David - TM / Gulfstream Resources
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NORTH GAS FIELD
Qatar's proven reserve base of natural gas is the third largest in the world. It has constructed the world's largest LNG export facility and a huge gas liquefaction plant at the Ras Laffan port. First LNG shipments to the Far East began in December. A second LNG project is under construction, with a third in the planning stage. The gas for all the projects is sourced from the huge North Field. The ARCO Qatar
consortum is pursuing its own developement, currently targeting the Emirate of Dubai. Gross proven recoverable reserves are estimated at 32 TCF of gas and 1.1 billion barrels of liquids.
Dubai is projected to need incremantal gas supply of 1 bcf/d by the year 2000. If it does not secure a long term secure supply of gas, its position as one of the leading trading and service centers in the Middle East will be in jeopardy. The bulk of Dubai's current gas supply is sourced from Sharjah, a neighboring Emirate, which does not have the reserve base to support the magnitude of projected incremental demand from Dubai. Dubai does not produce any significant gas of its own, and is projected to have exhausted its oil reserves in approximately ten years.
There is competition between Qatar and Abu Dhabi to service Dubai's rapidly increasing gas consumption. According to "Petroleum Economist" (May97), however, Abu Dhabi may have difficulty in meeting its own projected internal demands for gas along with the needs of Dubai. "...Abu Dhabi may not be producing enough gas , at the beginning of the next century, to support its projected power and petrochemical output and its current export levels. It is unlikely to have any space, with which it can supply neighboring Dubai..." Political rivalry between Abu Dhabi and Dubai may also preclude Abu Dhabi from being the primary supplier of incremental gas supplies to Duabi.
Initial gas supply of 600-800 mmcf/d to Dubai is expected to commence in 2001, with deliveries escalating in response to demand growth (with estimates ranging from a low of 5% per annum to a high of 15% per annum). Associated liquids (condensate and LPG) of 50,000 bopd would also be produced. The cost of the project is estimated at over US$1 billion. The reserve base on Gulfstream's concession in the North Field is, however, so huge that it could support several similar sized projects. If Dubai chooses to source its new gfas supply from Qatar, then we would expect the project to be significantly expanded or new similar sized projects launched every three to four years, given the rising demand for gas in the region. Other parts of the United Arab Emirates as well as Bahrain, Kuwait and Suadi Arabia are also in need of new gas supplies to meet increasing demand for electricity and desalinated water.
At present, the market is assigning only nominal value to Gulfstream's interest in the North Field. We estimate Gulfstream's share of the North Field gas reserves to be worth $5.46 per share. The probability of Gulfstream being able to monetize this asset within the next six months in terms of a long term contract with Dubai is steadily increasing.
After literally years of negotiations, the North Field consortum and the Governmant of Qatar have agreed on gas sales terms to Dubai, and are prepared to submit a formal gas sales proposal to thew Government of Dubai. The proposal is the culmination of much informal discussion that has gone on between the Government of Qatar, the consortum, and the Government of Dubai to establish basic principles and negotiating parameters. Given the looming gas supply crunch in Dubai and the lead time (two to three years) required to bring a gas project of this magnitude on stream, Dubai needs to make a decision quickly about where it is going to get its incremental gas supplies.
Qatar now appears to be in the drivers seat to service Dubai's rapidly increasing gas consumption. Oman has dedicated the bulk of its surplus reserves to an LNG project. Iran has a huge surplus of gas, but it politically unacceptable. While Abu Dhabi, in addition to facing political obstacles, may not have the reserve base to support both its internal demands and Dubai's. |
