Qatar Today - - INSIDE THIS ISSUE -

“Tell your own story, be­fore some­one else tells it,” says Jonathan Macpher­son, Re­gional Di­rec­tor of Com­mu­ni­ca­tions at Hill+Knowl­ton Strate­gies in an in­ter­view with Qatar To­day.

While at­tract­ing a price pre­mium in com­par­i­son with crude oil-de­rived equiv­a­lents, GTL prod­ucts are prov­ing to be a pop­u­lar al­ter­na­tive in the mar­ket thanks to their per­for­mance ben­e­fits, chem­i­cal pu­rity and en­vi­ron­men­tally friendly prop­er­ties. How­ever, in­creas­ing com­pe­ti­tion has the po­ten­tial to erode some of Qatar's GTL mar­ket share in the long term.

A ma­jor player

Qatar has carved out a niche as the global leader in the GTL in­dus­try, cre­at­ing a range of liq­uid fu­els from nat­u­ral gas, which is con­verted into longer-chain, highly paraf­finic oil prod­ucts. Fin­ished prod­ucts in­clude diesel, kerosene, lu­bri­cant base oil, and in­puts for petro­chem­i­cal and de­ter­gent pro­duc­tion.

GTL prod­ucts are odour­less and free from sul­phur and other im­pu­ri­ties com­monly found in crude oil-based al­ter­na­tives. They are also thin­ner, which helps to re­duce fric­tion and pre­vent con­tam­i­nant build-up and wear on ma­chin­ery.

Qatar has two ma­jor GTL fa­cil­i­ties with a com­bined ca­pac­ity of more than 170,000 bar­rels per day ( bpd). One of the plants, ORYX GTL, uses low-tem­per­a­ture pro­cess­ing tech­nol­ogy de­vel­oped by South Africa-based energy and chem­i­cals

com­pany Sa­sol, and op­er­ates as a joint ven­ture with Qatar Petroleum (QP). Qatar's other fa­cil­ity, Pearl GTL, uses Shell pro­pri­etary tech­nol­ogy and ranks as the world's largest GTL plant, pro­duc­ing 140,000 bpd, or more than 80% of the coun­try's to­tal GTL out­put.

Ac­cord­ing to Rob Sher­win, gen­eral man­ager of cor­po­rate af­fairs and deputy coun­try chair­man for Shell Qatar, 2016 will be the sec­ond con­sec­u­tive year when planned rou­tine main­te­nance ac­tiv­i­ties in the first half of the year will see Pearl GTL's pro­duc­tion halved for a pe­riod of time.

Mar­ket re­silience

A solid per­for­mance by Qatar's man­u­fac­tur­ing sec­tor in the third quar­ter of 2015 un­der­scored GTL's ris­ing con­tri­bu­tion to the broader econ­omy. Real gross value added in the sec­tor was up 4.3% quar­ter-on-quar­ter (q-o-q), driven in large part by GTL pro­duc­tion, ac­cord­ing to data from the Min­istry of Devel­op­ment Plan­ning and Sta­tis­tics, com­pared to 2.8% q-o-q growth in the broader econ­omy.

While GTL's nom­i­nal con­tri­bu­tion will de­cline this year on weaker energy prices and the par­tial shut­down at Pearl GTL, both de­mand and GTL's value propo­si­tion re­main strong, ac­cord­ing to Sher­win. “GTL prod­ucts have the ben­e­fit of be­ing sold into a global mar­ket that is con­tin­u­ally grow­ing,” he told OBG.

Phinda Vilakazi, pres­i­dent of Sa­sol GTL ven­tures, man­ag­ing oper­a­tions in Qatar, Nigeria and Uzbek­istan, agreed that de­mand for GTL prod­ucts was un­likely to be greatly af­fected by mar­ket tur­bu­lence. “In the ap­pli­ca­tions where it is used, GTL has a proven ben­e­fit pro­file in terms of en­vi­ron­men­tal im­pact and qual­ity,” he told OBG. “We don't fore­see the Qatari GTL mar­ket at cur­rent pro­duc­tion lev­els be­ing im­pacted sig­nif­i­cantly by wider mar­ket forces.”

Com­pet­i­tive prospects

De­spite its demon­strated re­silience, Qatar's GTL in­dus­try will likely face ris­ing com­pe­ti­tion in the years to come from new pro­duc­ers that are keen to tap into grow­ing global de­mand.

In late De­cem­ber Saudi Aramco an­nounced plans to de­velop a ma­jor gas in­dus­trial com­plex at Jazan, worth a re­ported 2.1 bil­lion, which will in­cor­po­rate a GTL com­po­nent into its sched­uled open­ing in 2017. Else­where, a GTL plant in Nigeria is near­ing full pro­duc­tion, and two smaller-scale fa­cil­i­ties are set to be com­mis­sioned in the US later this year. Other GTL projects are also be­ing ex­plored in Mozam­bique and Uzbek­istan.

In the mean­time, pro­duc­ers are gear­ing up to ac­com­mo­date Iran's re­turn to the in­ter­na­tional energy mar­ket. Iran's lead­ers are ac­tively seek­ing for­eign in­vest­ment in its dor­mant oil and gas in­dus­try, in both the up- and down­stream seg­ments, and the coun­try re­port­edly has plans to con­struct a pi­lot GTL plant on Qeshm Is­land. The fa­cil­ity is ex­pected to come on­line in 2018, ac­cord­ing to lo­cal me­dia re­ports, with ini­tial out­put of 3,000 bpd. While ini­tial in­stalled pro­duc­tion will be a frac­tion of Qatar's GTL out­put, Iran has the po­ten­tial to ex­pand its own ca­pac­ity – and, like its Gulf neigh­bour, has am­ple feed­stock to sup­ply the sec­tor.

Nonethe­less, Qatar is ex­pected to con­tinue to ben­e­fit from its es­tab­lished dom­i­nance in the global mar­ket, hav­ing al­ready made ex­ten­sive in­vest­ment in the cap­i­tal-in­ten­sive devel­op­ment stage, which should strengthen its po­si­tion as a sup­plier against a back­drop of ris­ing de­mand for pre­mium GTL prod­ucts.

BY OLIVER CORNOCK Man­ag­ing Ed­i­tor, Mid­dle East Ox­ford Busi­ness Group

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