Qatar shifts condensate export strategy as US light oil competes for Asia

11/6/2014

By ANTHONY DIPAOLA and ROBERT TUTTLE
Bloomberg

Qatar plans to cut exports of condensate and process more of the light oil into naphtha and other higher-value products that it can market in Asia, where the boom in US shale output is adding competition for sales.

Qatar’s Ras Laffan refinery will double its capacity for processing condensate by 150,000 bpd by the end of 2016, officials at state-run oil-marketer Tasweeq said at a conference in the capital Doha this week. The plant also targets a 42% boost in naphtha output, they said.

The US is exporting similar products to Asia and vying with Middle Eastern suppliers for sales, said Jeff Brown, president of Singapore-based consultant FACTS Global Energy.

Oil slid into a bear market last month as the US and Russia increased production and prices dropped more than 20% from their peak for the year in June. The US, which prohibits most crude exports, allowed foreign sales of condensate for the first time this year.

US exports of the light oil could rise to 1 million bpd this decade, Lucian Pugliaresi, president of the Washington, DC-based Energy Policy Research Foundation, said at the conference.

“The Middle East has a serious, long-term competitor in North America, led by the US,” Al Troner, president of Houston-based Asia Pacific Energy Consulting, said at the same event. “There will be pressure on prices for some time. Buyers will have a choice.”

Barzan Field

The US export push isn’t deterring Qatar. The Persian Gulf state’s Barzan natural gas field will begin producing in the first quarter of next year, contributing about 50,000 bpd of condensate, Saad Al-Kuwari, Tasweeq’s CEO, told reporters at the conference. Condensates are often produced alongside gas.

Qatar, which exports about 500,000 bpd of condensate, will reduce shipments to about 350,000 bpd as it uses more of the oil at home, said Ibrahim Al-Sulaiti, Tasweeq’s marketing director for field condensates. Additional condensate from Barzan will offset part of the decline, he said.

The nation will process some condensate into naphtha, raising its exports of this product by 3 million tpy once the Ras Laffan refinery starts operating, said Adel Abdula Al-Rumaihi, Tasweeq’s marketing director for refined products and naphtha. Qatar now ships 7 million tpy of naphtha, he said. Ras Laffan is also set to produce low-sulfur diesel.

Other Middle Eastern countries, including Saudi Arabia and the United Arab Emirates, are also expanding refineries to meet domestic demand and boost exports. With new 400,000-bpd refineries starting in Saudi Arabia and the UAE emirate of Abu Dhabi, “2015 looks to be a difficult year for naphtha,” Colin Shelley, a consultant at FGE, said at the conference. The added supply will depress naphtha prices and profits next year, he said.

Al-Kuwari, Tasweeq’s CEO, noted an ever-increasing supply of US shale oil. “We need to see how this will impact the supply picture,” he said.

11/06/2014