US embassy cable - 05DOHA1823

C O N F I D E N T I A L SECTION 01 OF 03 DOHA 001823 
 
SIPDIS 
 
E.O. 12958: DECL: 11/08/2015 
TAGS: EPET, ENRG, ECON, ETRD, EINV, PGOV, QA, ALJAZEERA 
SUBJECT: SCENESETTER - VISIT OF ENERGY SECRETARY BODMAN TO 
QATAR 
 
Classified By: Ambassador Chase Untermeyer for reasons 1.4 (b) and (d). 
 
 
1. (C) Mr. Secretary, we are pleased to welcome you to Doha. 
Your visit is an important one: you will be the first 
cabinet-level U.S. official to meet with Qatari officials in 
Doha this year. Your visit will demonstrate the importance we 
place on the future of our energy relationship and will help 
support U.S. businesses as they take advantage of the 
enormous opportunities here. 
 
2. (C) We have requested meetings with the Amir, Sheikh Hamad 
bin Khalifa Al-Thani (addressed as "Your Highness"). Your 
effective host will be His Excellency the Second Deputy Prime 
Minister and Minister of Energy and Industry, Abdullah bin 
Hamad al-Attiya, whom you know and with whom your staff met 
with in June on their visit to the region. He will be your 
host at Ras Laffan Industrial City and at the inauguration of 
RasGas Train III and has arranged a dinner in your honor the 
evening of your arrival. During your visit, you will also 
meet with American business people in energy and related 
sectors based in Doha and will visit CENTCOM and our troops 
at Camp Al Sayliya. Your trip should provide you with a 
well-rounded perspective of our growing relationship with 
Qatar. 
 
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Energy Sector 
------------- 
 
3. (U) Qatar's economy is one of the fastest-growing in the 
world, achieving a 20.5% increase in GDP in 2004. Per capita 
income is nearing $35,000, exceeding that of the U.S. and 
soon to be the highest in the world. Qatar's vast wealth has 
resulted from the successful development of its natural gas 
resources over the past 10 years with plans for even greater 
expansion over the next decade. Under the leadership of 
Abdullah bin Hamad Al-Attiyah, the minister of Energy and 
Industry, Qatar Petroleum is moving on all fronts to maximize 
utilization of Qatar's natural resources to diversify the 
economy and provide business and employment opportunities to 
Qataris. Since 1999, there has been $60 billion in foreign 
investment in Qatar's energy sector, about $40 billion of it 
coming from U.S. companies.  Qatar plans to invest $70 
billion in the natural gas sector over the next seven years. 
 
4. (U) The GOQ estimates Qatar's oil reserves are at 27 
billion barrels. Qatar's daily average production is 
currently estimated to be 806,000 barrels per day; at current 
production rates, oil reserves are expected to last about 80 
years. Qatar's goal is to increase overall production 
capacity to over 1 million bpd by 2006. Occidental and 
Anadarko are the two U.S. companies operating in this sector. 
Qatar's 900 trillion cubic feet of natural gas reserves are 
the basis for the country's current economic boom; the 
resource is expected to last approximately 200 years at 
existing production rates. 
 
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Oil Production 
-------------- 
 
5. (U) Foreign oil operators in Qatar include Maersk Oil 
(Denmark) in Al-Shaheen at 300,000 bpd; Occidental Petroleum 
in Idd Al-Shargui North and South Domes with a combined 
100,000 bpd (90,000 in the North Dome and 10,000 in the South 
Dome); TotalFinaElf (France) in Al-Kahleej 
with 30,000 bpd; and, Anadarko (USA) Al-Rayyan with 15,000 
bpd. Qatar's oil exports target primarily the Asian market: 
Japan 71.5%, Thailand 8%, South Korea 8%, Singapore 5.5%, 
China 3.5% and other countries 3.5%. 
 
