SIMMONS & COMPANY Integrated Oil Research

INTERNATIONAL April 24, 2006

Simmons Oil Monthly

Qatar
Despite being one of the smallest countries in the Middle East in terms of land mass and population, Qatar is
home to what is believed to be the largest non-associated natural gas field in the world (the North field). The
country’s aggressive development strategy has positioned Qatar as a leading source of supply for global
natural gas and particularly LNG. Existing and emerging LNG markets have come to rely on volumes from
Qatar. The country’s 77 mmtpa (10.3 bcfed) of planned liquefaction capacity is already fully committed for a
period of 25 years with additional would be buyers waiting for an allotment of supply. Meanwhile, in the
midst of an LNG market that is already short of supply, the Qatari’s placed a moratorium on new projects.
Qatar’s natural gas strategy, proved resource base and production capability have important implications for
the global natural gas market.

Source: worldoil.com

Qatar accounts for a large and growing share of the Much has yet to be learned about the North field. The
global natural gas market. Qatar accounts for 14% of North field is a carbonate reservoir lying approximately
global LNG supply today and an estimated 25% by 2015. 11,000 feet below the Arabian Gulf in water depths ranging
from 50 to 230 feet. Industry representatives we have spoken
A hold has been placed on new projects. Qatar has decided with about the field stress its complexity, non-homogeneity
not to approve any additional North field projects pending and lack of full delineation, leaving a large degree of
completion of an updated reservoir study (‘07/’08) and uncertainty about the true potential of the field.
potentially longer if their 900 tcf reserve estimate does not
increase and concerns of potential overproduction of the field The world remains short of LNG supply. Several
do not abate. companies and countries are looking for additional LNG
supply commitments, but new project announcements are
proving few and far between.
Robert A. Kessler, CPA
713-546-7208
[email protected]
Important disclosures appear in Appendix D
Table of Contents

Qatar.................................................................................................................................................. 3

The North Field.................................................................................................................................. 7

Liquefied Natural Gas ..................................................................................................................... 11

Gas-To-Liquids................................................................................................................................. 13

Regional Pipeline Projects .............................................................................................................. 16

Appendix D ...................................................................................................................................... 17

2 SIMMONS & COMPANY INTERNATIONAL

Qatar

Background. Qatar gained independence on September 3, Figure 1: Undiscounted Future O&G Revenue per Capita

1971, having been a British protectorate from 1916 up until $18,000

that point. Upon initial separation from Britain, Qatar had $16,000

joined forces with Bahrain and seven other states only to $14,000

$12,000
break away from the group that would later become the

$k per capita
$10,000
United Arab Emirates (UAE). Emir Hamad bin Khalifa
$8,000
Al -Thani has ruled Qatar since 1995, after seizing control
$6,000
from his father while on vacation in Switzerland. Qatar’s first
$4,000
oil production came from the large onshore Dukhan field in $2,000
1949. Dukhan remains Qatar’s largest producing oilfield and $0

still accounts for almost 40% of Qatar’s oil production

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capacity. However, production has since commenced on

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Oil Natural Gas

several offshore fields. Qatar’s main oil and gas asset is the Source: Simmons & Company International
Note: Assumes 6:1 natural gas conversion, $70/b crude prices and 20%
North field (believed to contain 900 tcf, 150 billion boe of natural gas price discount.
natural gas reserves). The field was discovered in 1971, but
without a near-term market, no decision was made to develop
Oil and natural gas production is expected to increase
the field until the late 1980’s. Qatar has plans for 25 bcfed of
exponentially within five years. Qatar’s current oil and gas
production capacity from the North field by early next
output of approximately 1.7 mmboed is targeted to increase
decade.
approximately 230% to almost 6 mmboed by 2011. An 85%
increase is expected from the North field alone. As a result,
A small population with a large estimated hydrocarbon
Qatar’s mix of natural gas and associated liquids as a percent
resource base. Qatar has a relatively small proved oil
of total hydrocarbon production is anticipated to rise from
resource base, at least by OPEC standards, with 15.2 billion
55% at present to 76% by 2011.
boe of stated proved oil reserves (ranking 9th within OPEC-
10, ahead of Indonesia). However, inclusive of its 152 billion
Figure 2: Historical and Targeted Oil & Gas Production
boe of natural gas reserves, Qatar ranks 3rd behind Saudi
Target
6,000

6,000 Historical Production

Arabia and Iran for total estimated hydrocarbon reserves.
Meanwhile, Qatar’s population is only 2.7% that of Saudi 5,000
5,000

