Qatar Oil and Gas

Q4 2013 www.businessmonitor.com

QATAR OIL & GAS REPORT INCLUDES 10-YEAR FORECASTS TO 2022

ISSN 1748-4189 Published by:Business Monitor International

Qatar Oil & Gas Report Q4 2013 INCLUDES 10-YEAR FORECASTS TO 2022

Part of BMI’s Industry Report & Forecasts Series Published by: Business Monitor International Copy deadline: August 2013

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Qatar Oil & Gas Report Q4 2013

CONTENTS BMI Industry View ............................................................................................................... 7 SWOT .................................................................................................................................... 9 Industry Forecast .............................................................................................................. 10 Oil And Gas Reserves ............................................................................................................................. 10 Table: Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Table: Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2017-2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Oil Supply And Demand .......................................................................................................................... 13 Table: Qatar Oil Production, Consumption And Net Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Table: Qatar Oil Production, Consumption And Net Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Gas Supply And Demand ......................................................................................................................... 16 Table: Qatar Gas Production, Consumption And Net Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Table: Qatar Gas Production, Consumption And Net Exports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

LNG .................................................................................................................................................... 22 Table: Qatar LNG Infrastructure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Refining And Oil Products Trade .............................................................................................................. 25 Table: Qatar Refining - Production And Consumption, 2011-2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Table: Qatar Refining - Production And Consumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Revenues/Import Costs ............................................................................................................................ 27 Key Risks To BMI's Forecast Scenario ....................................................................................................... 27

Industry Risk Reward Ratings .......................................................................................... 29 Middle East - Risk/Reward Ratings ............................................................................................................. 29 Table: BMI's Middle East Oil & Gas Risk/Reward Ratings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Table: Middle East Upstream Oil & Gas Risk/Reward Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Table: Middle East Downstream Oil & Gas Risk/Reward Rating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Qatar - Risk/Reward Ratings ..................................................................................................................... 36

Market Overview ............................................................................................................... 38 Qatar Energy Market Overview .................................................................................................................. 38 Overview/State Role ............................................................................................................................... 40 Licensing And Regulation ........................................................................................................................ 40 Government Policy ................................................................................................................................. 40 International Energy Relations ................................................................................................................. 41 Table: Qatar - Major Upstream Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Oil And Gas Infrastructure ........................................................................................................................ 43 Oil Refineries ........................................................................................................................................ 43 Table: Refineries In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Table: GTL Plants In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

LNG Terminals ...................................................................................................................................... 46 Table: LNG Terminals In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

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Qatar Oil & Gas Report Q4 2013 Gas Pipelines ........................................................................................................................................ 48

Competitive Landscape .................................................................................................... 50 Executive Summary .................................................................................................................................. 50 Table: Key Domestic And Foreign Companies In The Qatari Oil And Gas Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table: Key Upstream Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 Table: Key Downstream Player . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Company Profile ................................................................................................................ 52 Qatar Petroleum ..................................................................................................................................... ExxonMobil Oil Qatar .............................................................................................................................. Total Qatar ............................................................................................................................................ Royal Dutch Shell .................................................................................................................................... Other Companies - Summary .....................................................................................................................

52 57 60 63 66

Regional Overview ............................................................................................................ 72 Middle East Energy Market Overview ......................................................................................................... 72 Consuming It All .................................................................................................................................... 80 Gas Rises, But Consumption Does Too ....................................................................................................... 82

Global Industry Overview .................................................................................................. 89 Global Energy Market Overview ................................................................................................................ 89 Table: Global Oil Consumption Estimates, mn b/d . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Appendix ............................................................................................................................ 95 Middle East - Regional Appendix ................................................................................................................ 95 Table: Oil Consumption - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Table: Oil Consumption - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 Table: Oil Production - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 Table: Oil Production - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Table: Refining Capacity - Historical Data & Forecasts, 2011-2018 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Table: Refining Capacity - Long-Term Forecasts, 2015-2022 ('000b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Table: Gas Consumption - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 Table: Gas Consumption, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Table: Gas Production - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Table: Gas Production - Long-Term Forecasts, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 Table: Net LNG Exports - Historical Data & Forecasts, 2011-2018 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Table: Net LNG Exports - Long-Term Forecasts, 2015-2022 (bcm) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Methodology .................................................................................................................... 102 Oil & Gas Risk/Reward Ratings Methodology ........................................................................................... 102 Ratings Overview ................................................................................................................................. 102 Table: BMI's Oil & Gas Risk Reward Ratings - Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

Indicators ........................................................................................................................................... 103 Table: BMI's Oil & Gas Business Environment Upstream Ratings - Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

Oil & Gas Forecasts Methodology .......................................................................................................... 105 Energy Industry ................................................................................................................................... 106 Cross checks ....................................................................................................................................... 106

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Qatar Oil & Gas Report Q4 2013 Sources .............................................................................................................................................. 107

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Qatar Oil & Gas Report Q4 2013

BMI Industry View BMI View: Fuelled by the world's third largest proven gas reserves, Qatar has dramatically expanded export capacity to become the largest supplier of liquefied natural gas (LNG) globally. Rising competition, led for now by Australia but also from East Africa and North America, will pose a challenge to Qatar's hold on the global gas market later in the decade. Qatar is responding by making increasing efforts to protect its revenue stream by expanding its downstream network, including additional investments in gas-to-liquids, as well as expanding the international presence of the national oil company to offset what will likely be slow growth in domestic oil and gas revenues given the absence of plans for an expansion of LNG export capacity.

We highlight the following trends and developments in Qatar's oil and gas sector: ■

We expect Qatari gas production to reach nearly 180bn cubic metres (bcm) by the end of our forecast period in 2022; however, we expect output growth to slow compared to the gains seen in recent years. The Barzan gas project, due online from 2015, is the last major approved expansion of upstream capacity with a self-imposed moratorium on further development of the giant North Field as the country evaluates its oil and gas strategy.

■

There is some upside to this outlook, with an active effort to boost foreign exploration of Qatar's onshore and offshore acreage. The recent discovery offshore Block 4 - the first new find in 42 years - hints at Qatar's untapped potential. Exploration success could support future productions, but with consumption rising and no plans to expand export capacity, any additional supplies look likely to fuel the domestic market. Indeed, natural gas consumption is set to rise from an estimated 32bcm in 2012 to nearly 60bcm by 2022.

■

We see Qatari proven oil and natural gas reserves declining modestly over the forecast period, with a 1.9% decline in natural gas reserves expected between 2013 and 2021. Oil reserves are also due to decline gradually, but actual liquids production should grow slowly over the forecast period, namely on the back of increased recovery operations and field redevelopment alongside growing condensate and natural gas liquids (NGL) volumes. Plans are underway to increase production capacity from 950,000 barrels per day (b/d) to 1.2mn b/d. Already OPEC's smallest oil producer, we expect growth gains in liquids production to slow toward the tail-end of our forecast period.

■

Export capacity is also set to hold steady, with no plans to increase liquefied natural gas (LNG) capacity behind the current 77mn tonnes per annum (or around 107bcm mark) reached in 2011. However we expect that overall LNG export levels will remain elevated, with growing demand led by Asia. Qatar is increasingly expanding the reach of its exports, with Brazil and Argentina for example receiving LNG. According to Qatari officials, any addition to LNG send-out capacity will come from efficiency gains rather than new trains. There is some upside to pipeline exports supplies, with proposals to add additional compression facility to the Dolphin Pipeline which would allow for supplies closer to full design capacity. Growing demand in the GCC markets would support expansion, but a key sticking point will be price with gas currently sold at a significant discount.

■

While Qatar has proven resistant to calls to rethink its oil-indexed LNG pricing mechanism, importing countries are becoming more vocal in the de-linking of gas and crude in a bid to lower prices. With new supplies of gas from Australia, Russia, East Africa, and North America due to come online, Qatar's ability to resist reform on pricing may be soon be under strain.

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Qatar Oil & Gas Report Q4 2013

Qatar's dependence on oil leads to high volatility in the country's export revenues. Our assumptions of slower growth in China and persistent economic weakness in the eurozone, pose a threat to global oil demand. At the time of writing, we are forecasting average OPEC basket oil prices to fall from US$109/bbl in 2013 to US$101/bbl in 2014. While lower prices will result in less revenue after years of elevated prices, large fiscal and current account surpluses, as well as a sizable foreign exchange (FX) reserves, provide the economy with a significant buffer in the event of any short-term decline in oil prices.

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Qatar Oil & Gas Report Q4 2013

SWOT SWOT Analysis

Strengths

■

Qatar has the world's third largest proven gas reserves and is also an OPEC oil exporter.

■

The country remains open to foreign investment in its upstream segment and is actively encouraging exploration.

Weaknesses

■

Heavy reliance on the Asia Pacific liquefied natural gas (LNG) export market.

■

Majority of gas production comes from a single field with uncertainty regarding ultimate resources and recovery despite its prolific potential.

■

Qatar remains one of OPEC's smallest producers with 2012 output just ahead of Ecuador and limited upside potential for liquids.

Opportunities

■

Ongoing exploration activity could open up new offshore oil and gas reserves such as the recent Block 4 discovery.

■

Over the long term, gas-to-liquids (GTL) projects will allow for the accrual of significant revenues from exports of liquid products. Qatar is also an industry leader in GTL technology, giving it a significant first-mover advantage. Accommodative pricing is required, however.

Threats

■

The risk of terrorism or regional conflict cannot be discounted, with dependency upon shipping through the Strait of Hormuz a key vulnerability.

■

Competition from new suppliers of LNG could hit Qatar's chief source of hydrocarbons revenue, resulting in downward pressure on pricing which Qatar has been resistant to reform from oil-indexed linkages. The increasing push for the delinking of LNG and oil prices provides a threat to Qatari long-term LNG contracts.

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Qatar Oil & Gas Report Q4 2013

Industry Forecast Oil And Gas Reserves Table: Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2011-2016

2011

2012e

2013f

2014f

2015f

2016f

Proven Oil Reserves bbl bn

25.9

25.9

25.9

25.9

25.8

25.8

Proven Oil Reserves bbl mn

25,907.0

25,907.0

25,899.6

25,878.8

25,849.5

25,811.2

0.0

0.0

0.0

-0.1

-0.1

-0.1

Reserves to production ratio (RPR), years

43.2

44.9

43.5

42.1

40.9

39.8

Natural Gas Proven Reserves, tcm

25.4

25.3

25.3

25.3

25.2

25.1

Natural Gas Proven Reserves, bcm

25,366.2

25,328.2

25,302.9

25,252.2

25,189.1

25,126.1

Natural Gas Proven Reserves, % change y-o-y

-0.4

-0.1

-0.1

-0.2

-0.2

-0.2

Natural Gas Reserve to Production Ratio, years

190.4

161.3

159.6

157.6

155.2

152.2

3,937.1

4,284.7

4,363.1

4,446.8

4,528.8

4,623.4

14.1

8.8

1.8

1.9

1.8

2.1

135.7

148.6

150.9

142.6

144.0

145.6

58.4

9.6

1.5

-5.4

0.9

1.1

696.1

742.8

792.9

846.5

905.5

966.7

Total Hydrocarbons Consumption, 000boe/d, % change y-o-y

28.1

6.7

6.7

6.8

7.0

6.8

Total Hydrocarbons Consumption, US$bn

23.0

25.0

26.6

26.3

27.8

29.4

Total Hydrocarbons Consumption, US$, % change y-o-y

75.7

8.6

6.2

-1.1

5.9

5.6

Total Net Hydrocarbons Exports, 000boe/d

3,241.1

3,541.9

3,570.1

3,600.3

3,623.2

3,656.7

Total Net Hydrocarbons Exports, 000boe/d, change y-o-y

11.4

9.3

0.8

0.8

0.6

0.9

Total Net Hydrocarbons Exports, US$bn

105.2

116.8

117.5

110.1

109.9

110.0

Total Net Hydrocarbons Exports, US$, % change y-o-y

57.1

11.1

0.6

-6.3

-0.2

0.1

Total Net Hydrocarbons Exports, US$mn at US $50/bbl, US$bn

52.4

56.4

57.0

57.6

58.1

58.7

Proven Oil Reserves % change y-o-y

Petroleum Production, Consumption and Net Exports Total Hydrocarbons Production, 000boe/d Total Hydrocarbons Production, 000boe/d, % change y-o-y Total Hydrocarbons Production, US$bn Total Hydrocarbons Production, US$, % change y-o-y Total Hydrocarbons Consumption, 000boe/d

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Qatar Oil & Gas Report Q4 2013

Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2011-2016 - Continued

Total Net Hydrocarbons Exports, US$mn at US $100/bbl, US$bn

2011

2012e

2013f

2014f

2015f

2016f

104.7

112.9

114.0

115.2

116.1

117.3

e/f = estimate/forecast. Source: EIA, BMI

Table: Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2017-2022

2017f

2018f

2019f

2020f

2021f

2022f

Proven Oil Reserves bbl bn

25.8

25.7

25.6

25.6

25.5

25.4

Proven Oil Reserves bbl mn

25,765.0

25,710.8

25,648.3

25,582.0

25,511.7

25,439.2

Proven Oil Reserves % change y-o-y

-0.2

-0.2

-0.2

-0.3

-0.3

-0.3

Reserves to production ratio (RPR), years

38.8

37.9

37.1

36.5

36.1

35.7

Natural Gas Proven Reserves, tcm

25.1

25.0

25.0

24.9

24.9

24.8

Natural Gas Proven Reserves, bcm

25,063.3

25,013.2

24,963.2

24,913.2

24,863.4

24,813.7

Natural Gas Proven Reserves, % change y-o-y

-0.2

-0.2

-0.2

-0.2

-0.2

-0.2

Natural Gas Reserve to Production Ratio, years

148.9

145.7

143.2

140.8

138.7

136.7

4,719.8

4,818.2

4,898.9

4,968.0

5,026.7

5,081.7

2.1

2.1

1.7

1.4

1.2

1.1

145.6

147.1

149.6

151.7

153.5

155.1

0.0

1.0

1.7

1.4

1.2

1.1

1,031.3

1,097.1

1,161.2

1,230.0

1,301.0

1,377.1

6.7

6.4

5.8

5.9

5.8

5.8

Total Hydrocarbons Consumption, US$bn

30.7

32.3

34.2

36.3

38.4

40.6

Total Hydrocarbons Consumption, US$, % change y-o-y

4.5

5.3

5.9

5.9

5.8

5.9

Total Net Hydrocarbons Exports, 000boe/d

3,688.5

3,721.2

3,737.7

3,737.9

3,725.7

3,704.6

Total Net Hydrocarbons Exports, 000boe/d, change y-o-y

0.9

0.9

0.4

0.0

-0.3

-0.6

108.9

108.8

109.4

109.5

109.1

108.5

-1.0

0.0

0.6

0.0

-0.3

-0.6

Petroleum Production, Consumption and Net Exports Total Hydrocarbons Production, 000boe/d Total Hydrocarbons Production, 000boe/d, % change y-o-y Total Hydrocarbons Production, US$bn Total Hydrocarbons Production, US$, % change y-o-y Total Hydrocarbons Consumption, 000boe/d Total Hydrocarbons Consumption, 000boe/d, % change y-o-y

Total Net Hydrocarbons Exports, US$bn Total Net Hydrocarbons Exports, US$, % change y-o-y

© Business Monitor International

Page 11

Qatar Oil & Gas Report Q4 2013

Qatar Proven Oil & Gas Reserves And Total Petroleum Data, 2017-2022 - Continued

2017f

2018f

2019f

2020f

2021f

2022f

Total Net Hydrocarbons Exports, US$mn at US $50/bbl, US$bn

59.2

59.8

60.1

60.1

60.0

59.6

Total Net Hydrocarbons Exports, US$mn at US $100/bbl, US$bn

118.5

119.6

120.2

120.3

119.9

119.3

f = forecast. Source: EIA, BMI

Our forecasts suggest Qatari proven oil reserves will remain broadly flat, with reserves of 25.9bn barrels (bbl) in 2012 falling to just 25.4bn bbl by 2022, given stable production and the prospect of new offshore oil discoveries.

Gas reserves are expected to fall from an estimated 25.3trn cubic metres (tcm) in 2013 to 24.8tcm by the end of the forecast period. Although we have slightly revised up or reserves growth forecast in Q2 2013 on the back of the Khuff discovery at offshore Block 4 North. Germany's Wintershall and Qatar Petroleum (QP) have announced exploration success at Block 4 North offshore Qatar after four years of hunting. The discovery in depths of 70m is estimated to contain as much as 70bn cubic metres (bcm) of gas and is the country's first new find in 42 years.

The find is a boost to the exploration and production (E&P) sharing agreements QP has inked with international oil companies (IOCs) in recent years. Importantly, the find suggests Qatar may yet have untapped hydrocarbons resources, with gas currently sourced from North Field - the world's largest, holding more than 25trn cubic metres (tcm).

We have made a conservative estimate of reserves growth, based on the 70.8bcm that is estimated as gas-inplace (GIP). We also acknowledge, however, some downside risks to the country's proven reserves over the long term, given the expected completion of a study to assess the full potential of Qatar's giant North Field in 2014.

Indeed, some observers believe the repeated delays reflect the possibility that the potential of the field has been exhausted by Qatar's existing gas sales commitments, or that the moratorium will only be lifted on the basis of gas prices in key markets for Qatari LNG cargoes. The government says the study is looking into how quickly gas can be developed without damaging the reservoir.

© Business Monitor International

Page 12

Qatar Oil & Gas Report Q4 2013

Oil Supply And Demand

Table: Qatar Oil Production, Consumption And Net Exports

2011

2012e

2013f

2014f

2015f

2016f

1,641.2

1,579.2

1,631.7

1,686.1

1,731.9

1,779.0

599.0

576.4

595.6

615.4

632.1

649.3

Total Oil Production, % change y-o-y

13.9

-3.8

3.3

3.3

2.7

2.7

Total Oil Production, US$bn

64.4

63.1

64.9

62.2

63.2

64.3

Total Oil Production, US$bn, % change y-o-y

58.3

-2.0

2.9

-4.3

1.7

1.7

Total Oil Production, US$bn at US$50/bbl

30.0

28.8

29.8

30.8

31.6

32.5

Total Oil Production, US$bn at US$100/bbl

59.9

57.6

59.6

61.5

63.2

64.9

Total Oil Production, US$bn at US$150/bbl

89.9

86.5

89.3

92.3

94.8

97.4

176.0

186.5

197.7

209.6

222.1

235.5

6.0

6.0

6.0

6.0

6.0

6.0

1,465.2

1,392.7

1,434.0

1,476.5

1,509.7

1,543.5

Total Net Oil Exports (crude and products), % change y-o-y

14.9

-5.0

3.0

3.0

2.3

2.2

Total Net Oil Exports (crude and products), US $bn

57.5

55.7

57.0

54.4

55.1

55.8

Total Net Oil Exports (crude and products), US $bn, % change y-o-y

59.7

-3.2

2.5

-4.6

1.2

1.2

Total Net Oil Exports (crude and products), US $bn at US$50/bbl

26.7

25.4

26.2

26.9

27.6

28.2

Total Net Oil Exports (crude and products), US $bn at US$100/bbl

53.5

50.8

52.3

53.9

55.1

56.3

Total Net Oil Exports (crude and products), US $bn at US$150/bbl

80.2

76.2

78.5

80.8

82.7

84.5

2017f

2018f

2019f

2020f

2021f

2022f

1,818.5

1,858.9

1,895.2

1,919.1

1,938.3

1,953.1

663.7

678.5

691.7

700.5

707.5

712.9

2.2

2.2

2.0

1.3

1.0

0.8

64.4

65.1

66.4

67.2

67.9

68.4

0.2

1.2

2.0

1.3

1.0

0.8

Total Oil Production, 000b/d Total Oil Production, mn bbl/year

Total Oil Consumption, 000b/d Total Oil Consumption, % change y-o-y Total Net Oil Exports (crude and products), 000b/d

e/f = estimate/forecast. Source: EIA, BMI

Table: Qatar Oil Production, Consumption And Net Exports

Total Oil Production, 000b/d Total Oil Production, mn bbl/year Total Oil Production, % change y-o-y Total Oil Production, US$bn Total Oil Production, US$bn, % change y-o-y

© Business Monitor International

Page 13

Qatar Oil & Gas Report Q4 2013

Qatar Oil Production, Consumption And Net Exports - Continued

2017f

2018f

2019f

2020f

2021f

2022f

Total Oil Production, US$bn at US$50/bbl

33.2

33.9

34.6

35.0

35.4

35.6

Total Oil Production, US$bn at US$100/bbl

66.4

67.8

69.2

70.0

70.7

71.3

Total Oil Production, US$bn at US$150/bbl

99.6

101.8

103.8

105.1

106.1

106.9

249.6

264.6

280.5

297.3

315.1

334.0

6.0

6.0

6.0

6.0

6.0

6.0

1,568.9

1,594.3

1,614.7

1,621.9

1,623.2

1,619.1

1.6

1.6

1.3

0.4

0.1

-0.3

Total Net Oil Exports (crude and products), US$bn

55.5

55.9

56.6

56.8

56.9

56.7

Total Net Oil Exports (crude and products), US $bn, % change y-o-y

-0.4

0.6

1.3

0.4

0.1

-0.3

Total Net Oil Exports (crude and products), US$bn at US$50/bbl

28.6

29.1

29.5

29.6

29.6

29.5

Total Net Oil Exports (crude and products), US$bn at US$100/bbl

57.3

58.2

58.9

59.2

59.2

59.1

Total Net Oil Exports (crude and products), US$bn at US$150/bbl

85.9

87.3

88.4

88.8

88.9

88.6

Total Oil Consumption, 000b/d Total Oil Consumption, % change y-o-y Total Net Oil Exports (crude and products), 000b/d Total Net Oil Exports (crude and products), % change y-o-y

f = forecast. Source: EIA, BMI

© Business Monitor International

Page 14

Qatar Oil & Gas Report Q4 2013

According to the EIA, 2012 Qatar's 2012 production averaged around 1.58mn barrels per day (b/d). For

Qatari Oil Production, Consumption And Net Exports

2013, we expect output to remain largely flat around

2002-2022, 000b/d

the 1.63mn b/d mark. In the year to date, crude production - excluding condensates and natural gas

3,000

2,000

2,000

1,500

1,000

1,000

liquids (NGLs) - production has averaged 730,000b/ d according to the EIA. Sustainable production capacity is reported by the IEA to be 750,000b/d,

production.

