RAS LAFFAN, Qatar — The temperature hovered around 100 degrees on the jetty here, where a set of pipes were connected to a giant red-hulled ship. But the moisture in the air froze on the pipes and flaked off, creating snowlike flurries on the early summer evening.
The incongruous sight is common on the Qatari ship, the Al Rekayyat, which carries a frigid fuel known as liquefied natural gas.
Natural gas, when chilled to minus 260 degrees, turns into a liquid with a fraction of its former volume. The process has reshaped the natural gas business, allowing the fuel to be pumped onto ships and dispatched around the world.
After investing tens of billions of dollars, Qatar is at the forefront. Part of the emirate’s fleet, the Al Rekayyat, run by Royal Dutch Shell, goes to Fujian in China and Yokkaichi in Japan, as well as Dubai and Milford Haven in Wales.
Graphic | Expanding Trade Routes
When loading was finished recently, four tugboats pulled the ship from its berth with a deep roar. “I expect to be in the north channel around midnight,” said the captain, Veerasekhar Rao Muttineni, over the marine radio, as the ship eased into the waters of the Persian Gulf. Four days later, it docked in Hazira on the west coast of India.
Once a poor nation whose economy depended on fishing and pearl diving, Qatar is a relatively new giant in the global energy trade.
In the 1970s, Shell discovered the world’s largest trove of natural gas, called the North field, in Qatari waters. But there was no market for the fuel. Potential customers in Europe were too far to reach via pipeline, the usual method. Shell walked away.
Looking to the example of Malaysia and Indonesia, Qatar and Hamad bin Khalifa al-Thani, who was then its emir, started promoting L.N.G. in the mid-1990s. Exxon Mobil was the important early investor; Shell, Total and ConocoPhillips soon followed.
Qatar and its energy partners took the business to a new level, developing far bigger and more efficient plants. Last year, Qatar produced about a third of all liquefied natural gas, although Australia and the United States have big export ambitions.
It is a lucrative business that has made Qatar the world’s wealthiest country by output per capita. While industry growth has recently been flat, worldwide volumes have roughly quadrupled in the last two decades to about 240 million metric tons a year, or 264 million short tons, accounting for about one-third of overall gas exports. Annual sales are worth an estimated $180 billion.
“With the full development of Qatar, L.N.G. came of age,” said Michael Stoppard, chief gas strategist at IHS, a market research firm. “Qatar made L.N.G. a bigger business — bigger projects, bigger ships, bigger volumes and a much bigger global footprint.“
Ras Laffan, a desert headland about an hour’s drive from Qatar’s capital, Doha, bristles with storage tanks, pipelines and other gas processing facilities. Gas comes in from offshore wells and then passes through a series of refrigeration units that clean the fuel and chill it to liquid form. Qatar Gas and RasGas, the emirate’s two exporting companies, have 14 of these facilities, known as trains.
“We pushed the R&D to go another step, to increase the size,” said Ibrahim Bawazir, a Qatar Gas executive, as he led a group of visitors dressed in orange fire-resistant suits around Qatargas 4, one of the largest and most modern installations. It stretches for three-fifths of a mile. “It is almost impossible to build L.N.G. on this scale,” Mr. Bawazir said.
With the ability to produce and process such huge quantities of gas, Qatar can keep its costs low. IHS estimates that it costs about $2 per million British thermal units, a standard natural gas measure, to produce and liquefy gas in Qatar. That compares with $8 to $12 for planned projects in the United States, East Africa and Australia. The low cost structure allows Qatar to be more nimble and make money even in the current weak environment, when prices are low.
The Qataris originally planned to deliver much of their L.N.G. to the United States and Europe, but those plans were frustrated by the shale gas boom in North America. Instead, three-quarters of Qatari gas flowed last year to Asian countries like China, India and South Korea. Japan was Qatar’s largest customer as the country’s electric utilities substituted natural gas generation for nuclear after the 2011 Fukushima disaster.
Qatar’s shift toward Asia mirrors broader trading patterns in the oil industry. In recent years, gulf producers like Saudi Arabia, Iraq and Iran have increasingly focused on Asia, where demand for energy imports is growing. Qatar is well placed to serve Asian markets, particularly India, which is only a few days’ sail across the Arabian Sea.
A vital part of the Qatar’s effort has been a new fleet of carriers, which are substantially larger and more efficient than previous models.
