first GTL-fuelled flight in 2008 from London to France, followed by the formal approval by the ASTM of a 50/50 fuel blend. What is currently approved is a 50% blend as a drop in fuel, which means you can put it into existing aircraft without any extra work on the engine. The second is the export market, which we are already doing. There is demand in both markets that we have seen with our first few cargos. I believe that in the coming years the value of GTL jet fuel is going to grow as more airlines recognise the advantage of GTL due to the lack of particulates in the emissions of the jet fuel.

To what extent could Shell’s investments in North American LNG export terminals impact its interests in the Qatari LNG market?

SAWAN: Our fundamental belief is that the world will require more gas, and we believe that the growth in demand for LNG in the coming few years will almost double that of gas. LNG more easily links buyers and sellers across the globe, whereas gas is a more localised resource. The market today sees 240m-250m tonnes per annum of LNG. With an expectation for strong growth, that market will require huge amounts of supply. Qatar has 77m tonnes, which today anchors the market. However, there will need to be significant growth in supply to meet that demand, which will likely come from Australia, the US and other markets like Mozambique. There is enough depth in the market to absorb additional supply from the US.

Given the current state of the moratorium, how much emphasis are international oil companies placing on upstream developments?

SAWAN: Firstly, we are fortunate to have been chosen by Qatar Petroleum (QP) to participate in a significant part of their assets producing 1.4bn cu feet per day at Qatargas 4 and 1.6 bn cu feet per day at Pearl GTL. This is a significant production base for us to continue to optimise and grow. Secondly, while there is a moratorium on the North Field, the Khuff reservoir, there is no moratorium on the pre-Khuff reservoir, the deeper horizons in the North Field for which QP has tendered a number of blocks. We bid for and successfully secured one block and have already started drilling. The pre-Khuff operation is purely exploratory at the moment.