With fields maturing, production gains will be led be enhanced recovery operations from crude oil fields,

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f

indicating limited upside for current Qatari crude 500

Total oil production, 000b/d (LHS) Total oil consumption, 000b/d (LHS) Total net oil exports (crude and products), 000b/d (RHS)

as well as gains in condensates and natural gas liquids (NGL) production. Qatar hopes to increase

e/f = estimate/forecast. Source: EIA, BMI

crude production capacity. Although crude production appears set to be lower in 2013, Qatar is forecasting a recovery by end-2014 as redevelopment plans are carried out. We have pencilled in higher crude production, but we expect growth to stall by the end of the forecast period and note the potential for overall output to fall given the mature state of many fields.

New tranches of production from the al-Shaheen fields have been brought online, spurring recent production increases. Over the course of our forecast period, we expect gains in total liquids output to slow, with production reaching 1.78mn b/d by 2016 and 1.95mn b/d by the end of our forecast period in 2022. We see more downside risk than upside to our production forecast, but, given the scale of the potential gas liquids volumes, particularly from the recent start-up of the Pearl GTL project, we note there is also some risk to the upside in our forecasts for overall Qatari liquids production.

In terms of oil consumption, demand for 2012 was around 190,000b/d and is likely to rise to 250,000b/d by 2017. As a result of rapid economic development, consumption has increased dramatically over recent years and looks set to continue with Qatar relying on oil and gas entirely for meeting energy consumption needs.

© Business Monitor International

Page 15

Qatar Oil & Gas Report Q4 2013

Gas Supply And Demand Table: Qatar Gas Production, Consumption And Net Exports

2011

2012e

2013f

2014f

2015f

2016f

133.2

157.0

158.5

160.2

162.3

165.1

Dry Natural Gas Production, % change y-o-y

14.2

17.8

1.0

1.1

1.3

1.7

Dry Natural Gas Production, US$mn

71.3

85.5

85.9

80.5

80.7

81.3

Dry Natural Gas Production, US$bn, % change y-o-y

58.6

20.0

0.5

-6.3

0.3

0.7

Dry Natural Gas Production, US$bn at US$4/mn btu

19.0

22.4

22.6

22.9

23.2

23.6

Dry Natural Gas Production, US$bn at US$12/mn btu

57.1

67.3

67.9

68.7

69.6

70.7

Dry Natural Gas Production, US$bn at US$18/mn btu

85.6

100.9

101.9

103.0

104.3

106.1

Dry Natural Gas Consumption, bcm

30.2

32.3

34.5

37.0

39.7

42.4

Dry Natural Gas Consumption, % change y-o-y

37.8

7.0

7.0

7.0

7.3

7.0

Dry Natural Gas Consumption, US$bn

16.1

17.6

18.7

18.6

19.7

20.9

Dry Natural Gas Consumption, US$bn % change y-o-y

91.5

8.9

6.5

-0.9

6.2

5.9

103.1

124.7

124.0

123.2

122.6

122.6

8.7

21.0

-0.6

-0.6

-0.5

0.0

Dry Natural Gas Net Exports, US$bn

47.7

61.2

60.5

55.6

54.8

54.2

Dry Natural Gas Net Exports, US$bn % change y-o-y

54.1

28.2

-1.2

-8.0

-1.6

-1.0

Dry Natural Gas Net Exports, at US$50/bbl US$bn

25.6

31.0

30.8

30.7

30.5

30.5

Dry Natural Gas Net Exports, at US$100/bbl US$bn

51.3

62.0

61.7

61.3

61.0

61.0

o/w Pipeline Gas Net Exports, bcm

19.5

19.5

19.5

19.5

19.5

19.5

0.0

0.0

0.0

0.0

0.0

0.0

18.9

15.6

15.7

15.8

15.9

15.9

o/w Pipeline Gas Net Exports, US$bn

0.0

0.0

0.0

0.0

0.0

0.0

o/w Pipeline Gas Net Exports, US$bn % change y-o-y

0.0

0.0

0.0

0.0

0.0

0.0

o/w LNG Net Exports, bcm

83.6

105.2

104.5

103.7

103.1

103.1

o/w LNG Net Exports, % change y-o-y

11.0

25.9

-0.7

-0.7

-0.6

0.0

o/w LNG Net Exports, % of Total Gas Exports

81.1

84.4

84.3

84.2

84.1

84.1

o/w LNG Net Exports, US$bn

47.7

61.2

60.4

55.6

54.7

54.2

o/w LNG Net Exports, US$bn % change y-o-y

54.2

28.3

-1.2

-8.0

-1.6

-1.0

Dry Natural Gas Production, bcm

Dry Natural Gas Net Exports, bcm Dry Natural Gas Net Exports, % change y-o-y

o/w Pipeline Gas Net Exports, % change y-o-y o/w Pipeline Gas Net Exports, % of total

e/f = estimate/forecast. Source: EIA, BMI

© Business Monitor International

Page 16

Qatar Oil & Gas Report Q4 2013

Table: Qatar Gas Production, Consumption And Net Exports

2017f

2018f

2019f

2020f

2021f

2022f

168.4

171.7

174.3

176.9

179.2

181.5

2.0

2.0

1.5

1.5

1.3

1.3

Dry Natural Gas Production, US$mn

81.2

82.0

83.2

84.5

85.6

86.7

Dry Natural Gas Production, US$bn, % change y-o-y

-0.1

0.9

1.5

1.5

1.3

1.3

Dry Natural Gas Production, US$bn at US$4/mn btu

24.1

24.5

24.9

25.3

25.6

25.9

Dry Natural Gas Production, US$bn at US$12/mn btu

72.2

73.6

74.7

75.8

76.8

77.8

Dry Natural Gas Production, US$bn at US$18/mn btu

108.2

110.4

112.1

113.7

115.2

116.7

45.4

48.3

51.1

54.1

57.2

60.5

6.9

6.5

5.8

5.9

5.7

5.8

21.9

23.1

24.4

25.8

27.3

28.9

4.7

5.4

5.8

5.9

5.7

5.8

123.0

123.4

123.2

122.8

122.0

121.0

0.3

0.3

-0.2

-0.3

-0.6

-0.8

Dry Natural Gas Net Exports, US$bn

53.3

53.0

52.9

52.7

52.3

51.8

Dry Natural Gas Net Exports, US$bn % change y-o-y

-1.7

-0.6

-0.2

-0.4

-0.8

-1.0

Dry Natural Gas Net Exports, at US$50/bbl US$bn

30.6

30.7

30.6

30.5

30.3

30.1

Dry Natural Gas Net Exports, at US$100/bbl US$bn

61.2

61.4

61.3

61.1

60.7

60.2

o/w Pipeline Gas Net Exports, bcm

19.5

19.5

19.5

19.5

19.5

19.5

0.0

0.0

0.0

0.0

0.0

0.0

15.9

15.8

15.8

15.9

16.0

16.1

o/w Pipeline Gas Net Exports, US$bn

0.0

0.0

0.0

0.0

0.0

0.0

o/w Pipeline Gas Net Exports, US$bn % change y-o-y

0.0

0.0

0.0

0.0

0.0

0.0

103.5

103.9

103.7

103.3

102.5

101.5

0.4

0.4

-0.2

-0.4

-0.8

-1.0

o/w LNG Net Exports, % of Total Gas Exports

84.1

84.2

84.2

84.1

84.0

83.9

o/w LNG Net Exports, US$bn

53.3

52.9

52.8

52.6

52.2

51.7

o/w LNG Net Exports, US$bn % change y-o-y

-1.7

-0.6

-0.2

-0.4

-0.8

-1.0

Dry Natural Gas Production, bcm Dry Natural Gas Production, % change y-o-y

Dry Natural Gas Consumption, bcm Dry Natural Gas Consumption, % change y-o-y Dry Natural Gas Consumption, US$bn Dry Natural Gas Consumption, US$bn % change y-o-y Dry Natural Gas Net Exports, bcm Dry Natural Gas Net Exports, % change y-o-y

o/w Pipeline Gas Net Exports, % change y-o-y o/w Pipeline Gas Net Exports, % of total

o/w LNG Net Exports, bcm o/w LNG Net Exports, % change y-o-y

f = forecast. Source: EIA, BMI

© Business Monitor International

Page 17

Qatar Oil & Gas Report Q4 2013

Qatari Natural Gas Production, Consumption And Net Exports 2002-2022, bcm 200

150

100 100

0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f

50

0

Dry natural gas production, bcm (LHS) (LHS) (LHS) Dry natural gas consumption, bcm (LHS) (LHS) (LHS) Dry natural gas net exports, bcm (RHS) (RHS)

e/f = estimate/forecast, Source: EIA, BMI

In terms of natural gas, BMI estimates that 2012 production was approximately 157bn cubic metres (bcm). This figure is set to rise steadily over the forecast period, but for now we expect that, with export capacity largely maxed out, production growth will slow compared to recent years.

© Business Monitor International

Page 18

Qatar Oil & Gas Report Q4 2013

Gains Slow As Exports Peak Qatar Gas Production Growth, % chg y-o-y

50

25

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0

Source: EIA/BMI

Upstream Upside

Qatar's energy minister Mohammed al-Sada said shortly after recent the Block 4 North discovery was announced that 'exploration efforts have been in intensified in new blocks', with the minister citing six 'active blocks that are being explored' both onshore and offshore. Sada also told reporters at the Gulf Energy Forum in Doha that the Block 4 find, which lies adjacent to North Field, was currently being assessed to determine 'to which extent it can be monetised'.

© Business Monitor International

Page 19

Qatar Oil & Gas Report Q4 2013

Little Strain On Supply From Flaring, Reinjection Qatar Gas Breakdown, Yearly (Mcm)

*OPEC figures may differ from EIA figures upon which we rely for historical data. Source: OPEC

The strike comes at an important time for Qatar's gas industry, with a self-imposed moratorium on new upstream developments at North Field currently in place as officials determine the best way to develop the field. The QP and ExxonMobil Barzan gas project, with the capacity to supply an additional 14.3bcm by 2014/15, is currently the only project that has been allowed to proceed since the 2005 moratorium came into force. The US$8.6bn project will deliver gas to the domestic market, primarily serving power and water needs.

With mixed signals from Qatari officials about when, or if, the moratorium on additional development at North Field may be lifted, any increase in production in the near term may have to be sourced from new discoveries such as the Block 4 discovery.

© Business Monitor International

Page 20

Qatar Oil & Gas Report Q4 2013

Gas Powered Qatar Total Net Generation By Type (Twh) 125

100

75

50

25

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

2010

0

Source: EIA/BMI/World Bank

On the other side of the ledger, gas consumption is also rising rapidly - indeed, at a much more rapid pace than production - with power generation expansion and the start up of Pearl GTL as primary drivers. Our consumption forecast estimates that consumption rose nearly 10% between 2011 and 2012 to reach approximately 32bcm. This is on top of a 38% increase in natural gas consumption which occurred between 2010 and 2011. Consumption growth will continue steadily over our forecast period, reaching almost 45bcm by 2017 and 60bcm by 2022, with upside risk to these figures as new industrial projects are announced and with limited prospects that measures could be introduced to reduce demand such as the reform of subsides.

© Business Monitor International

Page 21

Qatar Oil & Gas Report Q4 2013

Qatar In Front… For Now LNG Exports By Country, LHS & Share Of Total Market, RHS (%)*

*IGU figures may differ slightly from historical data from EIA upon which we rely. Source: International Gas Union

LNG Qatar is the world's biggest exporter of liquefied natural gas (LNG), accounting for more than 25% of global contracted volumes in 2010. The country has two LNG exporters, namely Qatargas and Ras Laffan LNG Company (RasGas). Each operates seven trains, which represent a total LNG export capacity of 77mn tonnes per annum (mntpa), or around 107bcm. Qatar has not announced plans to add more liquefaction capacity beyond the existing 77mntpa

© Business Monitor International

Page 22

Qatar Oil & Gas Report Q4 2013

Asia In Front Qatar LNG Exports By Destination, 2012 (%)

Source: International Gas Union

Table: Qatar LNG Infrastructure

Name

Location

Status

Type

Rasgas Trains 1 and 2

Ras Laffan

Operational

Onshore

6.80

Rasgas Train 3, 4 and 5 (RGX)

Ras Laffan

Operational

Onshore

Rasgas Train 6 (RGX2)

Ras Laffan

Operational

Rasgas Train 7 (RGX2)

Ras Laffan

Operational

Qatargas1

Qatargas2

Ras Laffan

Ras Laffan

Operational

Operational

© Business Monitor International

Trains

Owners

9.38

2

Qatar Petroleum, ExxonMobil

14.10

19.46

3

Qatar Petroleum, ExxonMobil

Onshore

7.80

10.76

1

Qatar Petroleum, ExxonMobil

Onshore

7.80

10.76

1

Qatar Petroleum, ExxonMobil

13.80

Qatar Petroleum, ExxonMobil, Total, Mitsui, 3 Marubeni

21.53

Train 4: Qatar Petroleum, ExxonMobil;

Onshore

Onshore

Capacity (mn tpa) Capacity (bcm)

10.00

15.60

2

Page 23

Qatar Oil & Gas Report Q4 2013

Qatar LNG Infrastructure - Continued

Name

Location

Status

Type

Capacity (mn tpa) Capacity (bcm)

Trains

Owners Train 5: Qatar Petroleum, ExxonMobil, Total

Qatargas3

Ras Laffan

Operational

Onshore

7.80

10.76

Qatar Petroleum, ConocoPhillips, 1 Mitsui

Qatargas4

Ras Laffan

Operational

Onshore

7.80

10.76

1

Qatar Petroleum, Shell

Source: BMI

Over the near-to-medium term, increased exports to Asia, with India highlighted as one key growth market, are expected to make up for flat demand in Europe. While we expect gas production to grow slowly in Qatar, a decision to halt the expansion of LNG export capacity will keep exports steady over the course of our forecast, even as output rises. Although LNG capacity could rise via improvements to existing facilities, we do not currently anticipate any expansion of capacity via the construction of additional trains given government policy.

Indeed, Qatar must operate in a changing gas market - highlighted by changing supply dynamics stemming from the unconventional revolution and rising supplies of LNG from Australia, North America, East Africa and Russia. As a result, we expect LNG exports to largely hold steady and could even head lower should the demand for spot cargoes weaken as new supplies come online.

© Business Monitor International

Page 24

Qatar Oil & Gas Report Q4 2013

Asia & Europe Dominate Top 10 Qatar LNG Exports By Country, bcm (2012)

Source: International Gas Union

Refining And Oil Products Trade

Table: Qatar Refining - Production And Consumption, 2011-2016

2011

2012e

2013f

2014f

2015f

2016f

338.7

338.7

338.7

338.7

338.7

488.7

0.0

0.0

0.0

0.0

0.0

44.3

90.0

90.0

90.0

90.0

90.0

90.0

304.8

304.8

304.8

304.8

304.8

439.8

-7.2

0.0

0.0

0.0

0.0

44.3

Refined Products Production (inc ethanol and nonconventional), 000b/d

327.8

328.8

329.8

330.8

331.8

467.8

Refined Products Production (inc ethanol and nonconventional), % change y-o-y

-6.7

0.3

0.3

0.3

0.3

41.0

Refined Products Consumption (inc ethanol and nonconventional), 000b/d

176.0

186.5

197.7

209.6

222.1

235.5

Refined Products Consumption (inc ethanol and nonconventional), % change y-o-y

6.0

6.0

6.0

6.0

6.0

6.0

Crude Oil Refining Capacity, 000b/d Crude Oil Refining Capacity, % change y-o-y Crude Oil Refining Capacity, Utilisation, % Refined Petroleum Products Production, 000b/d Refined Petroleum Products Production, % change y-o-y

e/f = estimate/forecast. Source: EIA, BMI

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Table: Qatar Refining - Production And Consumption

2017f

2018f

2019f

2020f

2021f

2022f

638.7

638.7

638.7

638.7

638.7

638.7

Crude Oil Refining Capacity, % change y-o-y

30.7

0.0

0.0

0.0

0.0

0.0

Crude Oil Refining Capacity, Utilisation, %

90.0

90.0

90.0

90.0

90.0

90.0

574.8

574.8

574.8

574.8

574.8

574.8

30.7

0.0

0.0

0.0

0.0

0.0

Refined Products Production (inc ethanol and nonconventional), 000b/d

603.8

604.8

605.8

606.8

607.8

608.8

Refined Products Production (inc ethanol and nonconventional), % change y-o-y

29.1

0.2

0.2

0.2

0.2

0.2

Refined Products Consumption (inc ethanol and nonconventional), 000b/d

249.6

264.6

280.5

297.3

315.1

334.0

Refined Products Consumption (inc ethanol and nonconventional), % change y-o-y

6.0

6.0

6.0

6.0

6.0

6.0

Crude Oil Refining Capacity, 000b/d

Refined Petroleum Products Production, 000b/d Refined Petroleum Products Production, % change yo-y

f = forecast. Source: EIA, BMI

The Qatar Petroleum Refinery was built in 1958 and is capable of processing both crude oil and condensate. The QP refinery was last expanded in 2001, increasing total capacity from 57,500b/d to 200,000b/d. Qatar's latest refinery in the industrial city of Ras Laffan came on stream in late-September 2009, about a year behind schedule, adding 146,000b/d to the country's refining capacity.

QP has formally announced a joint venture with private players led by Total for the construction of US $1.5bn condensate refinery at Ras Laffan. At 146,000b/d, the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online in H216. The plant will have a production capacity of: ■

60,000b/d of naphtha

■

53,000b/d of jet fuel

■

24,000b/d of gas oil

■

9,000b/d of liquid petroleum gas (LPG)

The project will developed by QP (84%) and Total (10%), with Idemitsu Kosan, Cosmo Oil and Marubeniand Mitsui holding the remainder. Supplied from Qatar's giant gas-rich North Field, the combined 300,00b/d capacity of LR1 and LR2 will make the plant the largest condensate refinery developed to date.

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Gas-To-Liquids

Apart from the two conventional refineries, Qatar also has a 34,000b/d GTL plant known as Oryx, which is operated by South African synthetic oil specialist Sasol. Sasol plans to treble the capacity of the site, potentially taking it to more than 100,000b/d. The plan is feed by gas from the Al Khaleej field.

In addition, the larger Shell-operated Pearl GTL plant has the capacity to produce 140,000b/d of ultra-clean diesel, naphtha etc, with the first train having started up in 2011 and reached full capacity in the end of 2012. The Pearl facility also produces some 120,000b/d worth of associated condensate and LPG volumes. The plant is currently the world's largest GTL facility and is notable as the first GTL facility to integrate upstream natural gas production with the downstream conversion facility.

The planned US$11bn al-Shaheen refinery was reported in February 2010 to be indefinitely delayed, with re-scaling and re-tendering expected. The 250,000b/d facility was to be fed with heavy, sour crude from the eponymous offshore oil field. GTL capacity is currently not included in our downstream forecast.

Revenues/Import Costs Crude oil and liquids export revenues are set to fall slightly from an estimated US$56bn in 2012 to US $55.5bn by 2017. The BMI oil price assumptions are US$109/bbl in 2013 (OPEC basket) and US$101/bbl in 2014. By 2016, gas export revenues should have reached US$54bn. However, there is an expected decline at the end of our forecast period, with gas export revenues dropping to US$52bn by 2022.

Key Risks To BMI's Forecast Scenario Qatar is sensitive to oil price fluctuations, which would hit its crude export revenues. Although we do not see it as a likely event, the possible emergence of an 'LNG glut' could hit Qatar's LNG export revenues hard, while any increase in volume or price for pipeline exports to the UAE and Oman will boost gas revenues. Certainly the potential increase in competition from emerging natural gas players, including those in East Africa, could pose a long-term threat, although much of that new production is set to hit the market beyond our forecast period.