6. (U) The U.S. independent Anadarko was awarded Block 4 in 
August 2004. A subsequent controversial decision made by QP 
awarded 150 miles of this block to Maersk Oil. QP is looking 
to tender prospective exploration, production and sharing 
agreements (EPSA) for four additional blocks: 1, 3, 7 and 14. 
There are currently no onshore blocks being evaluated for 
possible production. The last onshore block QP awarded was 
Block 2 to ChevronTexaco in 1998. QP and ChevronTexaco signed 
an EPSA for Block 2 which covered an area of approximately 
10,900 kilometers. ChevronTexaco has conducted surveys and 
exploration drilling. In 2001, EnCana (Canadian) and Svenska 
(Swedish) acquired a stake in Block 2 from ChevronTexaco and 
now the block is operated through a consortium. 
 
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Natural Gas Production 
---------------------- 
 
7. (U) The majority of Qatar's current development in the 
energy sector is focused on its natural gas reserves. 
Discovered in 1971, Qatar's North Field contains 15.3% of 
world natural gas reserves, third behind 
Russia and Iran. Estimated at 900 trillion cubic feet (tcf), 
the North Field is the largest non-associated gas field in 
the world. The North Field extends over an area of 
approximately 6,000 square kilometers and is expected to 
support planned production for over 200 years. QP manages the 
natural gas sector through its two major joint ventures, 
Qatargas and RasGas. The GOQ's primary goal is to supply 78 
million tons of LNG annually to the international market by 
2012 in order to meet about 30% of the global energy needs 
for LNG. GOQ officials have said that QP would increase its 
LNG output from 15.1 million tons per annum (mtpa) in 2003 to 
20.2 mtpa by the end of 2004. In October 2004, Minister 
al-Attiyah said that Qatar plans to invest $70 billion in the 
natural gas sector over the next seven years. The production 
facilities for 
Qatargas, Rasgas and other natural gas related projects are 
located at Ras Laffan Industrial City. 
 
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Qatargas 
-------- 
 
8. (U) Founded in 1984, Qatargas built the first LNG plant in 
Qatar. Its first sales agreements were signed in 1992. The 
main activities of Qatargas are divided into two  projects 
with separate shareholder  groups: the upstream joint venture 
(offshore production and the onshore receiving facilities) 
and the downstream joint venture (onshore LNG plant). 
ExxonMobil has a 10% stake in both ventures. 
 
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Rasgas 
------ 
 
9. (U) Rasgas was established in 1993 as a $3.3 billion 
venture owned by QP (63%), ExxonMobil (25%), Koras (5%), 
Itochu Corporation (4%) and LNG Japan Corporation (3%). 
Rasgas can produce and sell 10 mt of LNG per year and 
additional quantities of related hydrocarbon products for at 
least 25 years. Rasgas and Qatargas operate three LNG trains 
each and are developing trains 4-7. 
 
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Al-Khaleej Gas Pipeline Project 
------------------------------- 
 
10. (U) A Memorandum of Understanding was signed between QP, 
ExxonMobil and Kuwait Petroleum Corporation (KPC) in July 
2000 to develop a project to transport natural gas from Qatar 
to Kuwait. A protocol for gas Sale and Purchase Agreement 
(SPA) between QP and KPC was signed on January 30, 2002 
concurrently with the signature of a term sheet between QP 
and ExxonMobil. In March 2003, the project was awarded to a 
consortium composed of Japan's Chiyuda Corporation, Mitsui, 
Italy's Snamprogetti and Al-Mana Group from Qatar. The 
execution of this project awaits the approval of the Kingdom 
of Saudi Arabia to allow part of the pipeline to go through 
Saudi territorial waters. The GOQ has actively sought USG 
assistance with the Saudis to move this project forward. The 
Saudis do not appear willing to budge on the matter, and now 
Qatari gas resources have been reallocated to other projects. 
 
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Ships Ahoy 
---------- 
 
11. (U) Qatar is rapidly expanding its fleet of LNG tankers. 
Qatar has 20 ships currently and has plans to expand to a 
total of 75 though the QP subsidiary Qatar Gas Transport 
Company. Qatargas and Rasgas have entered into charter 
agreements with Japanese and Korean companies that will 
source the construction of the vessels; Qatar Gas Transport 
-- Nakilat in Arabic -- will take up to 30% of the various 
projects. Nakilat has been one of the hottest stocks in the 
new Doha Securities market; shares were sold to Qataris at 
QR5 and quickly rose to QR60. It is capitalized at over $8 
billion. 
 