Arabia and 0.9% that of Iran. The result is a significant per

4,000
4,000

capita estimated resource base. Qatar’s per person proven oil

kboed

and gas reserves are 269k boe, 6.5x that of the UAE (the next 3,000 3,000

closest OPEC member), 21x that of Saudi Arabia and 62x

2,000 2,000

that of Iran. Using current oil prices of ~$70/boe and

assuming a 20% BTU discount for natural gas realizations, 1,000 1,000

Qatar’s undiscounted future oil & gas revenue is roughly 0 0

$15mm per person (or $154k per year when amortized over
9

3
5e
'6

'7

'7

'7

'7

'7

'8

'8

'8

'8

'8

'9

'9

'9

'9

'9

'0

'0
'0

Crude NGLs Natural Gas

the 100 year R-P target), 17.5x that of Saudi Arabia and 57x
Source: OPEC, IEA
that of Iran. While still classified as a welfare state with an
undiversified economy, Qatar at the moment has a
Oil production. Qatar has been producing crude oil since
significantly larger buffer to support future spending on
1949 from the large onshore Dukhan field. Offshore
social programs than its larger neighboring countries.
production comes from 11 fields, including liquids associated
with natural gas produced from the North field.

SIMMONS & COMPANY INTERNATIONAL 3

Qatar (continued)

Figure 3: Major Qatari Oil Fields ƒ Recent output of ~17 kbd.

Capacity ƒ Estimated recoverable reserves: 200-300 mmb.
Field Startup API Gravity kbd
Dukhan 1949 41 400
ISND 1964 100 o Al-Shaheen
Maydan Mahzam 1965 60 ƒ Operated by Maersk Oil Qatar of Denmark
Bul Hanine 1973 100
ƒ Current production capacity of ~200 kbd.
Al-Shaheen 1994 29-33 200
Al-Rayyan 1996 70 ƒ Located in block 5
Al-Khalij 1997 28 80 ƒ 43 miles off Qatar’s northeastern coast.
ISSD 1999 17
ƒ Heavy, 29-33 degree API, 1.7-2% sulfur.
Al-Karkara / A-North 2005 10
1,037 ƒ Above and potentially linked to the North field.
Source: Simmons & Company International ƒ Recent initiative to drill 70 additional wells.
ƒ Expected increase to 525 kbd by late 2009.
Primary oil fields. Notes on each of Qatar’s main oilfields
is included below. Most of the information is sourced from o Al-Rayyan
the U.S. EIA, supplemented by industry discussion and press ƒ Newer oil field
reports. ƒ Operated by Anadarko – bought stakes from BP,
BG, Wintershall and Gulfstream from ’01 to ’02.
o Bul Hanine ƒ Onstream November, 1996 – 20 kbd of heavy oil
ƒ Online in 1973.
from 4 wells.
ƒ Early production exceeded 100 kbd.
ƒ Currently 70 kbd.
ƒ Production began falling in early 1990s.
ƒ Block 12
ƒ Current production capacity is ~100 kbd.
ƒ PSA signed on July 16, 1997.
ƒ Development plan in place to drill 86 wells
ƒ APC acquired exploration acreage in May, 2004 on
ƒ 700 mmb of estimated reserves.
adjacent Block 4 and plans exploratory drilling over
5-year period.
o Maydan Mahzam
ƒ First operational in 1965
o Al-Khaleej
ƒ Current capacity is ~60 kbd
ƒ Latest oilfield to come onstream
ƒ Output has declined significantly from peak
ƒ Startup: March, 1997, after five years of exploration
ƒ Production was at 70 kbd in late-’04.
and appraisal work. Initial rate: 6 kbd.
ƒ QP is undertaking renovation on the field
ƒ Location: Block 6, along border w/ Iran, east of the
North Field.
o Id al-Shargi North Dome (ISND)
ƒ Development had been delayed since 1991 as Elf
ƒ Discovered by Shell in 1961.
Aquitaine Qatar had sought improved PSC terms
ƒ Now operated by OXY.
from QP.
ƒ 59 miles east of Qatar’s northern tip
ƒ TOT completed a capacity expansion in mid-’04
ƒ Produced 20 kbd in ’94 when OXY signed 25-year
that brought total capacity to 80 kbd.
PSA, agreeing to invest $700mm.
ƒ Medium/sweet 28-degree API gravity, 1% sulfur
ƒ Current output is ~100 kbd.
ƒ Oil piped to Halul Island for processing and
transport.
o Id al-Shargi South Dome (ISSD)
ƒ TOT holds 100% interest in the 25-year PSA with
ƒ OXY signed a PSA in September, 1997.
option for five-year extension (acquired NI’s 45%
ƒ Located 15 miles from ISND.
stake in May, 2002).
ƒ Designed to operate as satellite to ISND.
ƒ On stream November, 1999 at 11 kbd
4 SIMMONS & COMPANY INTERNATIONAL
Qatar (continued)