Finally, there is increasing pressure from major LNG importing countries, namely Japan and South Korea, which are pushing to de-link LNG contract pricing from oil prices. Qatar is strongly resisting this push; however, as new export markets become available, the arbitrage opportunity may become too great, forcing

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some contract terms and pricing mechanisms to change over the medium-to-long term. This could potentially have a significant impact on Qatar, and particularly on Qatari fiscal accounts.

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Industry Risk Reward Ratings Middle East - Risk/Reward Ratings BMI View: Smaller markets with strong openness to foreign investment continue to outperform those with larger resource endowments in our overall rankings, with Israel, the UAE and Qatar outperforming countries like Saudi Arabia. Iraq remains the country most likely to move up or down in our rankings with both strong upside and downside risks, as the country's potential is undermined by a multitude of aboveground woes. We also highlight Kuwait as a market at risk of continued underperformance as business environment threats challenge both upstream and downstream performance.

The main conclusions from our Middle East Risk/Reward Ratings are: ■

Scores and rankings have remained largely unchanged in our Risk/Reward Ratings (RRRs), reflecting the mature status of the majority of producers in the region. In terms of production, we currently expect steady gains in most markets over the course of our forecast period, notwithstanding the downside risks to this view. Risks stem from the ongoing disruption to traditional trade flows as growth in non-OPEC production displaces Middle East imports in the US, and as OPEC states increasingly compete for market share in demand-hungry Asia.

■

The UAE has retained its top spot in our overall oil & gas RRRs. The country's relative openness to foreign investment in both the upstream and downstream segments, as well as a major investment plan targeting a sizable expansion of production capacity are among the reasons for its outperformance relative to its peers in the region on key metrics. Nonetheless, we highlight risks to watch on the horizon for the UAE.

■

Firstly, reports are emerging that the UAE may miss its stated target of 3.5mn barrels per day (b/d) by 2017. According to officials and industry sources, the country may not reach this production level until 2020. While we had priced-in delays to our output forecast, which sees production reaching 3.6mn b/d only by 2020, further setbacks may cause us to revisit this and pencil-in slower growth that could result in a fall in the UAE's upstream scores.

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Gains May Come Slower As Setbacks Are Encountered UAE Oil Production ('000b/d) 4,000

3,000

2,000

1,000

2022f

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

0

f=forecast. Source: EIA

■

Secondly, we highlight delays to the concession renewal process, which has been complex and at times seemingly politically-charged. The likelihood that deadlines will be missed - in a process that has already been characterised as confusing and contentious - holds the risk that much-needed investment in enhanced oil recovery (EOR) operations to boost output from aging fields could be delayed. Moreover, concerns regarding the process itself could see the UAE's upstream risk score fall.

Table: BMI's Middle East Oil & Gas Risk/Reward Ratings

Upstream RRRs

Downstream RRRs

Oil & Gas RRRs

Rank

UAE

69

51

60

1

Israel

63

56

60

2

Qatar

71

39

55

3

Iraq

71

37

54

4

Oman

61

39

50

5

Saudi Arabia

50

48

49

6

Bahrain

53

37

45

7

Kuwait

50

37

43

8

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BMI's Middle East Oil & Gas Risk/Reward Ratings - Continued

Upstream RRRs

Downstream RRRs

Oil & Gas RRRs

Rank

61

43

52

8

Regional Average

NB Scores out of 100; *Higher score = lower risks. Source: BMI

■

Kuwait and Iran have swapped spots at the bottom of our overall rankings, leaving the latter in last place. This reflects the continued deterioration our outlook for Iran, as sanctions further erode the near- and long-term competitiveness of its oil & gas sector.

■

In the case of Kuwait, the country's long-troubled business environment remains the key obstacle to its industry performance. Long-running disputes between the government and opposition parties in the country's vocal parliament have stalled key upstream and downstream projects, while regular industrial action has further dampened its production outlook.

■

Iraq continues to be the most volatile market in our rankings. The oil & gas sector is in the midst of a major expansion, with new projects set to come online over the course of our forecast period. We have recently pared back our production forecasts to account for continued above-ground headwinds Iraq faces despite its abundant potential. Nonetheless, there are sizable risks to the downside which could well materialise and see Iraq's overall ranking slip.

Production Grows But Questions Remain Over Extent Of Gains Iraq Oil Production ('000b/d) 6,000

4,000

2,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f 2018f

0

f = forecast. Source: EIA/BMI

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Table: Middle East Upstream Oil & Gas Risk/Reward Rating

Upstream Industry Rewards

Upstream Country Rewards

Upstream Rewards

Upstream Industry Risks*

Upstream Country Risks*

Upstream Risks*

Upstream RRRs

Rank

Qatar

74

85

77

55

61

57

71

1

Iraq

88

85

87

40

21

33

71

2

UAE

68

75

69

73

62

69

69

3

Israel

50

70

55

90

67

82

63

4

Oman

51

60

53

85

62

77

60

5

Bahrain

38

65

44

80

61

73

53

6

Saudi Arabia

80

10

63

5

49

21

50

7

Kuwait

79

5

60

5

60

24

50

8

Iran

61

28

53

10

34

18

42

9

65

54

62

49

53

51

59

-

Regional Average

NB Scores out of 100; *Higher score = lower risks. Source: BMI.

■

Qatar and Iraq have changed positions at the top of our Upstream Rankings, with the gas-rich peninsula now in the lead. A downward revision in our production forecast for Iraq and a deterioration in the political outlook for the country - as relations sour between political and ethnic groups - have sent Iraq's scores lower.

■

Nonetheless, there is scope for strong gains in Iraqi oil and gas production. A reform of fiscal terms on offer, addressing its infrastructure bottlenecks, and improving relations between key interest groups are among the moves that could see an improvement in Iraq's upstream scores.

■

Qatar continues to benefit from a stable political environment, a strong degree of foreign participation in the oil & gas sector, and sizable reserves. However looking ahead, gains in gas production are set to slow as its last major project comes online mid-decade and while a moratorium on further developments remains. Although a recent discovery shows that the country not only has untapped potential but that its exploration push is bearing fruit, slower-than-expected growth in both gas and liquids output from middecade could see Qatar's upstream scores move lower.

■

Underscored by our recent upward revision of gas reserves in Israel, we see scope for the newly gas-rich country to move higher in our upstream rankings as exploration further proves up the offshore potential of the Mediterranean Sea. As development plans advance, we could also upwardly revise our production and export outlook for the country and see scores rise further.

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Israel Comes Online As Qatar Slows Down Israel & Qatar Gas Production (bcm) 200

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2013f 2014f 2015f 2016f 2017f 2018f

100

Israel : Dry natural gas production, bcm Qatar : Dry natural gas production, bcm

e/f = estimate/forecast. Source: EIA/BMI

■

The Israeli parliament has come to an agreement on the amount of gas to export and to reserve for the domestic market. However, we do see some downside risk to its gas reserves, production and exports if nationalist opposition to current export plans sees this national debate continue.

■

A slight increase in reserves and steady above-ground performance saw a slight increase in Saudi Arabia's overall upstream score and move ahead of Kuwait despite a recent downward revision to our production forecasts for the country. While we see further risks to Saudi output if the world's swing producer with the largest spare capacity decides to cut production to support prices in a well-supplied global oil market, the scale of its reserves and production capacity leaves it well-placed to continue its strong upstream performance.

■

However these rewards in Saudi Arabia are largely off-limits to foreign players due to its tightly controlled oil sector. We also note a tightening of gas supplies, which could even see the Kingdom resort to temporary or seasonal LNG imports, as a further downside risk to the country's upstream score.

■

Although Kuwait is advancing a major upstream investment programme, we see Kuwait's upstream scores particularly at threat as a result of the country's poor track record in attracting foreign investment compared to other producers in the region. Political infighting could also continue to delay major projects. These risks could see us further downgrade both the country's output and risk scores.

■

Across the region, we see growing interest in unconventional exploration. Although nearly all major producers in the region have expressed interest in tapping various deposits - shale gas and oil in Kuwait for example - we see Saudi Arabia and Oman as the best positioned for success. New supplies could boost upstream scores and alleviated shortages, with Oman on the verge of a major tight gas project led by BP following an agreement with the supermajor on prices. Again, owing to its troubled business

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environment, we expect Kuwait to make the least progress in the region in tapping challenging and difficult-to-recover deposits. ■

Despite its significant oil and gas reserves, above-ground obstacles in Iran will keep the country at the bottom of our rankings until sanctions are removed and badly-needed new investment and foreign participation returns to unlock the country's below-ground potential. While the recent election of moderate Hassan Rouhani could ease tensions, at present it remains near-impossible to determine if or when Iran's oil & gas sector could return to health.

■

Broadly speaking, despite strong hydrocarbons potential across much of the region which translates into strong industry rewards, limits to foreign participation result in lower rewards scores while political uncertainty results in elevated risks in our proprietary upstream rankings.

Table: Middle East Downstream Oil & Gas Risk/Reward Rating

Downstrea Downstrea Downstrea Downstrea m Industry m Country Downstrea m Industry m Country Downstrea Downstrea Rewards Rewards m Rewards Risks Risks m Risks m RRRs

Rank

Israel

37

60

43

100

69

88

56

1

UAE

50

44

49

50

63

55

50

2

Saudi Arabia

60

34

54

10

71

34

48

3

Iran

51

50

51

10

42

23

42

4

Qatar

43

28

40

20

66

38

39

5

Oman

26

42

30

60

58

59

39

6

Iraq

42

44

43

15

39

25

37

7

Kuwait

42

26

38

15

63

34

37

8

Bahrain

24

32

26

60

63

61

37

9

Regional Average

42

40

41

38

59

46

43

-

NB: Scores out of 100; *Higher score = lower risks. Source: BMI

■

Israel maintains its top score in our downstream rankings. Despite its small market and limited growth potential - particularly compared to favourable demographics for demand in other countries in the region - hitting on its rewards score, the open nature of the sector supports high risks scores, reflecting lower overall perceived risks.

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In The Lead But Below Average Oil Consumption, % chg y-o-y

25

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

0

Israel: Oil consumption, % change y-o-y Saudi Arabia: Oil consumption, % change y-o-y UAE: Oil consumption, % change y-o-y Middle East: Regional Oil consumption, % change y-o-y

f = forecast. Source: EIA, BMI

■

However, in general the Middle East's downstream segment is highlighted by relatively low scores, with downstream rewards averaging at 41 (including Israel). Despite the growth potential offered by rapidly rising consumption across much of the region, state ownership of refineries and subsidised fuel prices, which oil-rich states in the region have been resistant to reform, limit potential rewards.

■

While greenfield and brownfield developments over the course of our forecast period will raise capacity in the region, many projects, such as the three mega-refineries due to come online by 2017 in Saudi Arabia, have already been priced into our long-term forecasts.

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■

Where we see further upside, is Iraq, although the country has struggled to advance the four major downstream projects since awarding design contracts in 2009. This has left Iraq dependent on imports despite its growing crude oil production. Although there are incentives, we see little nearterm scope for improvement in the above-ground economic and regulatory risks that have deterred foreign investment in refining projects to date. One project we are optimistic may advance is the 300,000b/d Nassiriya plant tied to development of a major field, though we have not pencilled-in any capacity increase to our current forecast.

On The Rise Middle East Refinery Capacity ('000b/d) & % chg y-o-y 15,000

10 10,000

5,000

Although we expect capacity increases in Kuwait, we note that previous delays to the Al-Zour refinery project - again as result of political and bureaucratic pressures - could see downward revisions to our projections that currently include the 615,000b/d greenfield development as well as capacity expansions at existing plants.

• While investment in new refineries across the region will lift our assessment of downstream infrastructure and therefore ratings for each market, new capacity will do little to alter the fundamentals of a tightly-regulated downstream segment.

0

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f 2018f

■

Middle East oil refinery capacity, 000b/d (LHS) Middle East oil refinery capacity, 000b/d~ % change y-o-y (RHS)

f = forecast. Source: EIA/BMI

Qatar - Risk/Reward Ratings Qatar Upstream Rating

Qatar, a member of OPEC, is also the world's largest supplier of liquefied natural gas (LNG) worldwide. It also remains one of the world's top crude oil exporters. Its significant below-ground potential, as well as its leadership of the natural gas industry, ensures that the country will remain a key global player for the foreseeable future. The presence of non-state competitors and relatively stable political outlook support an attractive business environment.

Massive proven natural gas reserves and its strong gas reserves to production ratio support Qatar's role as a key player in the sector for the foreseeable future. Its oil reserves are significant as well, although its fields are maturing. As such, the absence of new oil discoveries will see its proven oil reserves begin to decline over the coming decade. However, the strong presence of foreign players and positive licensing terms also make it an attractive investment location, making its overall outlook very positive.

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The strong likelihood of governance and policy continuity, as well as relatively low levels of corruption, especially for the Middle East region, reduces some of the country's political risks. The country receives an average score for physical infrastructure, although there has been additional infrastructure investment in recent years, particularly in support of LNG exports.

Qatar Downstream Rating

Meeting rapidly growing domestic energy demand going to be critical in the years ahead, particularly in terms of gas production which is the primary input for the country's electricity. While oil consumption remains low relative to production, it is rising rapidly as well. The downstream segment also remains relatively closed off to foreign investment. Planned expansions of downstream capacity could bolster Qatar's downstream rating.

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Market Overview Qatar Energy Market Overview Latest data from the Qatar Statistics Authority (QSA) show that the Qatari economy expanded by 6.2% in real annual terms during Q113, decelerating slightly from growth of 7.5% and 6.6% in Q112 and Q412 respectively. The oil and gas sector continued the trend of weak growth seen since Q212, expanding by 0.8% year-on-year and remaining the worst performing sector of the economy. We expect the expansion of the hydrocarbons sector to remain mild throughout Q413 and 2014, constrained by a small decline in oil production and limited medium-term potential for liquefied natural gas (LNG) output growth. According to data from the International Energy Agency, oil output averaged 0.73mn barrels per day (b/d) during the first seven months of 2013, down by 3.0% from the same period of 2012.

The changing LNG market could push Qatar to shift strategies on gas. Firstly, we could see greater investment in both petrochemicals and gas-to-liquids (GTL). These moves would diversify the revenue stream away from gas and - if sufficient investment is made - could help offset any loss in profits as LNG prices trend downward in lucrative Asian markets. Secondly, Qatar may seek alternative export opportunities for gas; this could bring about an increase in existing pipeline connections within the Gulf region, with countries such as Kuwait and the UAE set to see their gas import requirement rise over the coming years.

Perhaps more boldly, Qatari officials at the Brooking Doha Energy Forum in April suggested the development of a regional network that would link the Middle East with Southern Europe. Such a proposal faces numerous geopolitical and financial hurdles, but given the financial resources of countries such as Qatar, and Europe's interest in securing investment from the cash-rich region as well as reducing reliance on Russian gas, the idea could enjoy a welcome reception.

With a moratorium on development of North Field, Qatar's energy strategy is in a period of transition. Downstream expansion is consistent with that broader strategy as Qatar's role as the largest exporter of LNG is increasingly under pressure from new suppliers. In response, Qatar has moved to boost cooperation with foreign players for new discoveries, make new investment in petrochemicals and gas-to-liquids (GTL), and boost investment abroad to capture a slice of emerging sources of new gas supplies.

An expansion of downstream capacity, although not a recent proposal, is consistent with Qatar's broader aims to diversify and strengthen its energy position as it prepares for shifting realities on the LNG front. Boosting refining capacity will allow Qatar to move up the value chain and capture higher revenues with

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export of refined products rather than unprocessed condensate alone, which already is sold at a premium on international markets given its suitability for both refining and as feedstock for petrochemicals.

Although LNG capacity could rise via improvements to existing facilities, we do not currently anticipate any expansion of capacity via the construction of additional trains given government policy. Indeed, Qatar must operate in a changing gas market - highlighted by changing supply dynamics stemming from the unconventional revolution and rising supplies of LNG from Australia, North America, East Africa and Russia. The anticipation of rising supplies is strengthening the hand of LNG importers, who are keen to see prices fall from recent record highs, particularly in Asia where demand for LNG is set to grow most.

In 2012, Qatar saw talks for LNG exports to India and Pakistan enter deadlock as both governments rejected Doha's offers based on prices that were seen as too high. Qatar, which has been resistant to altering gas prices indexed to oil, could come under pressure as alternative supplies enter the LNG market especially as the Asian gas market takes tentative steps toward greater liberalisation. Japan's efforts to introduce an LNG futures market, as well as Tokyo and Seoul's joint efforts to use their combined purchasing power to lower prices and ensure imports are indexed to alternative benchmarks such as Henry Hub, could place further pressure on Qatari LNG pricing.

Qatar has also announced plans to boost investment in North America. The moves seek to take advantage of the glut of low-priced gas that is likely to transform North America from an importer into a supplier to the global market. We believe the move will benefit not only upstream and downstream investment in North America, but will help Qatar remain a key player in the global LNG market, even as alternative supplies start to come online.

The response may allow Qatar to weather an environment of increased supply and even to profit from the rise of competitors in the global market. The most recent was Qatar Petroleum International (QPI)'s announcement that it would team-up with the UK's Centrica to spend CAN1bn (US $976mn) on acquiring Suncor Energy's conventional natural gas assets across Alberta, northeastern British Colombia and southern Saskatchewan. Centrica estimates proved plus probable gas reserves at nearly 30bn cubic meters (bcm), but contingent resources may be closer to 84bcm given prospective but undeveloped acreage.

The acquisition will help Centrica to meet local demand via its North American subsidiary, but importantly for Qatar, will give QPI a foothold in the Canadian gas market, where the number of planned and proposed LNG projects is growing. Indeed, in making the move, Qatar announced this play in Canada would be the first of numerous future investments.

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Following hot on the heels of the deal between QPI and US super major ExxonMobil to 'assess jointly unconventional gas resources in North America and global opportunities' in LNG, Qatar should be taken at its word. Exxon, with a significant presence in the gas and LNG market in Qatar, is now deepening its global cooperation with Doha. The duo have already partnered on the Gulf Coast-based Golden Pass LNG terminal, with an application currently pending with US regulators to allow exports beyond those countries with which the US has Free Trade Agreements (FTA).

Overview/State Role The oil and gas sector is state-controlled, with Qatar Petroleum responsible for exploration and production (E&P). NODCO is in charge of refining and distribution. Qatargas and RasGas are responsible for the production and marketing of LNG. The state controls virtually all aspects of the energy sector, sets policy and determines domestic pricing. Qatar Petroleum itself accounts for 50% of national oil production and almost 40% of gas volumes.

Licensing And Regulation Following a bloodless coup in 1995, Qatar initiated policies aimed at increasing oil production, locating additional oil reserves and investing in advanced oil recovery systems to extend the life of existing fields. The government also improved the terms of exploration and production (E&P) contracts and production sharing agreements (PSAs). The aim was to encourage international oil companies (IOCs) to improve oil recovery in producing fields and to explore for new oil deposits. There has been considerable success in the field of natural gas, making it the world's leader in LNG, but there is less IOC involvement in oil. Major foreign oil companies now involved in Qatar include ExxonMobil, Royal Dutch Shell, Maersk Oil & Gas, Japan's Marubeni and Mitsui, Occidental Petroleum and Total.

Government Policy Qatar is a member of OPEC, making it such that its oil production levels are subject to the quotas and policies of the organization. However, because condensates and natural gas liquids (NGLs) are not considered under the auspices of OPEC, their share of production in Qatar has been on the rise in recent years. Indeed, according to the EIA, condensate and NGL production almost doubled from 2007 to 2010, from 287,000 barrels per day (bbl/d) to 567,000bbl/d.

Qatar Petroleum remains the dominant player in the country's natural gas sector. Its preference for largescale projects with an eye to either boosting the country's exports or facilitating a deeper utilisation of the country's natural resources by its industries allows the government to favour partnerships with the world's

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top integrated oil companies with expertise in mega-projects. QP does maintain, however, a majority share in all of the country's projects.

International Energy Relations While Qatar has historically tended to focus on investing in its domestic energy resources, companies such as QP are looking to develop a higher-profile international presence. This links into a more general Qatari policy of raising the country's international profile both economically and diplomatically. This policy was demonstrated by developments in March 2010 when Russia and France both announced potential energy sector cooperation with Qatar.

Qatar is looking to diversify its customer base for LNG sales, with a significant amount of new demand coming from Asia. Indeed, in 2012 the country sold LNG to 23 countries. This represents a significant increase from the eight countries with which Qatar did business in 2007.

Middle East

The Dolphin pipeline which currently supplies exports to Oman and the UAE from Qatar could see investment in new infrastructure to support additional supplies. However, the current steep discount at which gas is sold means that the actual delivery of any additional volumes will likely be dependent upon an increase in prices as Qatar looks to shift strategies on gas in line with a changing liquefied natural gas market. Under current plans, a new compression facility at Ras Laffan would allow Dolphin to economically deliver volumes closer to full capacity from 2015. The cost at which any gas would be sold will be key to determining whether a capacity expansion would be utilised. Currently, gas is sold at a significant discount, with customers in the UAE and Oman reportedly paying just US$1.30 per mn British thermal units (BTU), compared to the US$17/mnBTU that Qatari gas was fetching in Asia at the time of writing.

