Qatar Delays Construction of al-Shaheen Oil Refinery

Wednesday, March 3, 2010

Qatar Petroleum, the Middle Eastern Kingdom's state-backed oil and gas company has indefinitely delayed the construction of its $11 billion al-Shaheen oil refinery. The firm is terminating the engineering, procurement and construction contract tender due to the size of the refinery project. It is thought that the project will be been scaled down and retendered at a later date.

The 250,000 barrel per day (bpd) refinery was slated for construction in the Mesaieed Industrial City in southeastern Qatar. The refinery was designed to process heavy sour crude from the al-Shaheen offshore oil field, which would be supplied to the facility by a 200km oil pipeline.

Front-end engineering and design has been carried out by French services provider Technip over the last couple of years for the project. The first phase was expected to involve the construction of a crude distillation unit and a hydrocracker, while the second phase would see the addition of a fluid catalytic cracker. However, back in April of last year, reports emerged that QP intended to split the refinery project up into smaller sections to both cut costs and spread project risks simultaneously.

At present, Qatar has two operational refineries. The 200,000 bpd Qatar Petroleum Refinery, located in the Mesaieed region, was constructed in 1958 and is capable of processing both crude oil and condensate. A newer refinery in the industrial city of Ras Laffan came onstream in late September last year, about twelve months behind schedule. The new refinery added some 146,000 bpd to the Kingdom's refining capacity.

Apart from the two conventional refineries, Qatar also possesses a 34,000 bpd gas-to-liquids (GTL) plant known as Oryx, operated by South African synthetic oil specialist firm Sasol, which plans to treble the capacity of the site to more than 100,000 bpd. The bigger Royal Dutch Shell-operated Pearl GTL plant is also due to add 140,000 bpd of capacity, with the first train due onstream by end-2011.

Qatar is in the middle of a rapid expansion of its refining sector, which has lifted total processing capacity from as little as 87,000 bpd in 2001 to an estimated 350,000 bpd in 2009. However, as the various expansion projects come onstream, this level stands to rise further north.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

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