Up and coming member of OPEC. Based on OPEC’s upstream components to these integrated developments are
official project list and stated capacity figures, Qatar expected to yield 265 kboed of associated liquids.
currently ranks last in OPEC for crude oil & NGL production Figure 5: North Field Project Listing
capacity. However, associated production from several Liquefied Natural Gas (LNG)
LNG Feed Liquids Total
North field projects is expected to bring Qatar’s liquids Project Startup Train MMTPA mmcfd mmcfd mmcfed mmcfed
QatarGas 1997 1 2.0 267 310 118 428
production ahead of both Indonesia and Algeria by 2011. As QatarGas 1997 2 2.0 267 310 118 428
QatarGas 1998 3 2.0 267 310 118 428
QatarGas 2003 D1 1.1 147 171 65 235
a side note, figures below are OPEC estimates, not SCI QatarGas 2003 D2 1.1 147 171 65 235
QatarGas 2003 D3 1.1 147 171 65 235
estimates and assume a default 5% decline rate for QatarGas II 2008 4 7.8 1,040 1,209 460 1,669
QatarGas II 2009 5 7.8 1,040 1,209 460 1,669
illustrative purposes. QatarGas III
QatarGas IV
2009
2011
6
7
7.8
7.8
1,040
1,040
1,209
1,209
460
460
1,669
1,669
RasGas 1999 1 3.3 440 512 194 706
RasGas 1999 2 3.3 440 512 194 706
RasGas 2004 3 4.8 640 744 283 1,027
RasGas 2005 4 4.8 640 744 283 1,027
Figure 4: OPEC Liquids Production Capacity Rank (kbd) RasGas 2007 5 4.7 627 729 277 1,006
RasGas 2008 6 7.8 1,040 1,209 460 1,669
2006 2007 2008 2009 2010 RasGas 2010 7 7.8
77.0
1,040
10,267
1,209
11,938
460
4,536
1,669
16,474
Algeria 1,505 1,539 1,611 1,653 1,639
Indonesia 1,060 1,023 1,022 1,048 1,157 Regional Natural Gas Projects
Iran 4,610 4,787 4,627 4,498 4,531 Feed Liquids Total
Project Startup Train mmcfd mmcfed mmcfed
Libya 1,725 1,735 1,669 1,586 1,506 Al Khaleej 2005 Initial 600 300 900
Al Khaleej Undecided Future 1,050 570 1,620
Kuwait 2,950 2,828 2,712 2,577 2,673 Dolphin 2007 Initial 2,000 760 2,760
Dolphin Undecided Future 1,000 380 1,380
Nigeria 3,155 3,160 3,207 3,317 3,384 4,650 2,010 6,660
Qatar 995 1,053 1,290 1,582 1,729
Gas-to-Liquids (GTL)
Saudi Arabia 11,568 11,547 11,762 12,215 12,512 Feed Liquids Total
Project Startup mmcfd mmcfed mmcfed
UAE 2,948 2,991 2,857 2,814 2,779 Oryx 2006 330* 330*
Venezuela 2,750 2,613 2,482 2,358 2,240 Pearl
XOM
2009
2011
1,600
1,400
600
990
2,200
2,390
3,000 1,590 4,590

TOTAL OPEC 33,265 33,274 33,239 33,648 34,148 Total (Bcfed) TOTAL 19,588 8,136 27,724

Qatar Rank 10 9 9 9 7 Source: Simmons & Company International

Source: Simmons & Company International
Note: Based on OPEC stated capacity, not SCI assumptions.
Figure 6: Qatar Production Growth Targets
Note: Includes NGLs.
Note: Assumes base decline rates of 5% p.a.
6,000

5,000
Significant number of projects in Qatar’s North field.
4,000
Between now and 2011, Qatar plans to bring online seven
Kboed

new LNG trains with a cumulative capacity of 51.5 mmtpa 3,000

(6.9 bcfed), bringing total LNG liquefaction capacity to 77

2,000
mmtpa (10.3 bcfed). Natural gas feed into the plant must be
higher by approximately 14% in our estimation in order to 1,000

offset natural gas burned or otherwise lost in the liquefaction

0
process. Production of NGLs associated with liquefaction
et
9
1
3
5
7
9
1
3
5
7
9
1
3
5
7
9
1
3
5e
7f
9f

Ta 1f
'6
'7
'7
'7
'7
'7
'8
'8
'8
'8
'8
'9
'9
'9
'9
'9
'0
'0

rg
'0
'0
LT '1
'0

facilities is expected to amount to 756 kboed. Other projects, Liquids Natural Gas

including the ExxonMobil-operated Al-Khaleej domestic

Source: Simmons & Company International
natural gas project and the Dolphin pipeline to the UAE are
expected to add 2.6 bcfed in the near-term and 4.7 bcfed
Refining. Qatar has one refinery complex at Umm Said with
long-term and are expected to produce 335 kboed of
a current capacity of 137 kbd (expanded from 57.5 kbd in
associated liquids. Feedstock requirements for the Pearl and
2002).
ExxonMobil GTL facilities are expected to be 3 bcfed and