Asia

In 2012, Qatar exported 47% of its total LNG supplies to Asia, with the leading importers being Japan, India and South Korea, respectively. 2013 will also see the delivery of Qatar's first cargoes of LNG to Singapore, and new sales agreements have reportedly been signed with Thailand as well. The willingness of Asian countries to sign long-term supply contracts also supports Qatar's preferred method of supply, with an anticipated decline in spot market supplies in the coming years as a result of new long-term agreements absorbing an increasing amount of the country's production.

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Europe

Given the desire of many European countries to reduce their reliance on Russian gas imports, Qatar has sensed an opportunity for new markets for its LNG cargoes. In 2009, Qatar signed a supply agreement with Poland, and the Gulf state is also looking to build an LNG terminal on Greece's Aegean coast, for re-export by pipeline to the Italian market. Greece received its first cargo of Qatari LNG in May 2011 at the Revithoussa terminal. The customer was Greek public gas supply DEPA.

In 2012, Europe imported 42% of Qatari LNG production, with the UK being the largest individual importer. In addition to having a long-term contract for 12mn tonnes per annum (tpa), Britain also purchased additional volumes on the spot market. Italy, Spain, and France are also significant Qatari LNG importers.

However, given the country's preference for long-term supply contracts, an increasing amount of which are sent to Asia, there will be a reduction in LNG spot cargoes available to European importers. Indeed, in 2014, Qatar expects to reduce the sale of LNG spot cargoes by 40%.

Latin America

Qatargas has signed a 20-year LNG supply deal with Argentina's Enarsa, marking the company's first supply deal in Latin America, Qatargas announced on June 29 2011. The deal will see Qatar start shipping as much as 6.9bn cubic metres (bcm) of LNG to the Latin American country in 2014.

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Table: Qatar - Major Upstream Projects

Companies

Estimated Completion Date

Status

Type of Project

Onshore/Offshore

Qatar Petroleum, Occidental Petroleum

2013

Development (Brownfield)

Oil

Offshore

Qatar Petroleum (93%), ExxonMobil (7%)

2014 (train 1); 2015 (train 2)

Development

Gas

Offshore

Maersk Oil (100%)

2012

Development

Oil

Offshore

Mubadala Development Company (51%), Total (24.5%), Occidental Petroleum (24.5%)

2007

Producing

Gas

Offshore

Occidental Petroleum, Qatar Petroleum

2012/13

Development (Brownfield)

Oil

Offshore

Qatar Petroleum, ExxonMobil

2010

Producing

Gas

Offshore

Field Name Al-Rayyan Barzan Al Shaheen

Dolphin Idd El Shargi North Dome (ISND); Idd El Shargi South Dome (ISND) North Field

Source: BMI

Oil And Gas Infrastructure Oil Refineries Qatar has two crude oil refineries, both of which are owned by Qatar Petroleum (QP). A third facility, alShaheen, has been in the pipeline since 2007, but was postponed indefinitely in early 2010.

Table: Refineries In Qatar

Refinery

Capacity (b/ d)

Owner (Contractor)

Completed

Details

Qatar Petroleum

200,000

Qatar Petroleum

1958

na

Ras Laffan

146,000

Qatar Petroleum

2009

Condensate refinery

Total capacity

346,000

Suspended

US$11bn project

Planned additional capacity Al-Shaheen

250,000

Qatar Petroleum

Ras Laffan (Expansion)

146,000

Qatar Petroleum

EPC contract 2016 Technip awarded design contract; expected in Q312

na = not available/applicable. Source: BMI

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Qatar Petroleum Refinery

The first refinery, known as the Qatar Petroleum Refinery, was built in 1958 and is capable of processing both crude oil and condensate. The QP refinery was last expanded in 2001, giving it a total capacity of 200,000 barrels per day (b/d). The 100%-state owned plant mainly produces liquefied petroleum gas (LPG), premium gasoline, super gasoline, jet fuel, diesel and marine fuel oil, as well as large quantities of naphtha for petrochemical operations. Over half of the refinery's products are supplied to the Gulf region, although much of the jet fuel is sold to Europe and the bulk of the naphtha is exported to East Asia for further processing.

Ras Laffan Refinery

The 146,000b/d Ras Laffan plant, which became operational in late-September 2009 (about a year behind schedule), is the country's second refinery and the first designed exclusively to process condensate, the byproduct of Qatar's massive gas industry. The Ras Laffan condensate refinery is operated by a consortium comprising state-run Qatar Petroleum (51%), oil majors ExxonMobil (10%) and Total (10%), and four Japanese companies: Cosmo Oil (10%), Idemitsu Kosan (10%), Mitsui (4.5%) and Marubeni (4.5%). The Japanese companies farmed in to the project in 2006 as Japan was expected to be one of the main markets for Ras Laffan's oil products.

At full capacity the refinery produces 52,000b/d of kerosene and jet fuel, 24,000b/d of gas oil (heating fuel), as well as other clean-burning middle distillates. The facility is fed from all three main Qatari upstream projects: gas fields run by QP and RasGas and the Al-Khaleej condensate complex. The second phase of the Ras Laffan refinery is scheduled be completed by 2016, and would boost output to 292,000b/d, with most of the produced fuels likely destined for the Japanese market. Our forecasts see Ras Laffan's capacity coming fully on stream by 2017.

Al-Shaheen Refinery (Proposed)

QP had been considering building a third facility, although construction has been indefinitely delayed. The 250,000b/d al-Shaheen refinery was slated for construction in the Mesaieed Industrial City in south-eastern Qatar. The US$11bn refinery was designed to process heavy sour crude from al-Shaheen offshore oil field, which would be supplied to the facility by a 200km pipeline. Front end engineering and design (FEED) work was carried out by French services provider Technip between 2007 and 2009. The first phase was expected to involve the construction of a crude distillation unit and a hydrocracker, while the second phase

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would see the addition of a fluid catalytic cracker. In April 2009, however, MEED reported that QP intended to break the project up into smaller sections to cut costs and spread project risks.

GTL

Qatar's large gas reserves have made it a frontrunner in the development of gas-to-liquids (GTL) plants. The country has one operational plant, Oryx, with a capacity of 34,000b/d. This capacity rose significantly with the start-up of Pearl GTL operations in 2011. The Pearl project, which cost a total of US$19bn, hit full capacity in September 2012. It is now the largest GTL project in the world.

Table: GTL Plants In Qatar

Facility

Capacity (b/d)

Owner

Completion date

Oryx

34,000

QP, Sasol

2007

Pearl

120,000

Royal Dutch Shell

2012

66,000

QP, Sasol

2014

Planned Additional Capacity Oryx expansion

Source: BMI

Oryx GTL

Qatar's first GTL plant is a 34,000b/d facility known as Oryx, which is operated by South African synthetic oil specialist Sasol. Sasol has announced plans to treble the capacity of the site, potentially taking it to more than 100,000b/d.

Pearl GTL

The 260,000b/d Pearl plant in Ras Laffan, developed by Shell, is the largest of the world's four GTL plants. It reached full capacity in September 2012. The plant processes around 20bcm of North Field gas per annum in two trains, and, using the Shell Middle Distillate Synthesis (SMDS), produces 140,000b/d of products such as gasoil, kerosene, naphtha and normal paraffin for export. It also strips out 120,000b/d of natural gas liquids (NGLs) and the petrochemical feedstock ethane. Over the 25-30 year life of the plant, Shell says Pearl will use 3bn barrels of oil equivalent (boe) of natural gas. The facility started receiving

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North field gas in March 2011 and its first refined fuels cargoes began shipping in June of that year. Pearl GTL's construction costs ballooned from an initial US$5bn to US$19bn.

LNG Terminals Qatar has two liquefied natural gas (LNG) projects comprising 14 liquefaction trains. The country's sendout capacity reached a peak in 2011, with 77mn tpa (around 106bcm) of liquefaction capacity. No further trains are planned at present with any capacity increase expected to come from upgrades or efficiency gains to existing trains. For example we note an ongoing gas flaring reduction programme underway by Qatargas, the Jetty Boil-Off Recovery Project,which will collect gas lost during loading at the Ras Laffan Port and compress it to be used as fuel or converted into LNG.

Table: LNG Terminals In Qatar

Terminal

Trains

Capacity (mn tpa)

Capacity (bcm)

RasGas I

2

6.6

9.2

RasGas II

3

14.1

19.5

2004

QP (70%), Exxon (30%)

RasGas III

2

15.6

21.5

2010

QP (70%), Exxon (30%)

Qatargas I

3

10.0

13.8

2005

QP (65%), Exxon (10%), Total (10%), Mitsui (7.5%), Marubeni (7.5%)

Qatargas II

2

15.6

21.5

2009

Completed

Ownership

1999 QP (63%), Exxon (25%), Kogas (5%), LNG Japan (3%)

Train 4: QP (70%), Exxon (30%). Train 5: QP (65%), Exxon (18.3%), Total (16.7%) Qatargas III

1

7.8

10.8

2010

QP (68.5%), Conoco (30%), Mitsui (1.5%)

Qatargas IV

1

7.8

10.8

2011

QP (70%), Shell (30%)

14

77.5

107.1

Total capacity

Source: BMI

RasGas

RasGas I is owned by a consortium made up of QP (63%), ExxonMobil (25%), Kogas (5%) and LNG Japan (3%). RasGas I consists of two 3.3mn tpa (4.6bcm) trains. The main export market for LNG from trains one and two is South Korea.

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RasGas II, a 70:30 JV between QP and ExxonMobil, consists of three additional trains, each of which has a processing capacity of 4.7mn tpa (6.5bcm). Trains three, four and five came on stream in 2004, 2005 and 2006 respectively, raising RasGas' total processing capacity to 20.7mn tpa (28.5bcm). The main export market for LNG from train three is India, with LNG from train four destined for Europe and exports from train five shipped to Europe and Asia.

RasGas III, a 70:30 JV between QP and ExxonMobil, consists of two additional trains, each of which has a processing capacity of 7.8mn tpa. Trains six and seven were originally scheduled to start operations in 2008/2009. The scheduled start-up for train six for early April 2009 was also missed, with the train having been brought on stream in August 2009. Train seven was expected to become operational before the end of 2009, but did not become operational until late February 2010. Once these two trains operate at full capacity, RasGas's processing capacity will rise to 36.3mn tpa (50.1bcm).

Qatargas

Qatargas I, made up of a consortium between QP (65%), ExxonMobil (10%), Total (10%), Mitsui (7.5%) and Marubeni (7.5%), comprises three trains, which originally had a capacity of 2mn tpa (2.7bcm) each. At the end of 2005, Qatargas I completed the de-bottlenecking of its facilities, increasing total capacity to 10mn tpa (13.8bcm). Most of the exported LNG is destined for Japan and Spain. In December 1996, the Qatargas venture delivered its first shipment of LNG to Japan.

Qatargas II consists of two trains, with train four owned by QP (70%) and ExxonMobil (30%) and train five by a consortium between QP (65%), ExxonMobil (18.3%) and Total (16.7%). Trains four and five, which each have a 7.8mn tpa (10.8bcm) capacity, were due to come onstream by the end of 2008 and in 2009 respectively. The first LNG cargo from Qatargas II arrived at the UK's South Hook LNG terminal on March 20 2009 and train five became operational in early September 2009.

Qatargas III (also known as train six) is owned by QP (68.5%), ConocoPhillips (30%) and Mitsui (1.5%). Qatargas III has a capacity of 7.8mn tpa (10.8bcm), with exports aimed at the US market, mainly through El Paso Energy's terminal at Elba Island. Production at the train started in November 2010, following a delay from June 2010.

Qatargas IV (train seven) also has a capacity of 7.8mn tpa (10.8bcm). It is a JV between QP (70%) and Shell (30%). Shell announced in January 2010 that half the LNG produced at the Qatargas IV project will be sent to China (which is to receive around 40%) and Dubai (around 10%), instead of to the US market.

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Qatargas started production from Train 7 at Qatargas IV in February 2011. The train increases Qatargas' total capacity to 42mn tpa.

Gas Pipelines Qatar has one gas export pipeline through which it supplies the UAE and Oman. The pipeline is owned and operated by Dolphin Energy, a JV between the state-owned Mubadala Development Company (51%), France's Total (24.5%) and the US's Occidental Petroleum (24.5%). This is the first cross-border gas project in the Arab Gulf region.

The Dolphin Energy gas pipeline, the Gulf Cooperation Council (GCC)'s first regional gas project, could see a capacity expansion according to Total's senior vice president for the Middle East, Arnauld Breuillac. The pipeline, which currently connects Qatar to Abu Dhabi and onwards to Oman has a capacity of 90mn cubic metres per day (Mcm/d) - or 33bn cubic metres (bcm) per annum. However, current sales agreements and existing compression facilities only support volumes of just over 60Mcm/d or 23bcm per year. Under current plans, a new compression facility at Ras Laffan would allow Dolphin to economically deliver volumes closer to full capacity from 2015. The pipeline has seen exports rise temporarily to meet demand in excess of contracted capacity, but only for short periods of time

Dolphin Energy supplies the UAE with gas from Qatar via a subsea export pipeline connecting the company's Ras Laffan gas processing plant in Qatar with the receiving facilities at Taweelah. This 48-inch pipeline is 364km long, with a maximum underwater depth of 50m. Construction of the pipeline was successfully completed in August 2006, with Italy's Saipem the contractor.

Dolphin started supplying the UAE with gas in February 2008 and Oman in October 2008. Most of the gas is used to feed the UAE's burgeoning heavy industries, petrochemicals and water desalination plants as well as to maintain production at maturing oil fields through gas injection. Around 2bcm is exported on to Oman. The long-term customers for Dolphin gas from Qatar are ADWEA (Abu Dhabi Water & Electricity Authority), UWEC (Union Water & Electricity Authority), DUSUP (Dubai Supply Authority) and Oman Oil Company (OOC). Each has signed a 25-year gas supply agreement with Dolphin Energy.

Qatar is one source of gas for the proposed subsea gas export pipeline from the Middle East to India. The South Asian Gas Enterprise (SAGE) has been working on the project, which was originally proposed in the 1990s, for over three years, according to its director Subodh Kumar Jain in August 2009. In 2008, a technical and commercial feasibility report was undertaken by INTECSEA, which found that the project would be technically feasible. Gas for the US$3bn project would be sourced from Qatar, Iran and possibly

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Iraq, and transported to a gas-gathering system on the eastern coast of the Arabian Peninsula from where deepwater gas pipelines would cross the Arabian Sea to India's west coast.

The pipelines would reach a maximum depth of 3,500m with a total length of about 1,000km, according to Jain. The pipelines would each transport 226.5bcm over a 25-year period, suggesting an annual supply per pipeline of around 9bcm per year. According to the project timeline, FEED and detailed studies will be ongoing through 2013, and installation will occur between 2015 and 2017. First gas, under proposed plans, is targeted for 2017. However to date no announcements have been made that suggest the project is slated to move forward.

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Competitive Landscape Executive Summary ■

The main government vehicle is Qatar Petroleum (QP), which owns all downstream oil interests, negotiates exploration and production (E&P) agreements, has shares in upstream projects and is involved in liquefied natural gas (LNG) projects, and gas-to-liquid (GTL) schemes. It is responsible for about 30% of oil and 50% of gas production.

■

International oil company (IOC) upstream involvement is extensive. Foreign groups are active in oil production, gas field development, LNG projects, as well as GTL and petrochemicals schemes.

■

Maersk Oil operates the al-Shaheen field in Block 5 and has a PSA for the Block 5 extension area.

■

Present in Qatar since 1936, Total has a 20% interest in the upstream part of the Qatargas 1, a 10% interest in the Qatargas 1 liquefaction plant JV, a 24.5% stake in Dolphin Energy and a 16.7% stake in Qatargas 2 Train 5 JV. Total's Qatari production averaged 139,000 barrels of oil equivalent per day (boe/ d) in 2012. Total has signed a new agreement with QP under which the two companies will continue to develop the Al Khalij for the next 25 years. The existing exploration and production sharing agreement, signed in 1989, will expire in early 2014.

■

QP has formally announced a joint venture with private players, led by Total, for the construction of a US $1.5bn condensate refinery at Ras Laffan. At 146,000 barrels per day (b/d), the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online in H216. The plant will have a production capacity of 60,000b/d of naphtha; 53,000b/d of jet fuel; 24,000b/d of gas oil; and 9,000b/d of liquid petroleum gas (LPG).

■

Occidental (Oxy) has expanded the ISND field development programme, which is expected to result in the recovery of approximately 145mn additional gross barrels (bbl) of oil. It has been reported that Oxy is considering the sale of a 30-40% stake in its entire Middle Eastern business.

■

ExxonMobil has a 25% interest in LNG company RasGas I and 30% in RasGas II. It also has a 10% interest in Qatargas I and a 30% stake in Qatargas II. It also participates in the Al Khaleej Gas project, the first phase of which became operational in 2005 and the second in December 2009.

■

Qatargas I is a consortium of QP, Total, ExxonMobil, Mitsui and Marubeni. Train four of Qatargas II belongs to QP and ExxonMobil, with train five of Qatargas II being owned by QP, Exxon and Total. Qatargas III is held by QP, ConocoPhillips and Mitsui. RasGas comprises QP, ExxonMobil, Kogas, Itochu and LNG Japan.

■

Sasol, Shell, ConocoPhillips and Marathon Oil are involved in developing a series of GTL facilities, with the 34,000b/d Sasol/QP Oryx plant entering production in March 2007. Shell, in July 2007, launched the 140,000b/d Pearl GTL project. It reached full capacity in September 2012, and is now the largest GTL plant in the world.

■

In late-August 2009, QP signed a 25-year EPSA with Chinese explorer CNOOC Middle East, a subsidiary of CNOOC, for Block BC in the deep pre-Khuff reservoirs.

■

Japan's JX Nippon Oil and Gas Exploration (NOEX) entered Qatar's upstream segment with the signing of a 30-year exploration and production-sharing agreement (EPSA) with QP for the 6,173 sq km offshore Block A.

■

Germany's Winterhsall and QP have announced exploration success at Block 4 North offshore Qatar after four years of hunting. The discovery in depths of 70m is estimated to contain as much as 70bcm of gas and is the country's first new find in 42 years.

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Table: Key Domestic And Foreign Companies In The Qatari Oil And Gas Sector

Company

2011 sales (US $bn)

Qatar Petroleum

% share of total No. of employees Year established sales

Ownership

79.4

100

10,378e

1974

100% state

Total Qatar

na

na

na

1938

100% Total

Maersk Oil

na

na

na

1992

100% AP Moeller

Occidental Qatar

na

na

na

1994

100% Occidental

ExxonMobil Qatar

na

na

na

1935 100% ExxonMobil

na = not available; e = estimate. Source: BMI

Table: Key Upstream Players

Company

Oil production (000b/d)

Market share (%)

Gas production (bcm)

Market share (%)

517

33e

62

54

Total Qatar

49

3.5

6.6

4

Maersk Oil

167

10.6

na

na

Occidental Petroleum

89

4.8

2.4

na

ExxonMobil

na

na

na

na

Qatar Petroleum

na = not available; e = estimate. Source: Company data; BMI

Table: Key Downstream Player

Company

Refining capacity (000b/d)

Market share (%)

Retail outlets

Market share (%)

346

100

na

na

Qatar Petroleum

na = not available. Source: Company data; BMI

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Company Profile Qatar Petroleum SWOT Analysis

Strengths

■

Major domestic oil and gas producer

■

Unrivalled access to exploration acreage

■

Well established partnerships with international oil companies (IOCs)

■

Substantial near-term volume growth

■

Rapid expansion of liquefied natural gas (LNG), gas-to-liquids (GTL) and petrochemicals

Weaknesses

Opportunities

Threats

Company Overview

■

Limited financial or operational freedom

■

Some cost and efficiency disadvantages

■

Rising investment requirement

■

Considerable untapped gas export potential

■

Rising domestic energy consumption

■

Large areas of under-explored territory

■

Competition in regional LNG supply

■

Changes in OPEC/national energy policy

QP is active in all segments of the energy chain and participates in all major oil and gas developments. The firm's exploration and production (E&P) activities are centred on the onshore Dukhan oil field and the offshore Bul Hanine and Maydan Mahzam oil fields. The state firm also holds stakes in seven offshore fields that are being developed under production sharing agreements (PSAs). Gas resources are centred on the giant North Field. QP operates all of the country's 200,000 barrel per day (b/d) crude oil refining capacity and brought the 146,000b/d Ras Laffan refinery on stream in 2009.

