THE EVOLUTION OF RAS LAFFAN

LIQUEFIED NATURAL GAS CO. LTD. (RASGAS)

LEVOLUTION DE LA COMPANIE RAS LAFFAN

LIQUEFIED NATURAL GAS CO. LTD. (RASGAS)

Neil B. Kelly, B.Sc. (Hons), M.Sc., P. Eng.

Managing Director
Ras Laffan Liquefied Natural Gas Co. Ltd.
P.O. Box 24200
Doha, State of Qatar

ABSTRACT
Ras Laffan Liquefied Natural Gas Company Limited (RasGas), Qatars second LNG
company, was established by Emiri decree in 1993 as an incorporated joint venture
between Qatar General Petroleum Corporation (QGPC) and Mobil Corporation. On
September 13, 1997, the founding shareholders were joined by Itochu Corporation and
Nissho Iwai Corporation of Japan. Discussions are currently ongoing to include a Korean
entity as a further shareholder

The government of the State of Qatar has granted RasGas the right to drill for and
produce natural gas within a specified location in Qatars principal gas field (the North
Field) and to sell a specified quantity of LNG and additional quantities of related
hydrocarbon products for a period of not less than 25 years.

The $3.5 billion RasGas project is well underway. Two drilling rigs are currently
working on a 15 well program and the construction of the offshore facilities and the
onshore plant is on schedule and within budget. This is largely due to the success of the
contracting strategy and project financing, which were innovative and introduced new
concepts in the LNG industry.

This paper outlines the brief history of the company, its role in the development of the
North Field and its vision of the future.

4.31
RESUME
La companie Ras Laffan Liquefied Natural Gas LTD (RASGAS) est la deuxime
companie de gas naturel liquifi au Qatar. Elle a t tablie par un decret Emiri en 1993
dans un cadre de partenariat entre la companie de ptrole Qatari QGPC (Qatar General
Petroleum Corporation) et la companie Amricaine Mobil Corporation. Le 13 September
1997, deux companies Japonaises Itochu Corporation et Nissho Iwai ont rejoint les
actionnaires fondateurs du projet. Des discussions sont maintenant en cours pour inclure
une entit Korene comme tant un autre actionnaire.

Le gouvernement de lEtat du Qatar a octroy le droit de forage et de production de

gas naturel dans une zone spcifique situe dans le domaine principal de gas appel (North
Field) et aussi de vendre une quantit determine de gas liquifi et des quantits
suplmentaires dhydrocarbures pour une priode de 25 ans au moins.

Le projet RasGas, au cot total de 3.5 milliard de dollars, progresse bien. En effet,
deux rigs de forage sont actuellement en opration dans le cadre dun plan de forage de 15
puits, la construction des installations et des equipment maritimes ainsi que lunit
industrielle progresse selon le plan et dans les limites du budget. Ceci est du
essentiellement au succ de la stratgie adopte pour les contracts et au mthode de
financement du projet. Ces mthodes taient novatrices et avaient introduit de nouveaux
concets lindustrie du Gas Naturel Liquifi.

Ce document resume Lhistorique de cette companie, son rle dans le development du

North Field et sa vision pour le future.

4.32
 THE EVOLUTION OF RAS LAFFAN
LIQUEFIED NATURAL GAS CO. LTD. (RASGAS)

THE STATE OF QATAR

The State of Qatar is a peninsula situated halfway along the west coast of the Arabian
Gulf. It covers an area of 11,437 Sq. Km. and has a population of 640,000.

Qatar gained its independence on September 3, 1971 and is currently ruled by His
Highness The Emir, Sheikh Hamad bin Khalifa Al-Thani, who with the support of the
ruling family and Qatari people assumed the Emirship on June 27, 1995.

Doha is the capital city, seat of government and financial and commercial center. Other
main cities include Messaged the base for numerous industries and seaport for the
exportation of oil and industrial products; Dukhan the main onshore oil production
field, Al-Khor, Al Wakra, and Al Ruwais.

4.33
THE OIL AND GAS INDUSTRY IN QATAR
The Dukhan Field was first discovered in 1938 and oil production began in 1949.
Associated gas has been extracted since this time but was originally used solely in field
operations. The first gas pipeline across the country was completed in 1962, enabling 25
MCF/day to be carried from Dukhan to Doha to be used for power generation.

However, it wasnt until the early 1990s that development of the vast North Field
commenced.

COMMERCIAL IMPORTANCE OF THE NORTH FIELD

The North Field extends over an area of 6,000 square kilometers underlying the
territorial waters off the north-east coast of Qatar. It was discovered in 1971 and is the
largest non-associated gas field outside of the former Soviet Union. The estimated proven
and probable reserves of the Khuff reservoir are in excess of 370 trillion standard cubic
feet of gas.

Gas Pipeline
NFA RG
Gas Liquid
QG
Pipeline
North Field

RAS LAFFAN

RG : Ras Laffan LNG Co.

QG : Qatargas
NFA : North Field Alpha
DUKHAN
DOHA

Mesaieed

Development of the North Field commenced in 1991 with the North Field Alpha
complex (NFA). This facility, operated by QGPC, produces 800 million standard cubic
feet of gas and approximately 30 thousand barrels of condensate per day.