SIMMONS & COMPANY INTERNATIONAL 5

Qatar (continued)

Petrochemical. Qatar’s existing petrochemical complex Other industrial activities. According to the U.S. EIA,
(Q-Chem) was first brought online in 2002 as a joint venture Qatar has 2,260 megawatts of electric generation capacity.
owned 51% by QP and 49% by Chevron Phillips Chemical Approximately 70% of Qatar’s electricity is used by the
Company (CPCC). The complex includes a 500ktpa residential sector, with free electricity offered to Qatari
Ethylene unit, 453ktpa Polyethylene plant and a 47 ktpa citizens (expats have been excluded from the free electricity
Hexene unit. An expansion project is underway, with provision since 1999). Other industries include fertilizer
completion expected in 2008. Expansion plans include a (Qatar Fertilizer Company), other chemicals such as ethylene
1.3 mmtpa ethylene cracker owned by Qatofin (a JV owned dichloride, vinyl chloride monomer and caustic soda (Qatar
63% by Qatar Petrochemical Company (Qapco), 36% by Vinyl Company), fuel additives, steel, concrete and
Total S.A. and 1% by QP) and Q-Chem. In addition, the aluminum.
Q-Chem II project will include a 350ktpa polyethylene unit
and 350 ktpa Normal Alpha Olefins plant. Qatofin is
constructing a 450 ktpa LLDPE unit, which is also planned
for completion in 2008.

6 SIMMONS & COMPANY INTERNATIONAL

The North Field

Single, most important natural gas field in the world. The Figure 7: Qatar LNG Liquefaction Capacity

North field is currently assumed to contain approximately 90.0

900 tcf of recoverable natural gas reserves, accounting for 80.0

14% of the 6,337 tcf of worldwide natural gas reserves 70.0

Liquefaction Capacity (mmtpa)

according to the BP statistical review of world energy. In 60.0

addition, Iran’s South Pars field (a geological extension of 50.0

Qatar’s North field) is estimated to contain 280 tcf of

40.0
reserves. Taken together, the North field and South Pars are
30.0
assumed to hold 1,180 tcf of reserves, or roughly 19% of the
20.0
world total. The north field covers an area of over 6,000 sq.
10.0
km, almost half of the surface area of Qatar. Reservoir depth
0.0
is up to 11,000 feet. Pressure is up to 5,200 psi (350 Barg). '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

The field is a carbonate reservoir with approximate thickness

Project Startup '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08
'11 '09 '10
of 1,500 feet (this varies considerably throughout the QatarGas
QatarGas
1997
1997
2.0 2.0
2.0 2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
2.0
QatarGas 1998 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0
2.0 2.0 2.0
reservoir). QatarGas
QatarGas
2003
2003
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
1.1
QatarGas 2003 1.1 1.1 1.1 1.1 1.1 1.1
1.1 1.1 1.1
QatarGas II 2008 7.8
7.8 7.8 7.8
QatarGas II 2009 7.8 7.8 7.8

A dominant future supplier of LNG. Qatar’s present LNG QatarGas III

QatarGas IV
2009
2011
7.8
7.8
7.8 7.8

RasGas 1999 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3 3.3
liquefaction capacity of 25.5 mmtpa (3.4 bcfd) accounts for RasGas
RasGas
1999
2004
3.3 3.3 3.3 3.3 3.3 3.3
4.8
3.3
4.8
3.3
4.8
3.3
4.8
3.3
4.8
3.3
4.8
3.3
4.8
3.3
4.8
RasGas 2005 4.8 4.8 4.8 4.8 4.8 4.8 4.8
approximately 14% of the world’s total and consists of RasGas
RasGas
2007
2008
4.7 4.7
7.8
4.7
7.8
4.7
7.8
4.7
7.8
RasGas 2010 7.8 7.8
QatarGas trains 1 through 3 (debottlenecked in 2003) with a 4.0 6.0 12.6 12.6 12.6 12.6 15.9 20.7 25.5 25.5 30.2 45.8 61.4 69.2 77.0

