US embassy cable - 05DOHA1158

UNCLAS SECTION 01 OF 02 DOHA 001158 
 
SIPDIS 
 
SENSITIVE 
 
DOE FOR MOLLY WILLIAMSON AND JOHN BRODMAN 
 
E.O. 12958: N/A 
TAGS: EPET, EINV, PREL, QA 
SUBJECT: MINISTER OF ENERGY ON GAS INVESTMENTS AND RESERVES 
 
1. (SBU) Summary. Energy Minister al-Attiyah welcomed a 
possible visit by Secretary Bodman in November, telling 
senior officials from the Department of Energy "we will plan 
a good trip for him." Attiya discussed Qatar's investment 
plans with the DOE delegation and noted that Qatar expects to 
supply 30% of natural gas needs in the U.S. He said Qatar's 
gas is currently fully allocated, with no room for new 
projects in the next five years. He complained about the 
difficulty in obtaining approval for new LNG terminals in the 
U.S. and about state-to-state specifications for gasoline. He 
said there was enough oil on the market and the problem lay 
in refining capacity. At a lunch hosted by the Ambassador and 
in individual meetings, U.S. oil and gas executives expressed 
their satisfaction with Qatar Petroleum as a business partner 
and about Qatar's overall investment climate, which they 
rated as excellent. End Summary. 
 
2. (SBU) Abdulla bin Hamad al-Attiyah, Second Deputy PM, 
Minister of Energy, and Chairman of Qatar Petroleum, 
discussed Qatar's energy investments with the Secretary of 
Energy's visiting Senior Foreign Policy Advisor, Molly 
Williamson, DOE DAS for International Energy Policy, John 
Brodman, and the Ambassador.  Attiya characterized 
ExxonMobil's projects in Qatar as "big" and "interesting," 
noting that a new condensate refinery and a gas-to-liquids 
(GTL) facility total approximately $17 billion. Investments 
in Ras Laffan Industrial City over the next five years will 
top $50 billion, he said. Qatar's strategic plan includes 
supplying 30% of U.S. natural gas needs. Qatar has plans to 
purchase 75 LNG tankers, the largest ever built, to ship its 
product to Asia, Europe, and North America. He noted that 
several years ago, he had not expected that Qatar would be 
supplying the U.S. and Europe. Technology, however, helped 
reduce production costs and allow Qatar to expand its trains 
(LNG processing plants). 
 
3. (SBU) U.S. companies investing in Qatar whose executives 
met with DOE officials -- ExxonMobil, Occidental, 
ConocoPhillips, and Anadarko -- were upbeat about the 
investment environment and the business outlook. All agreed 
that Qatar's growth makes investing here attractive. Conoco 
Phillips decided to locate its regional headquarters in Doha 
because doing so means "looking forward." Country managers 
described the investment climate as "healthy" and the outlook 
as "all good." They also agreed that business partnerships 
with QP are highly professional, better than with most other 
state-owned companies. They praised al-Attiyah for his 
efforts to institute transparency and intolerance for fraud 
or influence-peddling. The minister told Williamson that he 
is "trying to preserve ethics" in the industry, never deals 
with local agents or middlemen, and is on the lookout for 
corruption. 
 
Security 
-------- 
 
4. (SBU) QP provides "tight security" but only "on our area," 
Attiya said. The security of Persian Gulf waters are an 
international responsibility. He is not concerned about an 
attack in the Gulf, he said, because even Iran wants it to be 
secure. He said piracy in the vicinity of Indonesia was a 
greater concern. "History shows the Gulf was always safe," he 
concluded, because Gulf states are big oil and gas suppliers. 
U.S. oil and gas firms were comfortable with the level of 
security at Ras Laffan, the industrial site; they had also 
increased personal security procedures following the March 19 
terrorist attack in Doha. But they acknowledged that they are 
in others' hands when it comes to security at offshore 
facilities. 
 
Gas Reserves 
------------ 
 
5. (SBU) Al-Attiyah said that QP had postponed several GTL 
projects in order not to draw down the North Field gas 
reserves too quickly. "We have to be careful," he said. QP is 
conducting a "professional study" of the field that will be 
ready in two years. The study will provide information on 
state of the gas in different parts of the field and will 
help chart its flow. He claimed that the North Field might 
have more gas than the 900 trillion cubic feet currently 
estimated. U.S. executives agreed with this assessment, 
saying that the pace of investment would have been difficult 
to maintain for a variety of reasons and that it was prudent 
for Qatar to slow down and carefully monitor its resource. 
 