At over 1,000 feet, the Al Rekayyat, which was built in South Korea in 2009, is only slightly shorter than the largest aircraft carrier. The ship carries up to 217,000 cubic meters of gas, about 7.7 million cubic feet, worth around $30 million to $40 million at today’s market prices.
The Al Rekayyat is surprisingly fast for such a large ship. It cruises at about 18 knots, a speed that the crew figures makes it too fast to be easily boarded by pirates.
Still, the crewmen are cautious. On the first morning of the voyage, crewmen wearing heavy leather gloves, padding and hard hats rigged up barbed wire and water cannons to ward off pirates. “This is recommended good practice,” Captain Rao said. “We look on with suspicious eyes.”
Later that day, the ship entered the narrow choke point at the east end of the gulf, the Strait of Hormuz. Captain Rao was on the bridge with a navigator, Ervin Markovic, and two crewmen scanning for trouble with binoculars. Shrouded in the heat haze above the pale green water, Iran lay ahead and to the port side of the ship. To starboard loomed a rocky outcropping from the coast of Oman.
The strait, through which about one-third of the world’s waterborne oil exports travel, is one of those passages that mariners approach with a sense of trepidation. The high volumes of maritime traffic combined with narrow shipping lanes increase the risk of collisions. Just a few weeks before this trip, a cargo ship had been detained by an Iranian gunboat.
“You don’t know what to expect,” Mr. Markovic said.
The cargo carries its own risks.
The greatest danger, experts say, is that the liquid might escape and expand into a flammable, asphyxiating cloud. On a ship like the Al Rekayyat, the L.N.G. is contained in special tanks designed to minimize the likelihood of leaks.
L.N.G. requires a near obsession with precautions, drills and safety. Shell’s rules prohibit taking devices like mobile phones or cameras that could spark an explosion on deck. Alcohol is not permitted. Crew members rarely go outside unless for work.
Miroslav Ahmetovic, the chief officer, spends much of his workday in a room below the bridge monitoring the L.N.G. cargo on screens that display indicators like pressure and volume. Every few hours he dons hard hat, gloves, goggles and protective clothing and goes out on the sweltering deck to see that nothing is amiss.
“I want to make sure my video game conforms to reality,” Mr. Ahmetovic said, emphasizing the constant vigilance that Shell requires.
More than a day’s journey away from India, the ship’s crew was already preparing for port. Mr. Ahmetovic gradually began easing open the valves to the L.N.G. tanks, letting the cold fluid gradually chill the pipes so they would not crack from sudden cold.
“If you don’t treat the cargo right, it will break the ship,” he said.
Captain Rao stood on the bridge with a crewman at the wheel testing the engine and the steering. He even tried a full reversal of the engines, which might be required in an emergency. Gathering his officers around him, he warned them to pay close attention unloading the fuel so that there were no mistakes.
“If you are idle, ask yourself what you are missing,” he instructed.
On the fourth day, the Al Rekayyat eased through the narrow harbor entrance, coming to a halt at a modern jetty. From there pipes took the fuel to two large storage tanks, which fed the liquid into a long series of cylinders and other vessels. The fuel is gradually rewarmed back into a gas, so that it can be piped into the Indian pipeline network outside.
The terminal area is almost spotlessly clean, with staff members dressed in neat blue uniforms. Outside the gates is a different matter. Trucks grind along muddy roads lined with ramshackle shelters. Families drawn by the prospects of work in the factories camp under bridges.
Nilay Vyas, the general manager of Hazira, says that the pipelines buried in the ground outside the terminal are monitored by an optical fiber system that would “give a signal in case of unauthorized work.” A patrol also goes out at least four times a day, he says, to check in person.
Shell, which has made a bigger bet on gas than any of its rivals, opened the Hazira terminal in 2005 with the French giant Total as a junior partner. The terminal, the company figured, would supply the power plants and factories in the fast-growing industrial areas nearby.
In the early days, Shell struggled to find customers, until the state’s gas distribution system was expanded and Hazira connected. Now, the Indian economy is growing at a decent clip and the country faces an energy shortage. Customers, says Shell, are lining up, viewing L.N.G. as a clean, reliable source of energy.
Maarten Wetselaar, the head of Shell’s global gas business, said Hazira’s gas receiving and processing facilities were “completely sold out.”
“Even if you begged us on your knees for a slot,” he said, “I don’t think in the next 12 months we could accept another cargo.”
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(via NY Times)