Source: Simmons & Company International

total capacity of 9.3 mmtpa (1,240 mmcfd) and RasGas trains
1 through 4 with a total capacity of 16.2 mmtpa (2,160
Expectations for 100 years of production. Based on
mmcfd). While meaningful today, Qatar will take an even
current production capacity, the North field has a stated R-P
more dominant role going forward. Current liquefaction
ratio exceeding 400 years. Meanwhile, the Qatari oil
capacity construction projects in Ras Laffan are expected to
minister, H.E. Abdullah bin Hamad al-Attiyah, has made
bring total capacity to 77 mmtpa (10.3 bcfd) by 2011. By
clear on several occasions his country’s intent on developing
2015, Qatar will account for approximately 1/4th of the
the North field into a resource that will remain in production
world’s LNG liquefaction capacity. Calculated differently,
for over 100 years. This would not seem to be much of a
approximately 1/3rd of the expected growth in global LNG
challenge on current reserve assumptions and production
supplies from now through 2015 are expected to come from
rates. However, the 320% increase in production capacity
the North field alone.
planned over the next five to six years will bring Qatar’s
expected production to 25 bcfed and the North field’s reserve
life to 97 years (slightly below the minister's target of 100
years). This leaves little room for error if what is believed to
be the world's largest gas field turns out to be anything under
900 tcf. Accordingly, Qatar has chosen to first learn more
about the field through an active drilling and seismic
campaign. The minister informed us that 17 rigs are running
in the North field, with "hundreds" of wells already drilled.
In the near-term, Qatar is undertaking an initiative to update
the North field reservoir models. They anticipate completion
of their near-term reservoir re-evaluation in 2007 or 2008. In
the meantime, all projects that were in discussion but not yet
finalized have been put on hold (effective early 2005).

SIMMONS & COMPANY INTERNATIONAL 7

The North Field (continued)

The minister and QP have also expressed concern over the information comes from two sources, the IOCs that operate
significant increase in production planned for the north field projects in the North field and a few SPE papers. Even these
over the next several years, and have said explicitly that more sources are less than perfect. For instance, the IOCs who
knowledge of field performance under the higher rate of have booked reserves for the North field don’t generally
production is needed before decisions are made to further provide precise information on the reserves that have been
increase production levels (so as not to damage long-term recorded. This leaves our analysis heavily dependent on
reservoir productivity). conversations with various IOC executives. Still, these
conversations have been illuminating. For instance, we find
Figure 8: North Field Capacity and Implied Reserve Life no support for the myth that the North field is a single, large,
homogenous structure. To the contrary, several industry
3,500 30,000
representatives, including CEOs of two of the five largest
3,000
25,000 IOCs in the world have represented that the field is complex

Production Capacity (mmcfed)

2,500 and non-homogenous. Meanwhile, conversations with other
20,000
Implied R-P (years)

2,000
industry representatives indicate that new assumptions have
15,000 emerged about the North field structure over the past two to
1,500
three years and that those assumptions imply a more complex
10,000
1,000
reservoir than what was previously assumed to be the case.
500
5,000 Non-uniformity applies to the different Khuff formations. It
is generally assumed that developments to date have favored
0 0
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 the highly productive and liquids-rich zone 4 from the Khuff
Reserve Life Production
formation. This leaves a higher degree of uncertainty with
Source: Simmons & Company International
regard to production capabilities from the shallower three
Figure 9: North Field Production Capacity (Bcfed) zones.
uefied Natural Gas (LN Liquefied Natural Gas (LNG)
Project
QatarGas
Startup
1997
'97
428
'98
428
'99
428
'00
428
'01
428
'02
428
'03
428
'04
428
'05
428
'06
428
'07
428
'08
428
'09
428
'10
428
'11
428 Disappointing drilling results. Three apparently unrelated
QatarGas 1997 428 428 428 428 428 428 428 428 428 428 428 428 428 428 428
QatarGas 1998 428 428 428 428 428 428 428 428 428 428 428 428 428 428
QatarGas
QatarGas
2003
2003
235
235
235
235
235
235
235
235
235
235
235
235
235
235
235
235
235
235
individuals from three different organizations have noted that
QatarGas 2003 235 235 235 235 235 235 235 235 235
QatarGas II
QatarGas II
2008
2009
1,669 1,669
1,669
1,669
1,669
1,669
1,669
ConocoPhillips drilled an unexpected dry hole in the North
QatarGas III 2009 1,669 1,669 1,669
QatarGas IV
RasGas
2011
1999 706 706 706 706 706 706 706 706 706 706 706 706
1,669
706 field and that this event was at least a partial catalyst for a
RasGas 1999 706 706 706 706 706 706 706 706 706 706 706 706 706
RasGas 2004 1,027 1,027 1,027 1,027 1,027 1,027 1,027 1,027
RasGas
RasGas
2005
2007
1,027 1,027 1,027
1,006
1,027
1,006
1,027
1,006
1,027
1,006
1,027
1,006
revamped perspective on the North field structure and
RasGas 2008 1,669 1,669 1,669 1,669
RasGas 2010
856 1,284 2,696 2,696 2,696 2,696 3,402 4,429 5,456 5,456 6,461 9,799 13,137
1,669
14,806
1,669
16,474
potential. COP has no official comment on the matter.
ional Natural Gas Proj Regional Natural Gas Projects However, numbers in their financial statements leave open
Project
Al Khaleej
Al Khaleej
Startup
2005
Undecided
650 650 650 650 650 650 650
1,145
the possibility. Exploration costs incurred by Conoco (COP)
Dolphin 2007 2,760 2,760 2,760 2,760 2,760
Dolphin Undecided
0 0 0 0 0 0 0 0 650 650 3,410 3,410 3,410 3,410
1,380
5,935
in “Russia and Other Areas” were $12mm, $6mm and
Gas-to-Liquids (GTL) Gas-to-Liquids (GTL) $60mm in 2003, 2004 and 2005. Exploration spending
Project Startup
Oryx
Pearl
2006
2009
n/a n/a n/a n/a
1,700
n/a
1,700
n/a
1,700 expensed during these periods was $2mm, $5mm and
XOM 2011 1,565
0 0 0 0 0 0 0 0 0 0 0 0 1,700 1,700 3,265

