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ExxonMobil, Qatar Move Forward on $14B Production/LNG Project

ExxonMobil Corp. confirmed last week that as much as 2 Bcf/d of liquefied natural gas (LNG) could be headed to the U.S. marketplace from Qatar in 2008 or 2009. The company held a ceremony in Doha, Qatar with Qatar Petroleum, its partner in RasGas LNG, Tuesday to announce the launch of Ras Laffan LNG (RL3), a $14 billion gas production, liquefaction, transportation and regasification project that will include two LNG production trains totaling 15.6 million metric tons of LNG per year.

ExxonMobil spokesman Bob Davis said a final commercial agreement with Qatar Petroleum has not been signed yet so there "could be some change in ultimate disposition" of the LNG. Qatar Petroleum owns 70% of the project and could decide on a delivery alternative for some of the supply, he said. "We really can't say what is going to happen to all of the volumes at this point other than the fact that the majority is coming to the United States."

RL3 is a further expansion of the existing LNG production facilities operated by RasGas at Ras Laffan Industrial city in North Eastern Qatar. The two proposed 7.8 million-metric-ton LNG trains that make up the RL3 project will bring the total number of trains operated by RasGas to seven, and they are expected to increase RasGas LNG production capacity by more than 70%. RasGas is one of two LNG project operators in the city. QatarGas is the other operator with three operating LNG trains and two more planned.

RL3 will be developed in two phases with Train 6 scheduled to begin production in the second half of 2008, and Train 7 anticipated to come on stream one year later. Twenty-eight production wells are planned to be drilled to supply the two trains with natural gas, sourced from Qatar's giant North Field, which is estimated to contain 900 Tcf of gas.

ExxonMobil owns a 30% stake in the RL3 project and expects that the LNG will start arriving at its Golden Pass LNG terminal in Sabine Pass, TX, sometime in 2008. Davis said the company still isn't sure if it will build both of its proposed LNG import terminals -- Golden Pass and Vista del Sol, which would be located near Corpus Christi. Golden Pass currently appears to have the lead. The 2 Bcf/d terminal has the capacity to take all the Qatar deliveries, it's linked to ExxonMobil's Beaumont refinery, has a closer proximity to higher priced gas markets and ground already has been broken on the site.

"I don't know if we are going to build two [terminals]. But you can kind of figure it out for yourself," said Davis. "We are much more advanced with the Golden Pass location. We've sent out for [engineering, procurement and construction (EPC)] bids and we're currently in the process of evaluating those bids. We have not done that for the Corpus Christi site. We do have all the major permits for both sites. The Corpus site needs one final mitigation permit from the U.S. Army Corps of Engineers for some debris removal."

Davis said ExxonMobil has dropped plans to bring LNG to a terminal in the Bahamas. "That was being looked into but it never was finalized," he said. "There was a potential for us to go to Florida Power & Light but that is no longer being pursued."

A preliminary deal with FPL Group Resources for 800 MMcf/d of LNG supply was announced in July 2004. However, utility affiliate Florida Power & Light, Florida's largest power company, held a request for proposals for LNG supply earlier this year and decided it was not a good economic supply alternative. The Bahamas government also has not approved any of the proposed LNG terminals, including one proposed by AES Corp. and another proposed by Suez LNG, FPL and El Paso.

Earlier this year, EPC contracts for RL3 were awarded to J. Ray McDermott Middle East for the offshore facilities and to the Chiyoda Corp.-Technip France joint venture for the onshore work. RL3 also has signed financing documents securing funds to proceed with execution of the project. In total, $4.6 billion was raised from 19 commercial banks, capital bond market offerings and loans from ExxonMobil.

The capital markets portion of the financing ($2.25 billion) represents the largest energy project financing in the history of the capital markets. This was the initial tranche of a broader $10 billion debt program to underwrite the remaining expansions for RL3 and RLII.

"The State of Qatar is very pleased with the success of this landmark financing and we are well positioned to raise the full $10 billion required for the expansion of RLII and 3 efficiently and at an attractive cost," said H.E. Yousef Hussein Kamal, Qatar's minister of finance.

To deliver the LNG to its targeted U.S. markets, RL3 plans to lease 12 LNG tankers to support Train 6 to be constructed by Hyundai Heavy Industries, Daewoo Shipbuilding & Marine Engineering and Samsung Heavy Industries. Daewoo will build five tankers, Samsung will build four and Hyundai will build three. It is expected that an additional six LNG tankers will be required to support Train 7.

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