4.34
 The NFA gas is supplied to petrochemical plants at Mesaieed, Qatars original
industrial city, other industrial plants and some is reinjected into the onshore Dukhan field
for pressure maintenance and as a reserve. Exports of LPG and condensate originating
from NFA commenced in 1992.

The development of the Qatars LNG projects; Qatargas and RasGas, is part of an
overall plan for the development of Ras Laffan Industrial City (RLIC). RLIC currently
comprises Ras Laffan Port, one of the largest man-made port facilities in the world, built
at a cost of $1billion and the plant facilities of Qatargas and RasGas. Construction of
future industries in RLIC has been comprehended in the overall master plan.

RAS LAFFAN INDUSTRIAL CITY

Main breakwater
LNG
BERTHS
CONDENSATE
SWI
Future LNG
Lee breakwater
Utilities
Qatargas
Future LNG
Industries
Future
Industries
Ras Laffan Future Refinery
LNG
Cooling
Water Outfall

Future Initial Utilities &

Industries Support Industries
Construction Camps

QatarGas Pipelines
Existing Pipelines N

The port which is operated by QGPC, will accommodate product shipments from up
to 4 LNG berths, 6 liquids/chemicals berths, and 2 dry cargo/bulk solid berths. In addition,
1 Ro-Ro/Lo-Lo berth plus berths for tugs and launches are provided.

The port has thus been sized to cater for the needs of Qatars future LNG business and
those of the planned Condensate Refinery and other industries earmarked for RLIC.

4.35
 RAS LAFFAN PORT
N
FUTURE LNG BERTHS

LNG BERTH
2

LNG
BERTH
1
NORTHERN (MAIN) BASIN -13.5 m CD
BREAKWATER 5950m long
SEA
WATER
INTAKE -15 m CD
CHANNEL

MATERIALS 280m wide

OFF-LOADING
BERTH
TUG BERTH SULPHUR
BERTH
CONDENSATE
BERTH 2B

MODULE ROAD

SOUTHERN (LEE)
BREAKWATER
4785m long

The first sale of Qatar LNG, under a 25 year contract, was made from Qatargas to
Chubu of Japan in January 1997. RasGas will make its first deliveries of LNG to Korea in
1999.

By the year 2000 the North Field will be supplying gas to Qatargas and RasGas, to
enable them to produce 6MMTA and 4.8MMTA of contracted LNG sales, respectively.

The gas drawdown from the North Field to accommodate the combined requirements
of NFA, Qatargas and RasGas over a 25 year period will be less than 9% of the estimated
total recoverable gas reserves.

North Field Gas Reserves

Annual Consumption over 25 years for

existing Plant Capacity (Qatargas,
RasGas, NFA)

(The partners in the Qatargas joint venture are QGPC, Mobil, Total, Mitsui and Marubeni.)

4.36
SHAREHOLDERS OF RASGAS
The RasGas partnership is strong, combining host country commitment, technical
expertise, project management and financing skills and marketing presence in the two
principal established world markets for LNG (Japan and Korea) .

QGPC
QGPC is wholly owned by the State of Qatar and operates in all sectors of the
countrys oil and gas industry. It has responsibility for exploration, drilling, production,
marketing, refining, transport and storage of oil and gas, their derivatives and by-products.
In addition, QGPC has joint ventures with industries engaged in manufacturing and
marketing of petrochemicals and fertilizers. QGPC is also the majority shareholder in the
Qatargas LNG project, with a 65% interest.

Mobil Corporation

Mobil is one of the worlds largest integrated international oil and gas companies.
Mobil has over 20 years experience in every phase of the LNG business and is the second
largest producer and marketer of condensate in the world. Mobil also holds a 10% interest
in the Qatargas LNG project.

Itochu Corporation and Nissho Iwai Corporation

The Japanese shareholders are both leading sogo shosha, or general trading
companies. Both of these corporations are engaged in operations that range from the
distribution of raw materials to provision of finished products to end users. The energy
division of Itochu has considerable experience in the marketing and offshore trading of
LNG, LPG, crude oil and petroleum products. Nissho Iwai has been a leader in Japans
LNG trade for approximately two decades and is engaged in the transportation and
marketing of LNG to Japan.

Korea Gas Corporation (KOGAS)

KOGAS is owned 50% by the Republic of Korea, 34.7% by the state owned Korea
Electric Power Corporation and 15.3% by regional Korean governments. KOGAS has
been importing LNG since 1986 and is currently the sole importer of LNG into Korea.

SPA WITH KOGAS

On June 30, 1997 RasGas and KOGAS agreed to an amendment to the SPA entered
into in 1995, thereby doubling the annual quantity of LNG to be delivered from
2.4MMTA to 4.8MMTA. Contractual deliveries will commence in July 1999. The
contract term runs until 2024, with an option to extend beyond this.

The SPA with KOGAS underpins the investment in the RasGas facilities that are now
being constructed.

4.37
FIELD DEVELOPMENT
RasGas drilled and tested a delineation well in 1994, the results of which verified gas
quality, well deliverability and gas reserves to support a minimum of 2 trains of LNG
production for 25 years.