Total (Bcfed) 856 1,284 2,696 2,696 2,696 2,696 3,402 4,429 6,106 6,106 9,871 13,209 18,247 19,916 25,674
$56mm. Put differently, only $4mm of the $60mm of
Implied R-P 2,881 1,921 915 915 915 915 725 557 404 404 250 187 135 124 96

Source: Simmons & Company International exploratory costs incurred by COP in 2005 was capitalized.
Other industry sources indicate that COP spent roughly
$32mm on the rental of drilling rigs in Qatar alone in 2005.
Not a homogenous reservoir. With almost one-fifth of the
Assuming that COP carried 100% of its operating Qatari
world’s natural gas potential locked in one reservoir,
drilling costs in 2005 (a typical but undisclosed contractual
knowledge of the North field’s reserve characteristics are
term) then COP would have at the minimum expensed 88%
important. Unfortunately, not much information is available
of its drilling costs incurred in 2005. Simply put, these
in this regard. Simple statistics, such as the total number of
numbers imply that COP drilled at least one dry hole in the
wells drilled in the North field and the average production
per well are not a matter of public record. Our best
8 SIMMONS & COMPANY INTERNATIONAL
The North Field (continued)

Qatar north field in 2005, seemingly confirming industry Future development assumptions. A limited production
discussion on the topic. history for the North field adds future development
uncertainty. As could be expected, less information is
Meanwhile, in 2005, COP recorded 1,212 bcf of natural gas
available for future developments. Those that have been
reserves and 21mmboe of NGLs in this business segment,
disclosed imply an apparent increase in per well productivity
noting that these additions were primarily attributable to
and a slightly higher NGL content. For instance, preliminary
Qatar. These amounts equate to 33% of COP’s 2005 organic
plans for the upstream component of the Dolphin pipeline to
reserve additions, without which COP would have reported a
the UAE called for 2 bcfed of natural gas production and
67% RRR for ’05. A 93% expense rate on exploration costs
100 kboed of associated liquids from 24 production wells.
incurred would imply that the company is basically taking it
Shell’s Pearl GTL project plans call for 1.6 bcfed of natural
on faith that these reserves are proven. The obvious
gas production and 100 kboed of associated liquids from 20
unknown offset is what well specific information the Qataris
wells.
might have provided COP in order to book these reserves.
Such information is required by the SEC in order to book Figure 10: North Field Well Productivity
Existing Startup Wells mmcfd kboed mmcfd/well Liquids %
reserves as proven. Meanwhile, other IOC operators in Qatar Alpha 1991 16 883 40 55 21%
Bravo (Qatargas) 1996 20 1,200 45 60 18%
have referred to the North field as one of the least delineated Charlie (RasGas) 1998 15 880 40 59 21%
natural gas fields in their portfolio of proven reserves. 51 2,963 125 58 20%

Future Startup Wells mmcfd kboed mmcfd/well Liquids %

Dolphin 2007 24 2,000 100 83 23%
Pearl GTL 2010 20 1,600 100 80 27%
Indications of well productivity. Information at the 44 3,600 200 82 25%