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Strategy

The government is planning a massive expansion of its refinery capacity. Qatar expects to earn more per barrel of crude oil produced if it can export refined products and petrochemicals, as well as creating private sector jobs. QP is looking to develop a higher-profile international presence through the establishment of an investment arm to finance energy projects across the globe. For starters, Qatar Petroleum International will look at investing in refineries in the energyhungry markets of India and China, as well as building LNG terminals in Europe and across the Atlantic in the US. Qatar's crude oil production will rise to 800,000b/d by 2017 due to higher investments and development plans in the country, according to a Qatar National Bank (QNB) report. In its 2010-14 development plan, QP budgeted US$6.6bn for investment in crude oil projects. The Barzan gas field is a large upstream project that has been pursued by QP. First engineering contracts were awarded in late 2010. Output from the field is expected at 14.5bn cubic metres (bcm) per annum. QP holds a 93% stake in the project, working alongside joint venture (JV) partner ExxonMobil with the remaining 7%. QP has raised US$10.4bn in financing for the Barzan scheme. The company will fund up to 30% of the project through equity, while the rest will be arranged through a syndicated loan of around US$7.2bn. The loan includes a US$3.34bn commercial bank facility, a US$2.55bn export credit agency financing and a US$850mn Islamic facility. In addition, ExxonMobil will offer part of the senior debt. The first and second production lines are scheduled to come online in 2014 and 2015 respectively. Total of France has signed a new agreement with QP, under which the two companies will continue to develop the Al Khalij oil field offshore Qatar for the next 25 years. The existing exploration and PSA, signed in 1989, will expire in early 2014. The Al Khalij field was discovered by Total in 1991 and commenced oil production in 1997. Under the terms of the deal, QP will own a 60% stake in the oil field, with Total holding the remaining 40%. QP has formally announced a joint venture with private players led by Total for the construction of US$1.5bn condensate refinery at Ras Laffan. At 146,000b/d, the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online in H216. The plant will have a production capacity of 60,000b/d of naphtha; 53,000b/d of jet fuel; 24,000b/d of gas oil; and 9,000b/d of liquid petroleum gas (LPG). The project will developed by QP (84%) and Total (10%), with Japanese firms Idemitsu Kosan, Cosmo Oil, Marubeni and Mitsui holding the remainder. Supplied from the North Field, the combined 300,00b/d capacity of LR1 and LR2 will make the plant the largest condensate refinery developed to date. Maersk Oil is in discussions with QP over an extension to a PSC for the al-Shaheen oil field offshore Qatar, reports Reuters. The company is seeking a 13-year extension to

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2030. The field's crude production could increase from the current 300,000b/d to 400,000b/d in 2017, one source said. Additionally, new equipment including a floating storage and offloading unit is likely to be deployed at the field if the contract is extended. QP expects to borrow heavily in 2014 in order to fund new industrial projects, according to its head of project finance, Meshaal al-Mahmoud. The company will approach the banking and capital markets, and will also consider conventional bonds and sukuk. The funds will be used for a planned aromatics plant in Ras Laffan and two petrochemical plants, al-Mahmoud added. The company plans to carry out downstream projects worth US$25bn during the next five years. QP and Royal Dutch Shell are targeting a 2018 completion date for the Al-Karaana petrochemical project in Ras Laffan, Qatar, after awarding a contract for front end design work to US Fluor Corporation, reports Zawya. The US$6.5bn project, 80% owned by QP and 20% by Shell, will comprise a steam cracker, a mono ethylene glycol (MEG) plant, a linear alpha olefin unit and an oxo alcohol unit. Qatar Petroleum International (QPI) has announced that it will team-up with the UK's Centrica to spend CAN1bn (US$976mn) on acquiring Suncor Energy's conventional natural gas assets across Alberta, north-eastern British Colombia and southern Saskatchewan. Centrica estimates proved plus probable gas reserves at nearly 30bcm, but contingent resources may be closer to 84bcm given prospective but undeveloped acreage. ExxonMobil has signed an agreement with QPI to move forward with construction of a US$10bn natural gas export terminal in Texas. The project will involve installing liquefaction equipment at an existing import facility in Sabine Pass, Texas, according to an e-mailed statement from Golden Pass Products, a subsidiary formed by the two companies. It won permission in 2012 to export the fuel to nations with free-trade agreements with the US and is awaiting approval to send the fuel to all other countries. Exxon and QPI plan to ship as much as 15.6mn tpa of gas annually from the Golden Pass facility, according to the statement. 'This agreement sets out a highly competitive commercial blueprint for Golden Pass Products, with a commitment that builds on the unique combined strengths of QPI and Exxon Mobil through the global downstream LNG value chain,' Bill Collins, president of Golden Pass, said in the statement. The country's political leaders are believed to favour more freedom for QP so that the firm can better compete against its national oil company (NOC) peers around the world. Plans could see QP freed from direct control by the energy ministry in an effort to allow the company to be more reflexive and responsive amid changes at home and abroad. Under the new structure, QP would accelerate its recent push to move beyond Qatar and into more upstream and downstream projects outside its home market. With no plans for an expansion of export capacity, Qatar is at risk of ceding its place as the world's leading LNG exporter by the end of the decade. The entrance of new

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supplies of LNG to the market will increase competition and give greater bargaining power to importers who are eager to see relief in their import bills - which Qatar has to date proven reluctant to offer as it insists for oil-indexed long-term contracts to remain. However, with reports that QP was considering a bid for RWE Dea - the oil and gas division of German utility RWE - growth could accelerate under an acquisition-led strategy. Interestingly, much of RWE Dea's most prospective acreage is in Egypt, a country where Qatar has recently sought to cement its political influence. RWE has struggled to offload its oil and gas business, with insiders revealing in June that that only Wintershall had expressed serious interest but at a lower price than the EUR4.5bn (US$5.9bn) executives had hoped to earn. Acquiring RWE Dea would quickly give Qatar a notable global footprint as producing and prospective upstream assets are added to its portfolio. QP may have the funds for such a deal. However, the state-owned firm will likely lack the managerial and technical capacity to manage a global portfolio on its own. Occidental Petroleum (Oxy) has announced that its Qatari subsidiary has signed a codevelopment agreement with QP for the development of the Idd El Shargi North Dome oil field offshore Qatar, according to Scandinavian Oil-Gas Magazine. Work at the site has already commenced and aims to sustain oil production levels at about 100,000b/d through the next six years to 2019.The pair will endeavour to improve the ease of recovery from the field's existing contract reservoirs. Market Position

QP is active in all segments of the energy chain and participates in all major oil and gas developments. The firm's E&P activities are centred on the onshore Dukhan oil field and the offshore Bul Hanine and Maydan Mahzam oil fields. The state firm also holds stakes in seven offshore fields that are being developed under PSAs. Gas resources are centred on the giant North Field. QP operates all of the country's 200,000b/d crude oil refining capacity and brought the 146,000b/d Ras Laffan refinery on stream in 2009. The group's key subsidiaries and affiliates include LNG companies Qatargas and RasGas. QP has a 65% interest in the upstream portion of Qatargas. The ownership of Qatargas' downstream component is split between QP (65%), Total (10%), ExxonMobil (10%), Mitsui (7.5%) and Marubeni (7.5%). RasGas I and II produce 20.7mn tpa of LNG from five trains. RasGas I is owned by QP (63%), ExxonMobil (25%), Kogas (5%), Itochu (4%) and LNG Japan (3%). RasGas II is a 70:30 JV between QP and ExxonMobil. QAPCO, in which QP holds an 80% stake together with Atofina, produces 525,000tpa of ethylene, 360,000tpa of low-density polyethylene (LDPE) and 70,000tpa of sulphur. QP has a 51% interest in Qatar Chemical Company (Q-Chem) together with ChevronPhillips Chemical Company. Q-Chem operates a world-class petrochemical plant producing high-density polyethylene (HDPE), medium-density polyethylene (MDPE) and 1-hexene (alpha olefin). Other group companies include Qatar Fuel

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Additives Company (QAFAC, 50% interest), Qatar Vinyl Company (QVC, 25.5%) and Gulf Helicopters (100%). The Qatari government is scheduled to conclude a reservoir assessment of its North Gas Field Development in 2013, according to the country's Energy Minister Mohamed bin Saleh Al-Sada. He said that the study would facilitate the formulation of future energy and gas field projects. It will also provide Qatar's energy ministry with enough information to ensure it can exploit reserves without causing environmental damage, AlSada stated. The 6,000sq km North Field's recoverable gas reserves are estimated at more than 25,500bcm. Germany's Wintershall and QP have announced exploration success at Block 4 North offshore Qatar after four years of hunting. The discovery in depths of 70m is estimated to contain as much as 70bcm of gas and is the country's first new find in 42 years. Financial Data

Net sales ■ ■ ■ ■ ■ ■

QAR289.2bn (2011) QAR188.0bn (2010) QAR118.1bn (2009) QAR168.5bn (2008) QAR177.4bn (2007) QAR100.7bn (2006)

Net income ■ ■ ■ ■ ■ ■

Company Details

■

■

QAR88.9bn (2011) QAR54.6bn (2010) QAR35.2bn (2009) QAR55.8bn (2008) QAR35.0bn (2007) QAR31.2bn (2006) Qatar Petroleum (QP) PO Box 3212 Doha Qatar

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Tel: +974 449 1491

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Fax: +974 483 1125

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www.qp.com.qa

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ExxonMobil Oil Qatar SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

Company Overview

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Major domestic gas producer

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Share of key liquefied natural gas (LNG) export schemes

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Good relationship with state energy company

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Substantial volume growth potential

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Potential role in gas-to-liquids (GTL) and petrochemicals capacity

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No producing oil interests

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No downstream oil exposure

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Rising investment requirement

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Considerable untapped gas export potential

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Substantial scope for plant expansion

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Bazran volumes

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Competition in regional LNG supply

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Changes in national energy policy

ExxonMobil has a 25% interest in RasGas I and a 30% interest in the RasGas II development. Gas for the trains is sourced from the North Field. Total investment in the development is estimated at US$12bn. ExxonMobil also has a 10% interest in Qatargas I, which has been in operation since 1996. ExxonMobil and QP signed a heads of agreement (HoA) in June 2002 for the supply of Qatari LNG to the UK and Northern Europe. It also holds a 30% stake in train four of Qatargas II, alongside Qatar Petroleum (QP) (70%) and ExxonMobil (30%), and an 18.3% stake in train five Qatargas II alongside QP (65%) and Total (16.7%).

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Strategy

Exxon continues to be heavily involved in the Qatar LNG sector. With significant returns around the corner these interests will continue to grow, while the group's excellent relations with QP should ensure its participation in any future developments in the country. In late-2010, Exxon launched the development of the massive Barzan gas field, which will produce around 14.5bcm once fully online in about 2015. Exxon is the only IOC partner in the project, holding a 7% stake, with the remainder held by QP. Barzan Gas Project's four offshore platform topside modules, collectively weighing a total of 9,500 tonnes will be installed in the fourth quarter of 2013, RasGas has said. The topsides, which include three wellhead platforms and an additional living quarters' module, started their long journey by sea from Ulsan, South Korea to the North Field in September 2013. ExxonMobil has signed an agreement with Qatar Petroleum International (QPI) to move forward with construction of a US$10bn natural gas export terminal in Texas. The project will involve installing liquefaction equipment at an existing import facility in Sabine Pass, Texas, according to an e-mailed statement from Golden Pass Products, a subsidiary formed by the two companies. It won permission in 2012 to export the fuel to nations with free-trade agreements with the US and is awaiting approval to send the fuel to all other countries. Exxon and QPI plan to ship as much as 15.6mn tpa of gas annually from the Golden Pass facility, according to the statement. 'This agreement sets out a highly competitive commercial blueprint for Golden Pass Products, with a commitment that builds on the unique combined strengths of QPI and Exxon Mobil through the global downstream LNG value chain,' Bill Collins, president of Golden Pass, said in the statement.

Market Position

ExxonMobil has a major position in the LNG sector. The US oil major has a 25% interest in RasGas I and a 30% interest in the RasGas II development. The RasGas II development comprises three LNG trains that will supply India, Italy, Belgium and Spain. The project, which was completed in 2004, has a contract to supply LNG to the US for a 25-year period under an October 2003 deal. Gas for the trains is sourced from the North Field, with the project to use 737bcm of reserves. Total investment in the development is estimated at US$12bn. ExxonMobil also has a 10% interest in Qatargas I, which has been in operation since 1996. ExxonMobil and QP signed a heads of agreement (HoA) in June 2002 for the supply of Qatari LNG to the UK and Northern Europe. It also holds a 30% stake in train four of Qatargas II, alongside QP (70%) and ExxonMobil (30%), and an 18.3% stake in train five Qatargas II alongside QP (65%) and Total (16.7%). ExxonMobil was involved in the US$1.1bn phase one development of the al-Khalij Gas project (AKG-1), together with QP. In March 2003, the US major launched the first phase development, which includes the production of gas from the North Field, the recovery of associated condensate and natural gas liquids for sale and the marketing of

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49Mcm/d of pipeline gas for domestic and export customers. AKG was developed in phases to meet gas sales commitments. The partners initially agreed to supply 21Mcm/ d of gas to the Oryx GTL plant, the Ras Laffan Power Plant and other domestic industrial customers. QP and ExxonMobil started operations at the AKG-2 project at Qatar's North Field in December 2009, according to a press release by Exxon on February 23 2010. The project has the capacity to produce 35.4Mcm/d, or an annualised 12.9bcm, of gas that will be used to supply domestic industries. The AKG-2 project involved the construction of onshore gas treating, liquids recovery and fractionation facilities, as well as two additional offshore wellhead platforms. The onshore facilities are integrated with the RasGas III LNG project, which has allowed the companies to share some of the infrastructure and utilities. Operational Data

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LNG production (ExxonMobil - interest trains) 61mn tonnes (2012)

Company Details

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ExxonMobil Oil Qatar Inc

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QNNTC Building 60 Al-Taameen Street PO Box 22500 Doha Qatar

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Tel: +974 434 9349

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Fax: +974 434 9217/9350

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Total Qatar SWOT Analysis

Strengths

Weaknesses

Opportunities

Threats

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Significant domestic oil and gas producer

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Share of major LNG export scheme

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Substantial near-term volume growth

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Rapid expansion of LNG and petrochemicals capacity

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No downstream oil exposure

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Absent from GTL development consortia

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Rising investment requirement

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Considerable untapped gas export potential

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Substantial scope for plant expansion

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Large areas of underexplored territory

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New condensates refinery project

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Competition in regional LNG supply

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Changes in OPEC/national energy policy

Company Overview

Present in Qatar since 1936, Total has a 20% interest in the upstream part of Qatargas 1, a 10% interest in the Qatargas 1 liquefaction plant JV, a 24.5% stake in Dolphin Energy and a 16.7% stake in Qatargas 2 Train 5 JV. Total's Qatari production averaged 139,000boe/d in 2012. Total is also a partner in the Laffan Refinery with a 10% interest and in the Qapco (20%) and Qatofin (48.6%) petrochemical plants.

Strategy

Total's good relationship with QP should stand it in good stead to expand its broadbased interests in Qatar. The company was linked in late-2010 with involvement in a large-scale petrochemicals plant in the country, and is likely to be actively interested in

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other major projects as and when they become available. Total has signed a new agreement with QP, under which the two companies will continue to develop the Al Khalij oil field offshore Qatar for the next 25 years. QP has formally announced a joint venture with private players led by Total for the construction of US$1.5bn condensate refinery at Ras Laffan. At 146,000 barrels per day (b/d), the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online in H216. The plant will have a production capacity of 60,000b/d of naphtha; 53,000b/d of jet fuel; 24,000b/d of gas oil; and 9,000b/d of liquid petroleum gas (LPG). The project will developed by QP (84%) and Total (10%), with Japanese firms Idemitsu Kosan, Cosmo Oil, Marubeni and Mitsui holding the remainder. Supplied from the North Field, the combined 300,00b/d capacity of LR1 and LR2 will make the plant the largest condensate refinery developed to date. The Dolphin Energy gas pipeline, the Gulf Cooperation Council (GCC)'s first regional gas project, could see a capacity expansion according to Total's senior vice president for the Middle East, Arnauld Breuillac. The pipeline, which currently connects Qatar to Abu Dhabi and onwards to Oman has a capacity of 33bcm per annum. However, current sales agreements and existing compression facilities only support volumes of just over 23bn cubic metres (bcm) per year. Under current plans, a new compression facility at Ras Laffan would allow Dolphin to economically deliver volumes closer to full capacity from 2015. The pipeline has seen exports rise temporarily to meet demand in excess of contracted capacity, but only for short periods of time. However, rising demand for gas in the region, with the UAE set to inaugurate a new liquefied natural gas (LNG) import terminal from 2016 in the face of tightening supplies, provides economic rationale for a Dolphin expansion. Market Position

Total is active in the upstream and petrochemicals sectors in Qatar. The French oil company has a 20% interest in the upstream and a 10% interest in the downstream portions of Qatargas I, which operates three LNG trains. Further, Total also owns a 16.7% stake in train five of Qatargas II. The French major operates the offshore Al-Khalij field, which was discovered in 1991. A new development phase launched in June 2002 boosted output to 80,000b/d by mid-2004. Total also participated in the development of the North Field's Bravo Block designated to supply gas to the Qatargas liquefaction plant. Total also has a 24.5% interest in the Dolphin Energy project, which is developing gas reserves in the North Field for sale to the UAE and other regional markets. The field started producing at the end of June 2007, with exports to the UAE and Oman having started in February and November 2008 respectively. Total's chemicals subsidiary Atofina has a 20% stake in Qatar Petrochemical Company (QAPCO), which produces ethylene and low-density polyethylene that is exported to Asian markets and other Gulf countries. Atofina is also involved in Qatofin, a JV

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between Atofina (36%), QAPCO (63%) and QP (1%), which is planning to build a 450,000tpa linear low-density polyethylene (LDPE) unit at Mesaieed. Production is expected to begin in 2007. Through Qatofin, Atofina will also participate in the construction and operation of the biggest ethane cracker in the world (1.3mn tpa) in Ras Laffan. Qatofin will have a 45.7% interest in the facility. Finally, Atofina has a 19.29% interest in QVC, a new chloro-chemical complex commissioned in April 2001. Total has signed a new agreement with Qatar's state-owned Qatar Petroleum, under which the two companies will continue to develop the Al Khalij oil field offshore Qatar for the next 25 years. The existing exploration and production sharing agreement, signed in 1989, will expire in early 2014. The Al Khalij field was discovered by Total in 1991 and commenced oil production in 1997. Under the terms of the deal, Qatar Petroleum will own a 60% stake in the oil field, with Total holding the remaining 40%. Operational Data

Oil production: ■ ■ ■ ■ ■

38,000b/d (2012) 44,000b/d (2011) 49,000b/d (2010) 47,000b/d (2009) 44,000b/d (2008)

Gas production: ■ ■ ■ ■

Company Details

■

■

5.8bcm (2012) 6.4bcm (2011) 6.6bcm (2010) 3.0bcm (2009) Total E&P Qatar Total Building C Ring Road Al-Muntazah Traffic Signal Doha Qatar

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Tel: +974 436 4466

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Fax: +974 430 6630

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www.total.com

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Royal Dutch Shell SWOT Analysis

Strengths

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High-profile international oil company (IOC) position in Qatari gas/NGL sector

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Recent expansion into Qatari exploration

Weaknesses

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Relatively narrow Qatari investment portfolio

Opportunities

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Substantial production growth potential

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Exposure to lucrative Asia Pacific LNG market

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Changes in national energy policy

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Competition in regional LNG supply

Threats

Company Overview

Shell's involvement in Qatar spans both the upstream and downstream sectors. The company has developed its flagship Pearl GTL facility at Ras Laffan, which is the largest facility of its kind in the world. Pearl GTL went into the start-up phase in 2011 and was due to reach full capacity in 2012. First deliveries have begun from the complex. Shell is also involved in the Qatargas IV (train seven) project, in which it holds a 30% stake (with QP holding the majority 70%). As well as its two downstream projects, Shell is also involved in the Qatari upstream. In May 2010, Shell and PetroChina were awarded the Block D concession. Under the terms of the deal, Shell will operate the block with a 75% stake and PetroChina will hold the remaining 25%.

