Congratulations to Qatargas for the completion of its Laffan Refinery 2 (LR2) and expected to start operations this month. This is not a crude oil refinery in the conventional sense, but a condensate refinery or condensate splitter as it is known in industry jargon.
Condensates are hydrocarbons mixtures that exist in a gaseous state in the reservoir, but are liquids once they are produced and brought to the surface. Another type of condensate is that associated with the processing of raw natural gas.
The liquids produced after recovering the dry natural gas are plant condensates or natural gas liquids (NGL). Even during the stabilisation of crude oil after production, condensates are recovered. In general, condensates are sometimes referred to figuratively as very light crude oils.
In Qatargas’ case, its condensate production is the result of producing gas from the famous North Field Dome. And Qatar is a main exporter of condensate to world markets, especially Asia. However, condensate refining or splitting is very attractive for its simplicity and the lesser investment needed as compared to crude oil refining.
The LR2 capacity at 146,000 barrels a day will double the capacity of the Qatargas refinery at Ras Laffan, where the first refinery of similar capacity started operations back in 2009. The production slate of the new refinery (similar to the LR1) is 610,00 barrels a day of naphtha, 52,000 barrels a day of jet kerosene, 24,000 barrels a day of gas oil, and 9,000 barrels a day of LPG. Notice the absence of fuel oil, which complicates refining and sells at much lower prices compared to other products.
Yet the products do need treatment to make them sellable according to accepted standards. Qatar has done very well in including naphtha and kerosene hydro-treaters and a gas oil hydro-treater was added in 2014 in LR1 to produce diesel of less than 10 parts per million sulphur.
Even the Qatar Petroleum Refinery in Um Said processes 57,000 barrels a day of condensate. It started as a small refinery in 1958 but expansions kept coming as local demand increased. The crude oil processing capacity of this refinery is 137,000 barrels a day.
To reduce fuel oil production and improve products quality, a residue fluid catalytic cracking unit was added during the 2001 expansion in addition to the kerosene and diesel hydro-treaters.
Qatar’s crude oil production has been falling steadily for some years now due to natural depletion and old age, with the Dukhan field, the oldest, started production in 1939. Even the investment in enhanced oil recovery is unable to arrest the decline though it may have slowed it down.
Therefore, the rise in condensate production in Qatar has more than compensated. While crude oil production is now around 659,000 barrels a day — having fallen from 845,000 barrels a day in 2007 — condensate production as a result of the North Field development is probably close to over 1 million barrels a day. Qatar National Bank estimated crude oil reserves at 2.3 billion barrels in 2011 while those of condensate reserves at 22.3 billion barrels.
This explains the drive of Qatar for condensate refining and probably the reason why the complex Al Shaheen crude oil refinery project was shelved in 2010 even after the front end engineering and design was made in 2008. The refinery was planned for a capacity of 250,000 barrels a day at an estimated cost of $6 billion (Dh22 billion).
Definite export markets
Other Opec members — such as but not limited to Saudi Arabia, Algeria, Nigeria and Iran — are condensate producers with definite export markets. Unfortunately for Opec, these volumes are not included in any agreement among member countries within Opec agreements for reasons that are bizarre, especially as they compete with crude oil and its products.
In 1986, Opec condensates were 1.5 million barrels a day and as the volumes increased, the issue became very contentious at official meetings without finding a solution to include these volumes within countries’ production in deciding production levels or quotas.
The current production of NGLs is said to be 6.29 million barrels a day compared to 33.4 million barrels a day of crude oil. Condensates are also rising in other producing countries, especially in US, as a result of the surge in natural gas production. This prompted the US to allow exports of condensates after lifting the ban on exports.
This has intensified the competition among condensate producers which drives the trend towards condensate splitting. The future is likely to bring more condensate to the market as the spread of natural gas production and processing increases. It is important for countries in our region to exchange experience on condensate production, marketing and refining.
The writer is former head of the Energy Studies Department at the Opec Secretariat in Vienna.