individual well level for the North field is difficult to find. Source: Simmons & Company International
On occasion, development plans are announced that provide
Heavy IOC dependence on the North field. Several
some indication on the number of wells and platforms
integrated oil companies have booked a sizeable proven
planned for a particular stage of the North field development.
reserve quantity for projects relating to the North field.
SPE papers published after the first rounds of North field
While the North field presents tremendous opportunity for
development provide some clues. For instance, they indicate
the International Oil Companies (IOCs) involved in its
that the Alpha platform (the first production facility in the
development, there remains a substantial amount of risk that
North field, which was brought online in July, 1991)
long-term field performance differs from assumptions
incorporated 16 wells to produce approximately 880 mmcfd
currently made by these companies. Of note, SEC standards
of natural gas and 40 kboed of associated liquids, implying
for recording proven reserves require a 90% confidence in
average well productivity of 55 mmcfd + 2.5 kboed of
the quantity recorded.
associated liquids from the Khuff formation, zone 4.
Similarly, the Bravo complex, which supplies the first LNG • ExxonMobil: The company has noted that proved
liquefaction trains at QatarGas was brought online in July, reserve additions associated with the Qatar North field
1996 produces an estimated 1.2 bcfd of natural gas and 45 totaled 1.6 billion boe in 2005 (accounting for 107%
kboed of associated liquids from 20 wells (note that 24 wells RRR out of a total 121% organic RRR). In 2004, North
were originally planned). Charlie, which supports RasGas, field additions totaled 1.7 billion boe. It appears as
was brought onstream in 1998 and produces an estimated 880 though ExxonMobil has yet to book reserves associated
mmcfd from 15 wells. Less information is available with its GTL project in Qatar, but has recorded a
regarding more recent expansions to the upstream supply substantial amount for its interest in current and future
components for QatarGas and RasGas and the Al-Khaleej gas liquefaction trains at QatarGas and RasGas.
project, although there is an indication that Al-Khaleej is • ConocoPhillips: As mentioned above, in 2005, COP
designed to produce from Khuff zones 1 to 3 in addition to recorded 1,212 bcf of natural gas reserves and 21mmboe
zone 4. Assuming similar well productivity for later stage of NGLs in this business segment, noting that these
developments to Alpha, Bravo and Charlie, then close to 100 additions were primarily attributable to Qatar.
producing wells are likely on stream in the North field.

SIMMONS & COMPANY INTERNATIONAL 9

The North Field (continued)

• Shell: Shell signed a PSA with Qatar for the Pearl GTL oil minister, H.E. Abdullah bin Hamad al-Attiyah, has
facility in July, 2004. In February, 2005, the company delivered a clear message in this regard. His primary
signed a Heads of Agreement (HOA) with Qatar for explanation notes the need to revisit the reservoir model of
construction of the 7.8 mmtpa capacity QatarGas 4 the North field, particularly in light of the prospect for
liquefaction facility. Neither of these projects has been sustained 25 bcfed production levels and what damage this
noted as a major reserve addition over the last two years, might cause to the reservoir in the long-term. He has
implying that Shell has yet to book reserves pertaining to frequently referenced Qatar’s desire to maintain 100 years of
their interest in the North field. production, implying the need to increase the field’s reserve
estimate beyond the current 900 tcf if new projects are to be
• Total S.A.: In 2005, Total S.A. reached an agreement in
sanctioned. Qatar is expected to conclude their reservoir
principal for the acquisition of a 16.7% interest in
study in the 2007/2008 timeframe, leaving open the
QatarGas II, Train 2. TOT also holds a 20% stake in the
possibility that new projects are announced after this time.
upstream operations at QatarGas and a 10% interest in
the 3 QatarGas LNG liquefaction trains with a capacity Construction challenges. Qatar is expected to spend
of 9.7 mmtpa. In December, 2001 a contract was signed between $70 and $80 billion over the next five years on
for the sale of 2 bcfd of North field gas over a 25 year expanded operations for the North field, including related
period to the Dolphin project, in which TOT holds a LNG and GTL facilities, not an inconsequential amount of
24.5% interest. money for a country who’s annual GDP in 2005 is estimated
at $23 billion. There has been some concern that the
• Occidental: Occidental holds a 24.5% interest in the
construction market in Qatar is overheating and that many of
Dolphin project. In addition, the company has been
these projects won’t be complete on time or on budget as a
involved in the redevelopment of the Idd El Shargi North
result. While we would generally agree that some of Qatar’s
Dome (ISND) field since 1993 and Idd EL Shargi South
projects (particularly the GTL developments) have the
Dome (ISSD) since 1999.
potential to be delayed and run over budget, but we would
Implications of the project moratorium. In early 2005, the note that the issue is global in nature and we find that the
Qatari’s issued a surprising moratorium on new North field construction market in other areas (such as Canada) remains
projects. This led to a substantial amount of speculation and more challenging in some regards than in Qatar. Qatar for
in some cases misinformation about the reasons behind the instance is close to the relatively inexpensive Southeastern
decision and the prospects for a second round of projects at Asia workforce and ready access to port infrastructure (which
some point in the future. However, we find that the Qatari is in the process of being expanded).