Strategy

Through the twin pursuit of Qatargas IV and Pearl, Qatar is emerging as the heart of Shell's Arab Gulf operations. Liquefied natural gas (LNG) is a key component of Shell's growth strategy, and its Qatari investments guarantee it a slice of a growing market. A poor outlook for US natural gas prices has led Shell to develop its Qatari gas projects with an eye towards the Asia Pacific market. Shell is keen to develop its profile as the leading IOC gas player in the Gulf, given its gas investments in Saudi Arabia and Iraq, and technical assistance towards the development of Kuwait's northern gas reserves. Although the Block D deal is Shell's first move into Qatari gas exploration, it is already heavily involved in the emirate, both upstream and downstream. The company is developing part of the North Field under an agreement signed in 2003, which called for

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it to produce 16.5bn cubic metres (bcm) of gas annually by 2011. Gas produced at the field will be used to supply the Pearl GTL facility. In February 2009, Shell announced plans to drill 22 offshore wells at a block in the North Field. QP and Royal Dutch Shell are targeting a 2018 completion date for the Al-Karaana petrochemical project in Ras Laffan, Qatar, after awarding a contract for front end design work to US Fluor Corporation, according to Zawya. The US$6.5bn project, 80% owned by QP and 20% by Shell, will comprise a steam cracker, a mono ethylene glycol (MEG) plant, a linear alpha olefin unit and an oxo alcohol unit. Market Position

Shell's involvement in Qatar spans both the upstream and downstream sectors. The company has developed its flagship Pearl GTL facility at Ras Laffan, which is the largest facility of its kind in the world. Shell estimates Pearl's costs, which it will bear alone, at US$19bn, based on its tapping 3bn boe over 25-30 years at US$6/bbl. Once at capacity, the facility will produce 120,000b/d of NGL and ethane and 140,000b/d of ultra-clean diesel, naphtha and other GTL products, generating around US$6bn annually based on an oil price of US$70/bbl. Major construction was substantially complete by the end of 2010. Pearl GTL went into the start-up phase in 2011 and reached full capacity in 2012 In March 2011, Shell started supplying gas from the North Field to its Pearl GTL plant. In March 2010, Shell Qatar spokesperson Andrew Brown said the project would generate annual profits of US$6bn based on an oil price of US$70/bbl, adding that operating costs were around US$6/bbl and that the company's production sharing contract (PSA) with QP allows it to claim back the US$19bn project cost. He claimed that following the start-up of deliveries from Pearl and a planned increase in output at the Qatargas LNG project, Shell's operations in Qatar could account for as much as 10% of the company's total hydrocarbons production.. Shell is also involved in the Qatargas IV (train seven) project, in which it holds a 30% stake (with QP holding the majority 70%). Once fully on stream, the train will have a capacity of 7.8mn tpa and will produce about 70,000b/d of NGL. The facility was originally scheduled to become operational in early-2010, but was delayed. It has been operating at full capacity in 2012. The LNG is shipped mainly to markets in North America, China, Europe and the United Arab Emirates. As well as its two downstream projects, Shell is also involved in the Qatari upstream. In May 2010, Shell and PetroChina were awarded the Block D concession. Under the terms of the deal, Shell will operate the block with a 75% stake and PetroChina will hold the remaining 25%. The 30-year contract includes an initial five-year exploration period, during which the two companies are obliged to carry out 2D and 3D seismic surveys, processing and interpretation. This period will also involve the companies drilling an unspecified number of exploration wells to target the pre-Khuff formation. According to PetroChina, part of the concession extends beneath the offshore North Field. Gulf Drilling International (GDI) has been awarded a drilling services contract by Qatar Shell for offshore exploration in the North field of Qatar. Under the contract, the

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company will use its Al-Khor jack-up vessel to drill the pre-Khuff interval of block D. This is the third contract between the two companies. The contract was signed by Shell's Executive Vice President Wael Sawan and GDI's CEO Ibrahim J Al-Othman. Financial Data

Revenues: ■ ■ ■ ■ ■

US$481.7bn (2012) US$484.5bn (2011) US$378.2bn (2010) US$278.2bn (2009) US$458.5bn (2008)

Net profit/loss: ■ ■ ■ ■ ■

Company Details

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■

US$26.6bn (2012) US$30.9bn (2011) US$20.5bn (2010) US$12.7bn (2009) US$26.5bn (2008) Qatar Shell Svc. Co. W.L.L. P.O. Box 3747 Al Mirqab Tower, 1st Floor Corniche Road West Bay, Doha Qatar

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Tel: +974 44957 777

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Fax: +974 44957 778

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http://www.shell.com.qa/

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Other Companies - Summary Maersk Oil

Maersk Oil of Denmark operates the al-Shaheen field on Block 5, with capacity of around 240,000 barrels per day (b/d). A production sharing contract (PSA) for the Block 5 extension area was awarded by QP in April 2004; since then, Maersk has carried out an extensive exploration programme for fast-track development. In December 2005, Maersk concluded an agreement about further development of al-Shaheen Field. The plan comprises drilling of more than 160 production and water injection wells up to 2011 and establishment of a further three offshore platform locations with production and accommodation facilities. To date, six drilling rigs have completed drilling 48 of the planned 160 wells. Maersk is in discussions with Qatar Petroleum (QP) over an extension to a production sharing contract for the al-Shaheen oil field, reports Reuters. The company is seeking a 13-year extension to 2030. The field's crude production could increase from the current 300,000b/d to 400,000b/d in 2017, one source said. Additionally, new equipment including a floating storage and offloading unit is likely to be deployed at the field if the contract is extended.

Occidental Petroleum

Occidental Petroleum had net Qatari output of 1.7bn cubic metres (bcm) of gas and 71,000b/d of crude and natural gas liquids (NGLs) in 2012. The company operates the Id al-Shargi North Dome (ISND) oil field. In December 1997, Occidental signed another PSA with QP to develop the Id al-Shargi South Dome (ISSD) field that came on stream in November 1999. Occidental's ownership interest in ISSD is 44%. In May 2007, Occidental purchased Anadarko's 92.5% interest in blocks 12 and 13. Block 12 contains the al Rayyan Field, which represented all of Anadarko's production operations in Qatar and had net output of around 6,000b/d. Occidental also holds a 24.5% share in the Dolphin Energy JV, alongside Total (24.5%) and the Abu Dhabi government (51%). Occidental Petroleum's wholly-owned Qatari subsidiary has signed a two-year contract with Gulf Drilling International (GDI) for the al-Rayyan (Gulf-2) drilling rig. The rig will operate along with the al-Wajbah (Gulf-3) rig in the Idd al-Sharqi field's North and South Domes, as well as the al-Rayyan field. Oxy will bid for six packages pertaining to the development of the Idd el-Shargi North Dome (ISND) oilfield offshore Qatar, reports Upstream, citing unnamed industry sources. The company is preparing to participate in an international tender for the packages, which include processing platforms, a wellhead platform plus jacket, pipelines, infield flowlines and modifications to the Halul Island terminal. The packages will be tendered in Q213; however, a source believes the tender may be delayed by about a year. Oxy has announced that its Qatari subsidiary has signed a co-development agreement with QP for the development of the Idd El Shargi North Dome oil field offshore Qatar, according to Scandinavian Oil-Gas Magazine. Work at the site has already commenced and aims to sustain oil production levels at about 100,000b/d through the next six years

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to 2019.The pair will endeavour to improve the ease of recovery from the field's existing contract reservoirs.

Qatargas

Qatargas I, made up of a consortium of QP (65%), ExxonMobil (10%), Total (10%), Mitsui (7.5%) and Marubeni (7.5%), comprises three trains, which originally had a capacity of 2mn tonnes per annum (tpa) (2.7bcm) each. At the end of 2005, Qatargas I completed the debottlenecking of its facilities, increasing total capacity to 10mn tpa (13.8bcm). Most of the exported liquefied natural gas (LNG) is destined for Japan and Spain. In December 1996, the Qatargas venture delivered its first shipment of LNG to Japan. Qatargas II consists of two trains, with train four owned by QP (70%) and ExxonMobil (30%) and train five by a consortium between QP (65%), ExxonMobil (18.3%) and Total (16.7%). Trains four and five, which each have a 7.8mn tpa (10.8bcm) capacity came on stream in 2009. The first LNG shipment from Qatargas II arrived at the UK's South Hook LNG terminal on March 20 2009 and train five became operational in early September 2009. Qatargas III is owned by QP (68.5%), ConocoPhillips (30%) and Mitsui (1.5%). Qatargas III has a capacity of 7.8mn tpa (10.8bcm) and began delivering gas in November 2010. Qatargas IV has capacity of 7.8mn tpa (10.3bcm). It is a JV between QP (70%) and Shell (30%), and came on stream in February 2011. QatarGas agreed in April 2011 to supply UK energy firm Centrica with LNG covering an estimated 10% of the country's gas demand. The deal covers a supply of 2.4mn tonnes per annum over three years. Qatargas has also signed a tripartite sales and purchase agreement with Japan's Chubu Electric Power and Shizuoka Gas for an annual delivery of 200,000 tonnes of LNG from 2016. LNG will be supplied through Qatargas I. Qatargas entered into a long-term LNG sale and purchase agreement with Tokyo Electric Power Company (Tepco) in 2012, under which the Japanese firm will receive 1mn tonnes of LNG every year from Ras Laffan. Qatar will supply 18-24 cargoes of LNG to Egypt under a swap deal from May 28 2013, reports Middle East News Agency (MENA), citing Tarek el-Barkatawy, the first undersecretary for agreements and exploration at the Egyptian Oil Ministry. Under the terms of the swap deal, BG Group and Malaysia's Petronas will supply around 152.4mn cubic metres of natural gas per day, el-Barkatawy said. Qatar Gas in turn will supply LNG directly to the companies' overseas customers. Each cargo will be equivalent to 1.0bcm of natural gas.

Rasgas

RasGas I is owned by a consortium made up of QP (63%), ExxonMobil (25%), Kogas (5%) and LNG Japan (3%). RasGas I consists of two 3.3mn tpa (4.6bcm) trains. The main export market for LNG from trains one and two is South Korea.

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RasGas II, a 70:30 JV between QP and ExxonMobil, consists of three additional trains, each of which has a processing capacity of 4.7mn tpa (6.5bcm). Trains three, four and five came on stream in 2004, 2005 and 2006 respectively, raising RasGas' total processing capacity to 20.7mn tpa (28.5bcm). The main export market for LNG from train three is India, with LNG from train four destined for Europe and exports from train five shipped to Europe and Asia. RasGas III, a 70:30 JV between QP and ExxonMobil, consists of two additional trains, each of which has a processing capacity of 7.8mn tpa. Trains six and seven were originally scheduled to start operations in 2008/2009. The scheduled start-up for train six for early April 2009 was also missed, with the train having been brought on stream in August 2009. Train seven was expected to become operational before year-end, but did not become operational until late-February 2010. RasGas will supply about 11.44bcm of LNG to South Korea's state-owned Kogas in 2011, according to Qatar's minister of energy and industry (and chairman of Qatar Petroleum and RasGas), Mohammed Bin Saleh Al Sada. He said that the quantity supplied is equivalent to almost 25% of South Korea's total projected demand. RasGas' annual LNG supply to South Korea exceeds 9.65bcm on a long-term basis, said Al Sada. Tasweeq

Qatar's state-run company Qatar International Petroleum Marketing (Tasweeq) is to discontinue term gasoil exports from 2012, owing to an expected rise in domestic demand for the fuel, according to industry sources. Under a monthly term contract, Tasweeq exports approximately 30,000-60,000 tonnes of 0.2% sulphur gasoil each month, while the company sometimes offers a similar amount of gasoil on the spot market, according to traders. Tasweeq's decision to stop exporting is likely to put a strain on the Middle East market, with demand unlikely to register much change but a shortage of supply. Tasweeq also markets crude oil and GTL entitlements on behalf of QP under an agency agreement that is termed as 'Non-Regulated Products'. It is an independent stateowned company, created under Qatar's Emiri Decree Law Number 15 of 2007, with the mandate of capturing maximum market value from the rapidly increasing exports of Regulated Products from the state of Qatar, reliably and efficiently. Tasweeq delivers products to customers and markets globally.

Sasol

Sasol of South Africa has built a US$1bn GTL plant that entered production in March 2007, manufacturing high-quality diesel fuel and naphtha from gas using Sasol's technology. Sasol expects the facility to reach full production by 2009. The facility features QP as a partner. In March 2004, Sasol, Chevron and QP announced plans to evaluate the expansion of the GTL project's output from 34,000b/d to 100,000b/d. In addition, the companies have agreed to pursue the opportunity to develop a 130,000b/ d upstream/downstream integrated GTL project utilising resources from the North Field.

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Conocophillips

Qatargas III is owned by QP (68.5%), ConocoPhillips (30%) and Mitsui (1.5%). Qatargas III has a capacity of 7.8mn tpa (10.8bcm). The integrated project comprises upstream gas production facilities to produce approximately 14.5bcm of natural gas over the 25year life of the project, as well as an initial average of approximately 70,000b/d gross of LPG and condensate combined from Qatar's North Field. The first LNG cargo was loaded in November 2010, and the Qatargas 3 Plant is now fully operational.

Cosmo Oil

In April 2011, Qatar Petroleum Development (QPD), which is a subsidiary of Cosmo Oil of Tokyo, began oil production from A-Structure South Field in offshore Qatar. QPD was established as the project company for the purpose of petroleum development and operation in Block 1 SE located offshore Qatar in September 1997. After the field development and installations in Al Karkara Field and A-Structure North Field, the first oil flowed in March 2006. In 2007, QP approved the development plan for A-Structure South Field in the same block. Since then, QPD has been continuing the development and on April 27 2011, oil production from the field started and is expected to reach around 3,000b/d, bringing the total production from the three fields in Block 1 SE to around 9,000b/d.

Wintershall

Germany's Wintershall, a wholly-owned subsidiary of BASF, became the operator of the wholly-owned Block 11 in Qatar's territorial waters in 2008. The block, which measures 544sq km and has a water depth of around 70 metres, is in close proximity to the North Field. Wintershall was in 2007 given the go-ahead to operate Offshore Block 3, which covers an area of 1,666sq km. Wintershall and Qatar Petroleum (QP) have announced exploration success at Block 4 North offshore Qatar after four years of hunting. The discovery in depths of 70m is estimated to contain as much as 70bn cubic meters (bcm) of gas and is the country's first new find in 42 years.

Gdf Suez

GDF Suez is active in Qatar, including participating in projects such as highperformance wastewater treatment technologies for water recycling and the construction of the power plant and desalination facility for Ras Laffan. The acquisition of a 60% stake in Block 4 marked the company's first entry into Qatar's upstream segment. GDF Suez announced in July 2009 that it has acquired a 60% interest in Qatar's offshore Block 4 from Anadarko through the purchase of Anadarko Qatar Block 4 Company.

Cnooc

CNOOC has sold a 25% stake in a licence to explore for hydrocarbons in Qatar to Total as the Chinese company seeks to reduce risk. The Beijing-based producer, which secured rights to the offshore concession in 2009, will retain a 75% stake and operate the area called Block BC, according to a statement.

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Petrochina

In May 2010, PetroChina and Shell were awarded the 8,089sq km Block D concession, which spans an area onshore and offshore north-eastern Qatar. Under the terms of the deal, Shell will operate the block with a 75% stake and PetroChina will hold the remaining 25%. The 30-year contract includes an initial five-year exploration period, during which the two companies are obliged to carry out 2D and 3D seismic surveys, processing and interpretation. This period will also involve the companies drilling an unspecified number of exploration wells to target the pre-Khuff formation. According to PetroChina, part of the concession extends beneath the offshore North Field, the largest non-associated gas field in the world. Although PetroChina had no direct exposure to Qatar prior to the deal, it is already contracted to receive LNG from Qatargas IV, having signed a binding SPA with Qatargas and Shell in April 2008. The SPA is for 3mn tpa of gas (4.1bcm) over a 25-year period, which will be shipped to PetroChina's receiving terminals. The deal for Block D gives PetroChina its first exposure to the Qatari upstream and the company may consider expanding its presence when new blocks are offered. Service Companies Petrofac: London-listed oil services company Petrofac set up an office in Qatar in 1997 and is involved in providing technology to the energy, petrochemicals, water and construction sectors. The company counts QP, WorleyParsons, Technip and Maersk among its clients. In March 2010, Petrofac was awarded a US$600mn contract by QP to provide engineering, procurement, installation and commissioning services for gas-sweetening units at Dukhan and Messaieed. The contract covers a sulphur-recovery upgrade at NGL-3 in Messaieed and an acid gas recovery facility at Arab-D in Dukhan. The work is expected to be completed by May 2013. Fluor: Although US-based engineering company Fluor does not currently maintain an office in Qatar, the company has been an active bidder for contracts in the country. In 2009, the company completed a four-year US$1.5bn EPCM for RasGas's Common Offplot Projects. In April 2010, Fluor was awarded an EPCM contract by Qatargas for the Jetty Boil-Off Gas Recovery Project at Ras Laffan in Qatar. The project is designed to minimise gas flaring at LNG berths and is expected to be completed by the end of 2013 or early 2014. The gas will be collected for use by Qatargas and RasGas and is part of a US $1bn project under way at Qatargas' LNG storage and loading facilities. Fluor awarded a contract to US firm GE Oil & Gasin February 2011 to supply equipment for the Jetty Boil-Off Gas Recovery project. The contract will include delivering six electric-motor-driven compressors to Fluor.

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Others

Engineering company Kentz was in January 2011 awarded a framework contract by Qatar Shell GTL to provide services for the Pearl GTL facility in Ras Laffan. The agreement will include procurement, engineering design and construction supervision services at the facility. The services will be provided to offshore platforms, offloading jetties and harbour tank farms, as well as linking infrastructure. The three-year contract includes a two-year extension option.

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Regional Overview Middle East Energy Market Overview BMI View: While the Middle East is set to remain a key supplier of both oil and gas, rising consumption within the region and booming production beyond its borders are putting traditional trade flows under pressure. While we expect steady growth in supply from the region, from both mature producers such as Saudi Arabia and rising players such as Iraq, we cannot preclude curtailment in output in response to the global market. Similarly on gas, rising new sources of LNG globally will see Qatar cede its place at the top of the global LNG export rankings towards 2022.

Iraq: Abundance of Risk, Abundance Of Potential

Iraq retains its position as the Middle Eastern market set to undergo the largest growth in supply. Supported by abundant below ground potential, but facing significant headwinds from political and security concerns, forecast for total Iraqi supply vary widely within the industry. However even factoring delays, cut-backs to production targets, and further setbacks, our conservative forecast for Iraq still calls for growth at an average annual rate of 8.4% per annum, putting supply at 6.7mn barrels per day (b/d) by the end of our forecast period in 2022.

Iraq retains a number of strengths that support a bullish production growth: low production costs, large fields and underdeveloped and underexplored acreage. However despite our conservative outlook the scale of Iraq's resource potential is not in doubt. Indeed, oil minister Adbul Kareem Al-Luaibi reported the country's actual reserves may be 300bn barrels, more than twice the government's official figure of 143.1bn barrels (bbl). It was this potential which generated significant initial interest from international oil companies (IOCs), but a number of above-ground concerns have seen recent bidding rounds attract little interest as investment moves towards less prospective but operationally-friendlier acreage in Kurdistan.

IOCs have been critical of the technical service agreements Baghdad offers, which compensate operators on a fee per barrel basis rather than more lucrative production sharing agreements offered by Erbil. The concern regarding these already unattractive agreements is growing among operators as production targets for Iraq's mega fields are cut.

Fiscal terms remain a key concern for international oil companies which have the resources necessary to unlock Baghdad's oil riches. Indeed, Eni's chief executive Paolo Scaroni was quoted in March as expressing concern about the slower-than-expected development of the Zubair field. According to Scaroni, 'we entered

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the Zubair project with a lot of enthusiasm,' but now 'we ask ourselves if the effort... that we are putting into it is adequately remunerated.'

More recently, BP's vice president of negotiations and upstream Andrew McAuslan told reporters the oil giant was 'talking to the government about the right commercial basis...do we expect to end up in a place with a different plateau and be compensated for that? Yes.' Indeed the concerns for BP are real as they plan to spend upwards of US$2.85bn annually on the Rumalia field to boost output from 1.35mn b/d over the next three years, with long term targets ranging from 2 - 2.8mnb b/d.

Concerns similar to those of Eni have seen a number of IOCs - including Statoil, Total, ExxonMobil and now Russian national oil company (NOC) Gazprom Neft - acquire acreage controlled by the Kurdistan Regional Government (KRG).

Risks To Forecast In Both Directions Iraq Oil Production, 2003-2022 ('000b/d & % chg y-o-y) 7,500

100

5,000

50

2,500

0

-50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f 2018f 2019f 2020f 2021f 2022f

0

Total oil production, 000b/d (LHS) Total oil production, % change y-o-y (RHS)

e/f = estimate/forecast. Source: EIA/BMI

However, with exports from the KRG via Iraq-controlled pipelines still offline at the time of writing since late 2012, political tensions between Erbil and Baghdad remain a key threat to the oil sector. Tensions are

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particularly elevated with the completion of a 200,000 - 300,000b/d pipeline linking Kurdistan and the Turkish border schedule for completion by October 2013 according to news reports. Although negotiations between Baghdad and Erbil have restarted, a lack discernible progress to date underscores the extent of the disagreement between the pair.

In the near term, Iraqi production is likely to remain volatile amid further political disputes, ongoing revisions of ambitious production targets and uncertainty with regard to the commitment of IOCs and now even NOCs to existing contracts for fields controlled by Baghdad.

Iraq could also see significant additions to downstream capacity, but plans have languished on an inability to attract foreign investment given the questionable economics despite the government's offer of incentives to private firms. With aging infrastructure and increasing consumption, the country's downstream sector is in desperate need of investment after years of sanctions and mismanagement. Although nameplate capacity varies widely by source, utilisation rates are estimated to hover around 60%, translating into a significant supply deficit even as Iraqi crude production grows.