 
12. (SBU) Qatar is experiencing strong demand for its gas, to 
the extent that current gas customers must compete for any 
increase in shipments. Qatar is looking for the best price 
while taking into consideration risk factors. Gas-to-liquids 
(GTL) projects already signed will proceed; these projects 
are with Shell, Exxon-Mobil, and Sasol. Projects that had 
been under discussion have been put on hold. Ministry and QP 
officials have said that this is because GTL has a higher 
risk associated with it and a high investment price tag. 
Rather than over-investing in this technology, Qatar plans to 
market its gas as LNG and sell to reliable customers at a 
good price with low risk. 
 
------------------------------------ 
What's Happening to the Gas Reserves 
------------------------------------ 
 
13. (SBU) Natural gas coming on-line in the near term is 
fully  allocated, including gas proposed for the pipeline to 
Kuwait. Expansion of the Dolphin project (a pipeline to the 
United Arab Emirates) is an example of how gas has been 
re-allocated rather than assigned to new customers. Qatar 
appears to be holding back on overly-rapid expansion of gas 
extraction while it analyzes the reserves in the North Field 
and how extraction is affecting the subsurface flow. QP has 
capped current daily production at 25 million cubic feet. 
 
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Trade Issues 
------------ 
 
14. (U) Qatar signed a Trade and Investment Framework 
agreement with the U.S. in March 2004 but has not yet 
achieved a Free Trade Agreement of the sort the U.S. has with 
Bahrain and soon will have with Oman and UAE. Achieving an 
FTA will require Qatar to remove such trade obstacles as 
mandatory majority Qatari ownership of most businesses, the 
government telecom monopoly, restrictions to foreign 
investment in the financial services sector, labor issues, 
and transparency in government procurement. 
 
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Political Reform 
---------------- 
 
15. (U) Qatar's own program of reform, launched by the Amir 
after he assumed power in 1995, took a significant step 
forward in June of this year when its first constitution 
officially came into force. The constitution calls for a 
two-thirds elected national legislature. These elections have 
not been announced but are expected to take place sometime in 
 early 2007. Qatari women will have the right to vote and 
will be encouraged by the government to run for office. In 
municipal elections in 1999 and 2003, women here were the 
first in the Gulf region to cast votes, and one woman was 
elected to the council. 
 
----------------------------- 
Dramatic Changes in Education 
----------------------------- 
 
16. (U) Education reform, headed by the Amir's wife, Sheikha 
Mozah, is a becoming a showcase. This reform includes a 
sweeping revamp of Qatar's pre-university and higher 
education system based on Rand Corporation recommendations. 
Also as part of this effort, Qatar has brought to its 
"Education City" branch campuses of Texas A&M University, 
Virginia Commonwealth University, Carnegie-Mellon, and 
Weill-Cornell Medical College, and Georgetown University. 
These have been ground-breaking efforts that have been hailed 
by many as models for other states in the region. 
 
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Al-Jazeera 
---------- 
 
17. (S/NF) Al-Jazeera remains the chief stumbling block to 
what is otherwise robust cooperation, impacting an increasing 
number of areas. In response to our repeated protests and 
appeals, Al-Jazeera's management has reduced the air time 
given to Al-Qaeda and kidnappers' videos and has made efforts 
to address the inflammatory nature of its reporting from 
Iraq. The channel has highlighted to us its coverage of 
pro-democracy movements in Lebanon and Egypt as well as 
broader coverage of Middle Eastern politics. Al-Jazeera 
Managing Director told the Ambassador, "If the Americans want 
to find a proper partner in its effort to get democracy and 
reform, they won't find a better one than Al Jazeera." 
 
18. (S/NF) In her meeting with the Qatari foreign minister in 
September, Secretary Rice reflected the consensus of opinion 
among USG agencies monitoring Al-Jazeera that the station has 
shown some signs of improved broadcasting but still a threat 
to U.S. forces in Iraq due to its anti-American editorial 
bent. 
UNTERMEYER