Furthermore, a number of Reservoir and Completion studies were completed to

support the most optimum development plan for the RasGas concession area, the
development plan which calls for the drilling of 15 wells from 3 Wellhead Platforms will:
1. Meet gas demand for at least the next 25 years without compression.
2. Ensure prudent reservoir management of the gas reserves.
3. Provide safe, reliable, cost effective and mechanically sound completions.

Drilling operations from 2 rigs commenced in April 1997.

Wellhead
Platform 2 Wellhead
Platform 3

Living
Quarters
Platform

Process &
Utilities
Platform

Riser

BS1
Flare

32" pipeline
92 km
Wellhead
Platform 1

RAS LAFFAN
RAS LAFFAN LNG PROJECT

PROJECT EXECUTION
In 1994, Front End Engineering Design (FEED) work commenced for both the
Onshore and Offshore facilities, with the objective of providing scope definition and bid
packages suitable for lump sum bidding.

Key to the project execution strategy was the bidding and early award of 4 critical
long-lead item contracts directly by RasGas. These contracts (LNG Tanks, Main
Cryogenic Heat Exchanger, Refrigerant Compressors and Turbines and Site Preparation
work) were awarded by RasGas in the fourth quarter of 1995, prior to the award of the
main Engineering, Procurement and Construction (EPC) contracts for the Onshore and
Offshore facilities. In parallel with these activities, bid packages for the main EPC
contracts were released to prequalified major international contractors.

4.38
 Following release of the lump sum bid packages, RasGas undertook additional FEED
work for the Onshore Facilities, to further define the scope of work for the EPC bidders.
This Critical Path Engineering provided detail definition on selected civil, underground
and structural designs and also detail designs on selected equipment for early procurement
by the successful EPC bidder. This strategy assisted EPC contractors in their bidding and
also shortened the overall Project schedule.

After the bid clarification and evaluation process, the Onshore and Offshore EPC
contacts were awarded in March/April 1996 .

The contract for the Offshore platform facilities was awarded to the McDermott
ETPM East Inc. / Chiyoda Corporation joint venture and Saipem SpA was awarded the
work for subsea and onshore pipelines. The joint venture of JGC Corporation / M. W.
Kellogg Company was awarded the Onshore EPC contract. Upon execution of the latter,
the 4 long lead contracts were simultaneously assigned to JGC/Kellogg for single
execution responsibility and coordination of the Onshore work.

In February, 1997 RasGas exercised its options within the Train 1 contracts and
awarded the Train 2 Facilities to these same EPC contractors.

For the first time in a project of this nature and size, RasGas required all Onshore EPC
bidders to submit proposals in respect of financing of all costs associated with the Project.
In employing this strategy, contractors sought optimum sourcing of funds tied to their
execution plans, from export credit agencies, commercial banks and other governmental
and financial institutions.

The bidding and commercial strategies employed by RasGas have led to the timely
execution of the EPC contracts to deliver the first shipment of LNG by July 1999.

FINANCING
In December 1996, RasGas finalized $2.55 billion of loan facilities to finance the
construction of the 2 trains. Bank and Export Credit Agency loan facilities represent $1.35
billion and an issue of bonds has already raised $1.2 billion. The bond offering was the first
4.39
capital markets issue for an LNG project, the first debt offering for any Qatari entity and
the first Middle Eastern debt issue with a maturity beyond 7 years. It is also the first
project debt from the Middle East with a rating of A3 from Moodys and BBB+ from
Standard and Poors.

CURRENT STATUS
At the time of writing, the onshore and offshore construction EPC contracts are on
schedule and within budget. Drilling and completion activities are progressing well, ahead
of schedule and test results are well within expectations .This progress has been achieved
by maintaining an exemplary safety record. RasGas is thus confident that it can meet its
contractual obligations to its shareholders, lenders and customer.

VISION
The vision of RasGas is to become a world class supplier of LNG by building, via a
staged development, a multi-train LNG facility, responsive to the long term needs of
buyers in existing and emerging markets.

The immediate goal of the company is to achieve 10MMTA of long-term LNG sales.
However, the plant has been sized to accommodate 6 trains with the potential to produce
LNG in excess of 15MMTA.

OUTLOOK
The outlook for RasGas is bright.

Marketing activity is strong within the traditional and emerging LNG Markets and
opportunities are currently being sought to utilize spare capacity within the initial 2 train
scope and expand the project by securing sales that would underpin the construction of
further trains.

As an integral part of the development of RLIC, RasGas has an opportunity to share

facilities with its neighbor, Qatargas, to the economic benefit of both parties and
participate as a supplier of feedstock to the planned future industries of RLIC.

LESSONS LEARNED
Expanding RasGas in a highly competitive environment presents many challenges. In
order to meet these challenges, RasGas must draw upon experiences gained to date, as
well as seek new opportunities to reduce capital costs through improved project definition
and optimum project scheduling.

Maintaining a competitive position in the world LNG market requires constant

appraisal of initiatives designed to produce more LNG and related products at lower cost,
without compromising on quality and responsibilities to the environment and safety.

4.310