Questionable project economics and a slow moving bureaucracy have translated into little tangible progress for the planned 740,000 b/d capacity expansion at a cost of up to US$20bn. According to MEED, while Iraq has nearly US$38bn worth of downstream projects planned, the vast majority - some US$24bn - are in the design stage.

Even in stable operating environments, downstream profitably can be both erratic and uncertain in response to changing input costs and competitive pressures. Iraq's above ground risks - from security and politics to poor infrastructure - only increase the wariness of investors. Moreover, upgrading existing plants is made more difficult by the fact that taking them offline would only exacerbate current product shortages.

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Downstream Growth Plans Confront Operating Environment Existing & Proposed Downstream Capacity (b/d)

Source: BMI

Proven Producers Invest To Lift Output

Although not on the scale of Iraq, the region's other key oil producers are also set to make upstream investments that will see output rise over our 10-year forecast period to 2022.

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Saudi Keeps Top Spot, But Iraq Moves To Second Place Middle East Oil Production 2012e (LHS) & 2022f (RHS) (%)

Source: EIA/BMI

Saudi Arabia, for example, has pledged investment worth US$35bn to offset declining production and raise output over the next five years. While the country has already eased production from the record volumes seen in parts of 2012, our current forecast calls for output to remain elevated and to grow slowly to 2022 to feed rising domestic demand and meet increasing consumption needs in Asia as Europe and America appear increasingly weak destinations for exports. However, we note in light of rising non-OPEC supply, with excess capacity and healthy currency reserves from years of historically elevated prices, Saudi Arabia could make further cutbacks in supply as it seeks to balance world markets and keep prices in the US$100 per barrel (/bbl) range.

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Steady As She Goes Saudi Arabia Oil Production, 2010-2021 ('000b/d & chg y-o-y) 15,000

10

10,000

5

5,000

0

2022f

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

-5 2010

0

Total oil production, 000b/d (LHS) Total oil production, % change y-o-y (RHS)

e/f = estimate/forecast. Source: EIA/BMI

We expect to see similarly steady growth in output, largely in line with official targets, from other OPEC producers in the region - namely Kuwait and the UAE. In the case of Kuwait, we highlight the downside risk stemming from problematic relations with foreign partners, whose expertise will be required to support enhanced oil recovery (EOR) projects needed to raise production from mature and difficult-to-develop fields, as well as to boost gas production from high sulphur deposits.

Although some optimism comes from recent political developments, with the Emir's political supporters winning their first majority, a recent populist legislation which seeks to limit the number of foreign workers in the country fuels uncertainty with regard to policy and reinforces negative perceptions regarding stability. Moreover, a recent reshulling of the country's oil sector management and strikes by state owned oil field service workers only reinforce the our caution regarding from the country's business environment. Upstream and downstream projects have already been delayed as result of bureaucratic infighting and enduring tensions between government and the legislature remain downside risks to our outlook for Kuwait.

In the UAE, Abu Dhabi is leading a major upstream drive targeting new offshore fields and increased recovery from existing sites of production. However delays in the awarding process of the expiring onshore

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concessions and setbacks to exploration and production (E&P) have led to reports that the UAE would push back its 3.5mn b/d target from 2017 to 2020. While we had already factored in delays to the 2017 date, we may now revisit our forecast for a slight downward revision with our expectation that output would reach 3.6mn b/d by 2020.

OPEC Players See Steady Gains Kuwait & UAE Oil Production, 2010-2020 2022 ('000b/d) 4,000

3,000

2,000

1,000

2022f

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

0

UAE: Total oil production, 000b/d Kuwait: Total oil production, 000b/d

e/f = estimate/forecast. Source: EIA/BMI

Given that the Middle East's largest producers are key players in OPEC, statements made by OPEC secretary general Abdalla Salem el-Badri during a November 2012 conference in London are relevant to our outlook. Indeed, el-Badri warned that OPEC upstream investment plans - some US$270bn from 2012 to 2016 that would add some 5mn barrels per day (b/d) in liquids capacity - were at risk from forecasts that the United States would overtake Saudi Arabia as the world's largest producer.

New supplies of oil from North America and elsewhere could see OPEC members in the region reduce or slow upstream investment and seek smaller increases in production capacity in a bid to reflect changing global supply dynamics and maintain higher prices now necessary to support domestic spending.

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The combination of high prices and the proliferation of new technology is supporting a boom in exploration and production (E&P) activity around the world. Rising supplies of non-OPEC crude have been a factor in previous price collapses, such as the fall in WTI seen in the 1980s.

OPEC Players Cut Output As Prices Fall Key Middle Eastern Countries Oil Production, LHS ('000b/d) & WTI, RHS (US$/bbl), 1980-1990

Source: EIA, Bloomberg

Indeed, el-Badri's warning has hallmarks of past supply cuts by OPEC's Middle Eastern heavyweight such as rising non-OPEC supplies and reduced demand in response to price shocks from the 1970s. Even dramatic cut backs in OPEC production from Middle Eastern suppliers were not enough to prevent large falls in WTI in the wake of rising supply and tepid demand.

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Rising Non-OPEC Production Leads To Supply Cuts, Price Fall OPEC & Non-OPEC Oil Production (LHS) & WTI (RHS) (US$/bbl)

Source: EIA, Bloomberg, IMF

Consuming It All However, an additional risk to oil production is the region's heavy consumption of its own supply. Saudi Arabia, the world's 43rd largest country by population, is the world's 7th largest oil consumer. Similar consumption patterns persist throughout the region.

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Subsides Fuel Consumption Fossil Fuel Consumption Subsidy Rates As A Proportion Of The Full Cost Of Supply, 2011

Source: IEA

State-owned Saudi Aramco's CEO Khalid al-Falih previously issued a warning that, without efficiency gains and slower consumption growth, Saudi Arabia's domestic demand could reach 8mn b/d by 2030. alFalih's statements echo a dynamic present throughout the region. Underpinned by demographics and economic growth, as well as subsidy-supported demand and political resistance to reform, we expect inefficient consumption patterns to continue over the course of our 10-year forecast period to 2022. This trend, as evidenced by the chart below, will result in slower growth in more lucrative exports, despite rising production.

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Exports Slow As Consumption Outraces Production Gains Middle East Oil Production, Consumption & Net Exports, 2012-2022 ('000b/d) 40,000

11,000 10,000

20,000

9,000 8,000

0 2022f

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

7,000

Middle East oil production, 000b/d (LHS) Middle East oil net exports, 000b/d (LHS) Middle East oil consumption, 000b/d (RHS)

f = forecast. Source: EIA/BMI

Gas Rises, But Consumption Does Too Rising oil consumption poses an upside to gas, with Iraq, Saudi Arabia, Kuwait and the UAE all targeting increased gas output as feedstock for power generation. Increased utilisation of the Middle East's sizable gas reserves will free up oil for more lucrative exports.

In the case of Saudi Arabia, both consumption and Aramco's investment in new E&P is planned to maintain the country's self sufficiency in gas. Aramco recently accelerated its shale gas development plans and announced that a record number of rigs will be deployed to target gas. There were also rumours that Saudi officials were considering lucrative service contracts for service companies targeting shale gas.

Yet, infrastructure, water and pricing remain obstacles to shale gas development in Saudi Arabia and throughout the region. We highlight the lengthy negotiation process between by BP to develop unconventional gas resources in Oman, where a final investment decision (FID) on a project that could add 10.2bn cubic metres (bcm) to the country's total production was delayed in a dispute over pricing. Although it appears BP and Oman have now reached a deal, the event underscores the extent to which pricing

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undermines the commerciality of upstream gas projects in the region, particularly as conventional supplies dwindled and more costly, complex gas deposits are increasingly targeted for development. Yet reports that Saudi Arabia was considering liquefied natural gas (LNG) imports in order to address temporary supply shortfalls while new sources of gas are developed underscores the downside risk to our current outlook. While gas imports were planned only as a temporary solution, as we have seen in Kuwait which is now turning to year round imports, Saudi Arabia would likely only see its reliance on imported gas grow should it bring online the necessary infrastructure. With a moratorium on further developments of the North Pars field and having reached its planned capacity goal of around 106bcm of LNG send out capacity, Qatar's gas sector is not poised for major new investment following the start up of the Barzan gas project around mid-decade. In light of rising new supplies of LNG that will not only challenge Qatar's place at the top of export league tables but also place pressure on prices, Doha is increasingly turning its attention to new sources of revenue with expansion abroad and domestic investment in its downstream. Israel and Iraq are also likely to become net LNG exporters over the course of current forecast period. However, we highlight an as yet-unresolved debate regarding the amount of future gas discoveries to be reserved for domestic use and the amount to make available for exports as a key trend to watch as Israel enters the global LNG market. In Iraq, the greatest downside to LNG exports remains inadequate domestic supplies of gas, a fact which could divert volumes from global markets to domestic consumers. Indeed operators have already pushed back the date at which Iraqi LNG can be expected to enter the market. In the UAE and Kuwait, despite efforts to tap more difficult-to-recover sources in order to raise output, we see net gas imports growing over our forecast period. Kuwait's announcement in 2012 that it will turn to year-round LNG imports to meet demand, and the UAE's continued progress in expanding import capacity, underscores the impact of inefficient consumption in the region.

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Rising Consumption Middle East Gas Production, Consumption & Net Exports, 2010-2021 (bcm) 750

50 25

500 0 250 -25 0 2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

-50

Middle East gas consumption, bcm (LHS) Middle East gas production, bcm (LHS) Middle East gas net exports, bcm (RHS)

f = forecast. Source: EIA/BMI

With Iraq having overtaken Iran as OPEC's number two producer, sanctions continue to take their toll on Iranian output despite some tentative movement on the diplomatic front. The near-term prospects for Iran's oil sector remain dire, with sanctions crippling a sector already in need of significant investment in both upstream and downstream capacity. With little evidence to suggest a diplomatic resolution is close at hand, we remain bearish in our outlook for the oil sector, which remains difficult to forecast.

The latest data suggest Iranian crude exports in 2012 averaged 1.5mn b/d, a staggering fall of around 1mn b/ d from 2011 figures. New sanctions introduced in February may further damage the sector as they limit Iran's ability to repatriate profits from oil trade. While Tehran has and continues to find novel ways to skirt sanctions, the loss of revenue has been significant and Iran's oil and gas sector remains largely cut off from foreign investment.

The long-term impact of sanctions is particularly worrying for Iran, as the oil and gas sector was already struggling from underinvestment prior to the implementation of sanctions. A number of developments have been cancelled, contractors have pulled out, and according to the IEA sustainable production capacity has

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fallen precipitously by some 700,000b/d from 2011 to 3mn b/d today. For the most recent month where data was available, the IEA reports Iranian production at some 2.7mn b/d in May.

Although the country desperately needs access to capital and expertise, the risk premium remains too high an obstacle for the majority of foreign players. Indeed, while sanctions have pushed Iran to seek even more investment from national oil companies (NOCs) of politically-friendly governments, the country has seen NOCs, namely from China, cancel projects. Chinese firms appear to be delaying major investments without dropping out altogether, in a bid to secure a place in the Iranian oil sector while minimising financial risks that could arise if investment go against terms of US and EU sanctions. Russian firms may be adopting a similar strategy; Gazpromneft was forced to exit the Anaran exploration block in 2011 after delaying activity since obtaining the block in 2008. Russia's Lukoil had similarly pulled out of the Anaran block in 2010.

Sanctions Continue To Strangle Output Iran Oil Production, 2008-2017 ('000b/d & % chg y-o-y) 6,000

10

0 4,000 -10 2,000 -20

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

2009

-30 2008

0

Total oil production, 000b/d (LHS) Total oil production, % change y-o-y (RHS)

e/f = estimate/forecast. Source: EIA/BMI

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Downstream Plans Afloat

New investment will flow into a number of greenfield and brownfield downstream projects across the region: ■

Qatar Petroleum has formally announced a joint venture with private players led by Total for the construction of US$1.5bn condensate refinery at Ras Laffan. At 146,000 barrels per day (b/d), the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online in H216;

■

Saudi Arabia's 400,000b/d Jubail refinery (developed with Total) is the first of three mega refinery projects to come online which will not only cut imports of refined products but make the Kingdom a mega-exporter of refined products;

■

Although delayed by political and bureaucratic infighting, Kuwait's 615,000b/d Al Zour refinery - the world's largest - is advancing and the country is targeting a 2018 start date as it also modernises existing downstream capacity to produce cleaner fuels;

■

Bahrain plans spend US$10bn to boost capacity at the Sira refinery from 260,000b/d to more than 450,000b/d by 2018;

■

In the UAE, International Petroleum Investment Co. has appointed a financial advisor and plans to approach lenders over 2013 in a bid to raise funds to begin construction of a 250,000b/d refinery at the budding hub of Fujairah.

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Downstream Rises Middle East Refinery Capacity ('000b/d) & % chg y-o-y 15,000

15

10 10,000 5 5,000 0

0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013f 2014f 2015f 2016f 2017f 2018f

-5

Middle East oil refinery capacity, 000b/d (LHS) Middle East oil refinery capacity, 000b/d~ % change y-o-y (RHS)

f = forecast. Source: EIA/BMI

In short, the region is awash in planned and proposed downstream projects, which provide opportunities for consulting and construction firms as plans advance. The combination of access to cheap feedstock from domestically produced crude and access to funding are supportive of mega projects and expansion, leaving the Middle East well-suited for a downstream boom that will cut regional imports of refined products while raising revenues.

Downstream expansions are set to be positive for the Middle East oil producers and their state-owned companies, as well as providing opportunities not only for engineering firms but also international oil companies (IOCs) such as Total which have emerged as winners via joint ventures. However, the impact of Middle East's downstream expansion will be negative for refiners elsewhere. The biggest loser will be Europe, where a recent poll of executives conducted by Bloomberg indicated that up to 10 of the current 104 refineries on the continent are likely to close as demand for fuel falls and firms see pressure on margins increase from capacity expansions elsewhere.

With booming investment elsewhere, weak demand and tight regulations, the prospects of further investment into Europe's refining sector are dim. The absence of investment into much-needed

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modernisation will only put the region further behind its peers and increase its exposure to further capacity rationalisations. However, Asia, which is also experiencing a boom in downstream investment, could also face pressure from rising Middle East exports. SK Energy, the largest refiner by volume in South Korea, told the Wall Street Journal through a spokesman in March that the firm expected new plants from the Middle East to force margins lower. Indeed, as capacity booms in the region, particularly in China, India's largest refiner Reliance Industries has said that it plans to reduce operational costs so that the firm can compete with projects from the Persian Gulf.

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Global Industry Overview Global Energy Market Overview Our forecasts suggest that global oil production will continue rising, registering average annual growth of 1.75% between 2013 and 2022. Various delays to production and start-ups over 2013 have prompted us to downgrade some of our expectations for key producers like Iraq, South Sudan and Brazil. In addition, we have tapered our forecasts for production growth for Saudi Arabia, and no longer include ethanol in our Brazil total oil production methodology. All of the above changes have in turn reduced our global supply forecast for 2013 from 93.2mn barrels per day (b/d) to 89mn b/d. There is still a downside risk to this number if Sudan shuts off oil transportation from South Sudan in early August, as it has threatened to do, and therefore causes another prolonged shut-in of supplies. Several of the postponed ramp-ups (specifically in Brazil and Iraq) have now been factored into our 2014 production forecast, hence the surge in our 2014 production growth forecast to 3% (see graph below). Over the longer term we anticipate that the current growth trajectory will strengthen as more discoveries are made and production forecasts therefore rise.

Long-Term Upside To Production Forecasts Global Oil Production Forecast 150,000

4

3 100,000 2 50,000 1

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

0 2010

0

World oil production, 000b/d (LHS) World oil production, % change y-o-y (RHS)

f=forecast. Source: EIA, BMI

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On the non-OPEC front, we see total production in 2013 reaching 51.4mn b/d, down slightly from an estimated 51.9mn b/d in 2012. Floods affecting Canada's Alberta fields and transportation system in June have taken out volumes, leading to bigger-than-expected losses due to seasonal factors. North America dominates non-OPEC production. Canada and the US will jointly produce 15mn b/d of crude oil, natural gas liquids (NGLs) and other liquids in 2013, and this is forecast to rise to 15.7mn b/d in 2014. Growth will remain robust to the end of our forecast period, with North American production rising to 17.9mn b/d.

For Russia, our view remains that the short-term gains will turn into a longer-term reduction in production as producing assets peak. The major caveat (and upside risk) is the business environment and to what extent it will become more accessible to the new large-scale investments needed to unlock Russia's vast natural resource potential. We forecast production to average 10.47mn b/d in 2013 and this to decline to 10.14mn b/ d by 2022, with a peak coming in 2015.

We have also altered our Brazil forecast methodology, to discount the effects of ethanol production in our total oil production forecast. We now estimate that total oil production will reach 2.3mn b/d in 2013, surging to 2.7mn in 2014 as new fields come onstream (some delayed from this year).

North America Surges Ahead Asia Pacific and Americas - Oil Production Forecasts, 000s b/d

40,000

20,000

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

0

Latin America (LHS) North America (LHS) Asia-Pacific oil production (LHS)

f=forecast. Source: EIA, BMI

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Production Rebound In Africa And Middle East EMEA - Oil Production Forecasts, 000s b/d

50,000

25,000

2021f

2020f

2019f

2018f

2017f

2016f

2015f

2014f

2013f

2012

2011

2010

0

Middle East Western Europe Emerging Europe Africa

f=forecast. Source: EIA, BMI

Uncertainty remains with regards to changes to OPEC policy, as the cartel seems to be in an uneasy equilibrium at the moment. Saudi Arabia has several conflicting factors to consider, from the challenge posed by US oil production, to providing a floor to prices and keeping more hawkish OPEC calls on production at bay.

In the latest OPEC meeting, the members decided to keep the quota for crude oil production at around 30mn b/d. Our forecasts suggest that total OPEC oil production will be 38mn b/d in 2013. This factors in our expectations that members will produce crude oil above their quotas, but it also includes natural gas liquids (NGLs) and other liquids production, as well as refinery gains (consistent with EIA data methodology), in contrast to a more strict 'crude-only' categorisation from OPEC for oil production.

Despite a sizable hydrocarbons endowment, major upstream and downstream projects remain at risk in Kuwait given long-standing above ground challenges that show few signs of near-term resolution. This suggests that Kuwait is on track to slip further behind its oil rich peers in the region, who themselves are in the midst of major upstream projects. As a result, we expect Kuwait to miss its 2020 capacity goal of 4mn b/d, and instead anticipate production will reach around 3.5mn b/d by the end of our forecast period.

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Iraq's ramp-up has failed to match expectations in 2013 and we have moved to downgrade our production forecasts for the market from 3.4mn b/d to 3.3mn b/d. Political tensions, security and infrastructure challenges, and complaints over fiscal terms will see production grow, but below the country's resource potential. In the near term, the key development to watch remains the Ankara-Erbil-Baghdad relationship, with the Kurdistan Regional Government (KRG) continuing to use trucks rather than the central government's pipelines to reach markets.

Saudi Arabia has been cutting back on production according to reports on the ground - something we have anticipated in our forecast scenario. Pressured by rising production from Iraq and non-OPEC members, as well as bearish sentiment regarding global demand, we expect a decline in Saudi output in 2013 compared to 2012. We forecast 2013 crude oil and NGLs production to be 11.35mn b/d, down from 11.7mn b/d in 2012. For 2014, we expect a small increase of 1% to 11.46mn b/d. We highlight that soft export demand and strong domestic consumption growth will see the latter become the key driver of long-term Saudi crude oil production.

Scope For Consumption Growth In The Middle East 2013e Oil Production and Consumption Forecasts, 000s b/d

Source: EIA, BMI

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Table: Global Oil Consumption Estimates, mn b/d

2013 Demand

2012 Demand

% change y-o-y

2013 GDP Growth % Assumption

IEA

90.6

89.8

0.9

3.5

OPEC

89.7

88.9

0.9

3.2

EIA

90.0

89

1.1

-

BMI

91

89.7

1.4

2.6

Source: OPEC, IEA, EIA, BMI

We remain more bullish in our demand growth forecasts than other major agencies. We attribute this to the fact that in some of the largest consumers in the world (such as China, India, Brazil and other large emerging markets), large subsidies are still in place that are artificially boosting demand. While across emerging markets price reform is taking place, we still price-in healthy levels of demand for products such as gasoline and diesel. Africa and Latin America will register the highest growth in consumption in 2013, at 3.3% and 3.2% respectively, with Western Europe and North America lagging behind at 0% and 0.4% respectively.

Looking at the longer-term trends in consumption, emerging markets will unsurprisingly lead in terms of the biggest gains in consumption growth. According to our forecasts, Brazil's per capital oil consumption will be 45% higher in 2021 compared to 2013, the largest increase amongst large consumers. Energy efficiency gains will mean a lower rate of growth in oil consumption in developed economies, whose consumption of oil per capita is going to be lower in 2021 than in 2013. Markets where we see a small increase in oil consumption to the end of our forecast period, but a population decline (Japan and Germany), will register a rise in per capital oil consumption - although this will be symptomatic of their population 'time-bombs' rather than any major structural divergences in energy consumption patterns from their peers.