Potential Customers on Hold 
--------------------------- 
 
6. (SBU) Al-Attiyah told the delegation that Qatar's gas has 
been allocated through the next five years and that QP cannot 
accommodate any additional customers or orders. "Upstream, 
everything is committed," he said. The Chinese "came late," 
and gas earmarked for them has gone instead to Australia. Gas 
earmarked for the Al-Khaleej Kuwait pipeline project was 
re-allocated to other markets, and in fact, according to U.S. 
executives in Qatar, QP would have difficulty honoring its 
agreement with Kuwait if Saudi Arabia were to remove its 
objections and allow the pipeline to Kuwait to go forward 
through its waters. Minister al-Attiyah said that the Qatari 
government, the Kuwaiti government, the USG and ExxonMobil 
did not spare any effort with the Saudis to convince them to 
approve the route of the pipeline, but this effort was in 
vain. Al-Attiyah added that just recently he raised the issue 
with Saudi Oil Minister Al-Noaimi, who said that there was no 
technical problem and that he will look into the matter. The 
Kuwaiti Oil Minister, Sheikh Ahmad Al-Fahd Al-Sabah, told 
al-Attiyah that there is no political will from the Saudi 
government to approve the project. Minister al-Attiyah 
connected Saudi disapproval of the project with 
dissatisfaction with the Al-Jazeera News Channel and liberal 
policies adopted by the Qatari government which embarrass the 
Saudis.  Regarding the proposed pipeline to Bahrain, 
al-Attiyah's office director said that no gas is available. 
According to him, the Bahrainis did not respond to Qatar's 
proposals. If any pipeline were to be built, gas would have 
to be shifted from other projects that are already firmly 
agreed upon. 
 
Terminals in the U.S. 
--------------------- 
 
7. (SBU) Terminal capacity in the U.S. and numerous gasoline 
specifications were concerns for al-Attiyah. He said QP has a 
contract with Shell to supply gas to California through Baja 
California; he said it was not wise for California to become 
dependent in this way on its southern neighbor. California 
would be better served by its own offshore terminal. He also 
discussed his unsuccessful efforts with ExxonMobil to get a 
permit for a terminal in Florida to supply Electric Power and 
Light. Another option was to pipe gas to Florida from the 
Bahamas, but that had not been approved. Williamson told 
Attiya that the Energy Bill currently under discussion in 
Washington could resolve many of the difficulties surrounding 
permitting and various states' "boutique" gasoline formulas. 
ExxonMobil officials in Doha said that they were working 
closely with the Federal Energy Regulatory Commission to 
obtain a license for the "Golden Pass" terminal near Texas's 
border with Louisiana. The deadline for the deliberations is 
June 30. 
 
Constraints on Business 
----------------------- 
 
8. (SBU) U.S. firms operating in Qatar noted however that 
resource costs were increasing. In particular, steel and 
cement prices are rising rapidly, and along with them 
engineering and construction costs. Housing is becoming 
increasingly scarce and rents are rising out of control. The 
demand for services driven by the billions of dollars being 
invested in Qatar is the root cause. While problematic for 
the oil and gas companies, executives were aware that service 
firms also operate cyclically and are now enjoying an upswing 
after some tough years. Foreign firms are also grappling with 
the requirement for "Qatarization" of the workforce. While 
employing only up to 10% Qataris, firms had mixed results. In 
many cases, they were impressed with the skills of the Qatari 
managers. However, they noted that for new Qatari graduates, 
"training" is expected to be at the senior levels of 
management. Firms also have trouble finding, in the Qatari 
population of only 150,000, those recent graduates who have 
the proper degree and are in the job market. 
 
Comment 
------- 
 
9. (SBU) Although Qatar does not currently supply the U.S. 
with any energy products, it has positioned itself to become 
an important energy partner. Qatar's strategy is to diversify 
in both investments and customers: it plans to supply North 
America, Europe, and Asia with roughly one-third of its gas 
each; it discusses investing in foreign oil projects such as 
Venezuela's, and it encourages reputable oil companies not 
yet in Qatar to invest. Qatar is also single-handedly 
changing the world natural gas market by making LNG a 
more-easily traded commodity like oil. 
UNTERMEYER