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Emerging Markets Lead Consumption Growth % Change In Per Capita Oil Consumption, 2013 - 2021

Based on 2013 and 2021 BMI's oil production and population forecasts. Source: EIA, UN, BMI

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Appendix Middle East - Regional Appendix The data contained in these appendix tables is correct as of 1 July 2013. It represents a snapshot of our regional forecasts at the end of our last publishing quarter. It is included for reference purposes only. Latest data, reflecting forecasts made for the market this quarter, can be found in the Industry Forecast Scenario section of this report. Please note that because this table represents a snapshot of our last regional forecasts, whereas data included in the Industry Forecast Scenario represents our latest forecasts made this quarter, country-specific data may not match.

Table: Oil Consumption - Historical Data & Forecasts, 2011-2018 ('000b/d)

2011

2012

2013

2014

2015

2016

2017

2018

Bahrain

46.81

47.98

49

50

52

53

54

56

Kuwait

339.00

375.63

383

395

403

411

419

427

Iran

1828.31

1855.84

1,884

1,908

1,936

1,968

2,002

2,038

Iraq

720.00

771.75

810

851

893

938

985

1,034

Israel

240.38

242.78

244

242

239

234

227

221

Oman

149.10

156.56

164

173

181

190

200

210

Qatar

175.96

186.52

198

210

222

235

250

265

3009.19

3174.70

3,286

3,384

3,486

3,590

3,698

3,809

UAE

567.96

590.68

614

639

664

691

719

747

Other

698.17

700.27

704

707

711

714

718

722

BMI Universe

7076.72

7402.44

7,633

7,851

8,077

8,312

8,554

8,806

Regional Total

7774.89

8102.71

8,337

8,558

8,788

9,026

9,272

9,528

Saudi Arabia

f = forecast. Source: EIA, BMI

Table: Oil Consumption - Long-Term Forecasts, 2015-2022 ('000b/d)

2015

2016

2017

2018

2019

2020

2021

2022

Bahrain

52

53

54

56

57

58

60

61.42

Kuwait

403

411

419

427

436

447

458

468.94

1,936

1,968

2,002

2,038

2,080

2,124

2,199

2274.86

Iran

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Oil Consumption - Long-Term Forecasts, 2015-2022 ('000b/d) - Continued

2015

2016

2017

2018

2019

2020

2021

2022

Iraq

893

938

985

1,034

1,086

1,140

1,197

1253.77

Israel

239

234

227

221

214

207

209

203.20

Oman

181

190

200

210

220

231

243

255.01

Qatar

222

235

250

265

280

297

315

334.02

3,486

3,590

3,698

3,809

3,923

4,041

4,162

4287.24

UAE

664

691

719

747

777

808

841

873.06

Other

711

714

718

722

725

729

729

-

BMI Universe

8,077

8,312

8,554

8,806

9,074

9,355

9,685

10,012

Regional Total

8,788

9,026

9,272

9,528

9,799

10,084

10,413

10,012

Saudi Arabia

f = forecast. Source: EIA, BMI

Table: Oil Production - Historical Data & Forecasts, 2011-2018 ('000b/d)

2011

2012

2013

2014

2015

2016

2017

2018

48.16

49.16

48

50

52

56

59

61

Kuwait

2691.82

2796.79

2,878

2,934

2,994

3,059

3,127

3,189

Iran

4234.12

3123.47

2,453

2,593

2,704

2,840

2,925

3,012

Iraq

2634.72

2991.50

3,303

3,610

4,043

4,609

5,000

5,346

4.03

4.03

4

4

4

4

4

4

Oman

888.91

893.40

926

931

923

909

895

873

Qatar

1579.00

1640.00

1,632

1,686

1,732

1,779

1,818

1,859

11159.88

11721.23

11,356

11,472

11,606

11,761

11,928

12,086

3087.03

3139.25

3,193

3,250

3,294

3,357

3,431

3,503

39.13

40.31

42

43

44

46

47

48

BMI Universe

26,327.67

26,358.83

25,794

26,530

27,353

28,373

29,187

29,933

Regional Total

26,366.81

26,399.14

25,836

26,573

27,397

28,419

29,234

29,981

Bahrain

Israel

Saudi Arabia UAE Other

f = forecast. Source: EIA, BMI

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Table: Oil Production - Long-Term Forecasts, 2015-2022 ('000b/d)

2015

2016

2017

2018

2019

2020

2021

2022

52

56

59

61

61

65

68

72

Kuwait

2,994

3,059

3,127

3,189

3,291

3,378

3,443

3515.42

Iran

2,704

2,840

2,925

3,012

3,072

3,134

3,196

3260.26

Iraq

4,043

4,609

5,000

5,346

5,685

6,016

6,381

6694.18

4

4

4

4

4

4

4

4.03

Oman

923

909

895

873

851

838

817

788.42

Qatar

1,732

1,779

1,818

1,859

1,895

1,919

1,938

1953.12

11,606

11,761

11,928

12,086

12,238

12,380

12,525

12661.03

3,294

3,357

3,431

3,503

3,584

3,621

3,658

3700.27

44

46

47

48

50

51

51

51

BMI Universe

27,353

28,373

29,187

29,933

30,681

31,355

32,032

32,649

Regional Total

27,397

28,419

29,234

29,981

30,730

31,407

32,083

32,700

Bahrain

Israel

Saudi Arabia UAE Other

f = forecast. Source: EIA, BMI

Table: Refining Capacity - Historical Data & Forecasts, 2011-2018 ('000b/d)

2011

2012

2013

2014

2015

2016

2017

2018

Bahrain

262.00

262.00

262

262

262

262

262

262

Kuwait

936.00

936.00

936

936

936

936

936

1,415

Iran

1860.00

1860.00

1,860

1,860

1,860

1,860

1,860

1,860

Iraq

924.00

924.00

924

924

924

949

949

975

Israel

220.00

220.00

220

220

220

220

220

220

Oman

222.00

222.00

222

222

293

293

293

293

Qatar

374.00

514.00

514

514

514

514

660

660

2110.00

2110.00

2,297

2,697

2,897

3,097

3,297

3,297

UAE

781.25

781.25

901

1,201

1,401

1,401

1,401

1,401

Other

765.00

803.00

843

886

930

976

1,025

1,076

7689.25

7829.25

8,136

8,836

9,307

9,532

9,878

10,383

Saudi Arabia

BMI Universe

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Refining Capacity - Historical Data & Forecasts, 2011-2018 ('000b/d) - Continued

Regional Total

2011

2012

2013

2014

2015

2016

2017

2018

8454.25

8632.25

8,979

9,722

10,237

10,508

10,903

11,459

f = forecast. Source: EIA, BMI

Table: Refining Capacity - Long-Term Forecasts, 2015-2022 ('000b/d)

2015

2016

2017

2018

2019

2020

2021

2022

Bahrain

262

262

262

262

262

262

262

262.00

Kuwait

936

936

936

1,415

1,415

1,415

1,415

1415.00

Iran

1,860

1,860

1,860

1,860

1,860

1,860

1,860

1860.00

Iraq

924

949

949

975

975

975

975

975.00

Israel

220

220

220

220

220

220

220

220.00

Oman

293

293

293

293

293

293

293

293.00

Qatar

514

514

660

660

660

660

660

660.00

Saudi Arabia

2,897

3,097

3,297

3,297

3,297

3,297

3,297

3297.00

UAE

1,401

1,401

1,401

1,401

1,401

1,401

1,401

1401.25

930

976

1,025

1,076

1,130

1,187

1,187

-

BMI Universe

9,307

9,532

9,878

10,383

10,383

10,383

10,383

10,383

Regional Total

10,237

10,508

10,903

11,459

11,513

11,570

11,570

10,383

Other

f = forecast. Source: EIA, BMI

Table: Gas Consumption - Historical Data & Forecasts, 2011-2018 (bcm)

2011

2012

2013

2014

2015

2016

2017

2018

Bahrain

12.62

12.75

12.9

13.1

13.4

13.7

14.1

14.4

Kuwait

14.22

15.04

15.6

16.2

16.9

17.7

18.5

19.3

Iran

153.34

151.60

155.8

162.4

169.8

178.9

187.5

197.3

Iraq

1.29

2.05

3.6

5.6

7.8

12.6

14.5

17.6

Israel

3.32

3.55

5.0

8.8

9.6

10.6

11.1

11.6

Oman

17.54

19.13

20.2

21.6

22.3

23.4

24.6

25.8

Qatar

30.18

34.71

38.2

41.6

45.2

48.8

52.2

55.6

Saudi Arabia

92.10

109.00

116.2

130.0

143.9

149.6

154.9

159.5

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Gas Consumption - Historical Data & Forecasts, 2011-2018 (bcm) - Continued

2011

2012

2013

2014

2015

2016

2017

2018

UAE

74.55

77.54

80.6

84.8

88.1

92.0

97.1

101.3

Other

46.00

48.30

50.7

53.2

55.9

58.7

61.6

64.7

BMI Universe

399.16

425.37

448.2

484.1

517.0

547.3

574.4

602.4

Regional Total

445.16

473.67

498.9

537.3

572.9

606.0

636.0

667.1

f = forecast. Source: EIA, BMI

Table: Gas Consumption, 2015-2022 (bcm)

2015

2016

2017

2018

2019

2020

2021

2022

Bahrain

13.4

13.7

14.1

14.4

14.8

15.2

15.5

15.92

Kuwait

16.9

17.7

18.5

19.3

20.1

20.9

21.9

23.03

Iran

169.8

178.9

187.5

197.3

208.3

220.6

226.3

239.18

Iraq

7.8

12.6

14.5

17.6

22.1

23.5

25.1

26.20

Israel

9.6

10.6

11.1

11.6

12.2

12.8

13.5

13.50

Oman

22.3

23.4

24.6

25.8

27.1

28.4

29.8

31.34

Qatar

45.2

48.8

52.2

55.6

59.3

62.8

66.9

71.62

143.9

149.6

154.9

159.5

163.5

166.8

170.1

173.16

UAE

88.1

92.0

97.1

101.3

104.7

106.4

108.9

112.42

Other

55.9

58.7

61.6

64.7

67.9

71.3

71.3

-

BMI Universe

517.0

547.3

574.4

602.4

632.1

657.4

678.1

706.4

Regional Total

572.9

606.0

636.0

667.1

700.0

728.7

749.4

706.4

Saudi Arabia

f = forecast. Source: EIA, BMI

Table: Gas Production - Historical Data & Forecasts, 2011-2018 (bcm)

2011

2012

2013

2014

2015

2016

2017

2018

Bahrain

15.87

16.03

16.27

16.52

16.85

17.27

17.70

18.14

Kuwait

13.38

13.82

15.86

17.82

18.08

18.34

18.54

18.74

Iran

151.82

154.86

157.96

161.12

164.34

167.63

170.98

174.40

Iraq

1.90

3.07

9.49

12.63

14.60

16.33

18.28

18.64

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Qatar Oil & Gas Report Q4 2013

Gas Production - Historical Data & Forecasts, 2011-2018 (bcm) - Continued

2011

2012

2013

2014

2015

2016

2017

2018

Israel

2.60

3.10

3.82

5.54

8.37

10.60

16.01

18.92

Oman

26.50

26.77

27.30

27.85

28.69

29.51

31.15

32.78

Qatar

116.71

121.38

126.00

130.28

134.19

137.47

140.22

142.89

Saudi Arabia

98.10

101.89

118.18

131.96

145.74

146.91

148.56

149.60

UAE

52.04

53.08

52.94

56.05

64.20

67.59

68.01

68.43

Other

6.00

6.60

7.20

7.90

8.70

9.60

10.60

11.60

BMI Universe

478.94

494.02

527.82

559.76

595.05

611.64

629.45

642.55

Regional Total

484.94

500.62

535.02

567.66

603.75

621.24

640.05

654.15

f = forecast. Source: EIA, BMI

Table: Gas Production - Long-Term Forecasts, 2015-2022 (bcm)

2015

2016

2017

2018

2019

2020

2021

2022

Bahrain

16.85

17.27

17.70

18.14

18.60

19.06

19.54

20.03

Kuwait

18.08

18.34

18.54

18.74

18.95

19.16

19.37

19.59

Iran

164.34

167.63

170.98

174.40

177.89

181.44

185.07

188.77

Iraq

14.60

16.33

18.28

18.64

18.89

19.15

19.42

19.70

Israel

8.37

10.60

16.01

18.92

19.73

20.25

20.67

21.21

Oman

28.69

29.51

31.15

32.78

32.78

32.78

32.78

32.78

Qatar

134.19

137.47

140.22

142.89

145.60

148.34

151.09

153.96

Saudi Arabia

145.74

146.91

148.56

149.60

150.65

151.72

152.79

153.86

UAE

64.20

67.59

68.01

68.43

69.29

70.17

71.06

71.96

Other

8.70

9.60

10.60

11.60

12.80

14.10

14.10

-

BMI Universe

595.05

611.64

629.45

642.55

652.39

662.07

671.80

681.86

Regional Total

603.75

621.24

640.05

654.15

665.19

676.17

685.90

681.86

f = forecast. Source: EIA, BMI

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Table: Net LNG Exports - Historical Data & Forecasts, 2011-2018 (bcm)

2011

2012

2013

2014

2015

2016

2017

2018

-2.40

-3.03

-1.64

-0.21

-0.66

-1.17

-1.60

-2.25

Iraq

0.00

0.00

0.00

0.00

0.00

0.00

1.50

1.75

Israel

0.00

0.00

0.00

0.00

0.00

0.00

5.00

5.00

Oman

8.97

7.65

7.12

6.28

6.38

6.13

6.60

7.02

Qatar

66.53

62.15

63.66

64.80

65.47

65.67

65.57

65.22

UAE

-1.82

-3.30

-6.06

-10.05

-4.90

-7.52

-13.36

-16.55

Kuwait

f = forecast. Source: EIA, BMI

Table: Net LNG Exports - Long-Term Forecasts, 2015-2022 (bcm)

2015

2016

2017

2018

2019

2020

2021

2022

-0.66

-1.17

-1.60

-2.25

-2.89

-3.53

-4.22

-4.95538

Iraq

0.00

0.00

1.50

1.75

2.00

2.00

2.00

2.00

Israel

0.00

0.00

5.00

5.00

5.00

5.00

5.00

5.00

Oman

6.38

6.13

6.60

7.02

5.73

4.37

2.95

1.46

Qatar

65.47

65.67

65.57

65.22

64.71

63.99

63.09

62.10

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

-4.90

-7.52

-13.36

-16.55

-18.00

-14.59

-9.54

-3.08

Kuwait

Saudi Arabia UAE

f = forecast. Source: EIA, BMI

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Qatar Oil & Gas Report Q4 2013

Methodology Oil & Gas Risk/Reward Ratings Methodology BMI's approach in assessing the risk/reward balance for oil and gas industry investors is threefold. First, we have disaggregated the upstream (oil and gas E&P) and downstream (oil refining and marketing, gas processing and distribution), enabling us to take a more nuanced approach to analysing the potential within each segment, and identifying the different risks along the value chain. Second, we have identified objective indicators that may serve as proxies for issues and trends that were previously evaluated on a subjective basis. Finally, we have used BMI's proprietary Country Risk Ratings (CRR) in a more refined manner in order to ensure that only those risks most relevant to the industry have been included. Overall, the new ratings system - which is now integrated with those of all industries covered by BMI - offers an industryleading insight into the prospects/risks for companies across the globe.

Ratings Overview Conceptually, the new ratings system is organised in a manner that enables us clearly to present the comparative strengths and weaknesses of each state. As before, the headline oil and gas rating is the principal rating. However, the differentiation of upstream and downstream and the articulation of the elements that comprise each segment enable more sophisticated conclusions to be drawn, and also facilitate the use of the ratings by clients who have varying levels of exposure and risk appetite. Oil & Gas Risk Reward Rating: This is the overall rating, which comprises 50% upstream BER and 50% downstream; Upstream Oil & Gas Risk Reward Rating: This is the overall upstream rating, which is composed of rewards/risks (see below); Downstream Oil & Gas Risk Reward Rating: This is the overall downstream rating, which comprises rewards/risks (see below);

Both the upstream RRR and downstream RRR are composed of Rewards/Risks sub-ratings, which themselves comprise industry-specific and broader country risk components; Rewards: Evaluates the sector's size and growth potential in each state, and also broader industry and state characteristics that may inhibit its development;

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Risks: Evaluates both industry-specific dangers and those emanating from the state's political and economic profile that call into question the likelihood of expected returns being realised over the assessed time period.

Table: BMI's Oil & Gas Risk Reward Ratings - Structure

Component

Details

Oil & Gas Risk Reward Rating

Overall rating

Upstream RRR

50% of Oil & Gas RRR

Rewards

70% of Upstream RRR

- Industry rewards

75% of Rewards

- Country rewards

25% of Rewards

Risks

30% of Upstream RRR

- Industry risks

65% of Risks

- Country risks

35% of Risks

Downstream RRR Rewards

50% of Oil & Gas RRR 70% of Downstream RRR

- Industry rewards

75% of Rewards

- Country rewards

25% of Rewards

Risks

30% of Downstream RRR

- Industry risks

60% of Risks

- Country risks

40% of Risks

Source: BMI

Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators and 41 separate indicators/datasets.

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Qatar Oil & Gas Report Q4 2013

Table: BMI's Oil & Gas Business Environment Upstream Ratings - Methodology

Indicator

Rationale

Upstream RRR: Rewards Industry rewards Resource base - Proven oil reserves, mn bbl - Proven gas reserves, bcm

Indicators used to denote total market potential. High values given better scores. -

Growth outlook - Oil production growth, 2009-2014 - Gas production growth, 2009-2014

Indicators used as proxies for BMI's market assumptions, with strong growth accorded higher scores. -

Market maturity - Oil reserves/production

Indicator used to denote whether industries are frontier/emerging/developed or mature markets. Low existing exploitation in relation to potential is accorded higher scores.

- Gas reserves and production

-

- Current oil production vs peak

-

- Current gas production vs peak

-

Country rewards

-

State ownership of assets, % Number of non-state companies

Indicator used to denote opportunity for foreign NOCs/IOCs/independents. Low state ownership scores higher. Indicator used to denote market competitiveness. Presence (and large number) of non-state companies scores higher.

Upstream BER: Risks Industry risks Licensing terms Privatisation trend

Subjective evaluation of government policy towards sector against BMIdefined criteria. Protectionist states are marked down. Subjective evaluation of government industry orientation. Protectionist states are marked down.

Country risks Physical infrastructure Long-term policy continuity risk Rule of law

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Rating from BMI's CRR. It evaluates the constraints imposed by power, transport and communications infrastructure. From CRR It evaluates the risk of a sharp change in the broad direction of government policy. From CRR. It evaluates government's ability to enforce its will within the state.

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BMI's Oil & Gas Business Environment Upstream Ratings - Methodology - Continued

Indicator

Rationale From CRR, to denote risk of additional legal costs and possibility of opacity in tendering or business operations affecting companies' ability to compete.

Corruption

Source: BMI

Oil & Gas Forecasts Methodology

BMI's industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, meaning seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms.

Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variable's own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity.

When forecasting for some of our industry sub-component variables, however, using a variable's own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historical data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.

It must be remembered that human intervention plays a necessary and desirable part of all our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not

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Qatar Oil & Gas Report Q4 2013

Energy Industry There are a number of principal criteria that drive our forecasts for each Energy indicator.

Energy supply

Supply of crude oil, natural gas, refined oil products and electrical power is determined largely by investment levels, available capacity, plant utilisation rates and national policy. We therefore examine: ■

National energy policy, stated output goals and investment levels;

■

Company-specific capacity data, output targets and capital expenditures, using national, regional and multinational company sources;

■

International quotas, guidelines and projections such as OPEC, IEA, and EIA.

Energy consumption

A mixture of methods are used to generate demand forecasts, applied as appropriate to each individual country: ■

Underlying economic (GDP) growth for individual countries/regions, sourced from BMI published estimates. Historic relationships between GDP growth and energy demand growth at an individual country are analysed and used as the basis for predicting levels of consumption;

■

Government projections for oil, gas and electricity demand;

■

Third-party agency projections for regional demand, such as IEA, EIA, OPEC;

Extrapolation of capacity expansion forecasts based on company- or state-specific investment levels.

Cross checks Whenever possible, we compare government and/or third party agency projections with the declared spending and capacity expansion plans of the companies operating in each individual country. Where there are discrepancies, we use company-specific data as physical spending patterns to ultimately determine capacity and supply capability. Similarly, we compare capacity expansion plans and demand projections to check the energy balance of each country. Where the data suggest imports or exports, we check that necessary capacity exists or that the required investment in infrastructure is taking place.

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Sources Sources include those international bodies mentioned above such as OPEC, IEA, and EIA, as well as local energy ministries, official company information, and international and national news, and international and national news agencies.

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