10 SIMMONS & COMPANY INTERNATIONAL

Liquefied Natural Gas

QatarGas. QatarGas began operations in December, 1996. Figure 13: QatarGas III Project Summary

Formed as a joint venture between Qatar Petroleum (55%), QatarGas III

ExxonMobil (10%), Total (10%), Mitsui (7.5%), and Capacity Feed (mmcfed) Cost
Train Start MMTPA mmcfd Gas NGLs Total $mm $/mta
Marubeni (7.5%), QatarGas was the first of four similar, but 6 2009 7.8 1,040 1,209 460 1,669 $2,340 $300
7.8 1,040 1,209 460 1,669 $2,340 $300
separate, LNG ventures in the country. QatarGas consists of Source: Simmons & Company International
three liquefaction trains with a combined 9 mmtpa of
capacity, thanks to a recent debottlenecking project that QatarGas IV. QatarGas IV is the last of the major Qatar
essentially added the volume of another train. QatarGas has LNG projects currently on the drawing board. Qatar
long term contracts in place with Japanese utilities that Petroleum, in a parternership with Shell (30%), will construct
occupy most of the project’s volume. a liquefaction train with a capacity of 7.8 mmtpa to serve the
North American and European gas markets. Production is
Figure 11: QatarGas Project Summary expected to commence sometime between 2010 and 2012.
QatarGas
Figure 14: QatarGas IV Project Summary
Capacity Feed (mmcfed) Cost
Train Start MMTPA mmcfd Gas NGLs Total $mm $/mta
1 1997 2.0 267 310 118 428 $567 $284
QatarGas IV
2 1997 2.0 267 310 118 428 $567 $284 Capacity Feed (mmcfed) Cost
3 1998 2.0 267 310 118 428 $567 $284 Train Start MMTPA mmcfd Gas NGLs Total $mm $/mta
D1 2003 1.1 147 171 65 235 $67 $61 7 2011 7.8 1,040 1,209 460 1,669 $2,340 $300
D2 2003 1.1 147 171 65 235 $67 $61 7.8 1,040 1,209 460 1,669 $2,340 $300
D3 2003 1.1 147 171 65 235 $67 $61 Source: Simmons & Company International
9.3 1,240 1,442 548 1,990 $1,902 $205
Source: Simmons & Company International
RasGas. RasGas became the second LNG project in Qatar
QatarGas II. QatarGas II represents another major LNG when it opened its first liquefaction train in April 1999 with a
endeavor involving QatarPetroleum and ExxonMobil. Slated capacity of 3.3 mmtpa. Since then, 3 trains have followed
to begin operations in 2008, QatarGas II will add another bringing its capacity to 15.2 mmtpa, with construction plans
15.6 mmtpa to primarily the European market. The project calling for an additional three more trains. When it is
will consist of two similar liquefaction trains, each with a complete RasGas will export over 36 mmtpa to markets
7.8 mmtpa capacity. France's Total recently announced that across the world. Ownership for the trains is primarily split
they have bought into the venture, purchasing a 16.7% between QatarPetroleum and ExxonMobil (XOM), with the
interest in the second train. Reserves for the project will Asian utilities sharing a small portion of the first two trains.
continue to be supplied from Qatar's North Field.
Figure 15: RasGas Project Summary
Figure 12: QatarGas II Project Summary RasGas
QatarGas II Capacity Feed (mmcfed) Cost
Train Start MMTPA mmcfd Gas NGLs Total $mm $/mta
Capacity Feed (mmcfed) Cost 1 1999 3.3 440 512 194 706 $1,650 $500
Train Start MMTPA mmcfd Gas NGLs Total $mm $/mta 2 1999 3.3 440 512 194 706 $1,650 $500
4 2008 7.8 1,040 1,209 460 1,669 $2,250 $288 3 2004 4.8 640 744 283 1,027 $1,300 $271
5 2009 7.8 1,040 1,209 460 1,669 $2,250 $288 4 2005 4.8 640 744 283 1,027 $1,300 $271
15.6 2,080 2,419 919 3,338 $4,500 $288 5 2007 4.7 627 729 277 1,006 $1,300 $277
Source: Simmons & Company International 6 2008 7.8 1,040 1,209 460 1,669 $2,250 $288
7 2010 7.8 1,040 1,209 460 1,669 $2,250 $288
36.5 4,867 5,659 2,150 7,809 $11,700 $321
QatarGas III. QatarGas III partners Qatar Petroleum with Source: Simmons & Company International
COP in another large scale liquefaction project set to become
operational in 2009. COP will have 30% ownership of the
project that includes a single 7.8 mmtpa liquefaction train.
The LNG will be marketed to the U.S. Gulf Coast.

SIMMONS & COMPANY INTERNATIONAL 11

Liquefied Natural Gas (continued)

LNG Trade. North field LNG projects are expected to announced plans, approximately ¼ of global LNG volumes
account for roughly one-third of the global increase in in 2011 will be sourced from Qatar, roughly doubling the
liquefaction capacity between now and 2015, adding an country’s market share of global LNG trade.
incremental 7.5 bcfed by early next decade. Based on current

Figure 16: Qatari LNG Supplies by Designated Market

12,000

10,000
Liquefaction Capacity (mmcfd)

8,000

6,000

4,000

2,000

0
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

Asia NWE U.S.

Source: Simmons & Company International

mmcfd '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Asia 533 800 1,680 1,680 1,680 1,680 1,680 2,320 2,320 2,320 2,633 2,633 2,633 2,633 2,633
NWE. 0 0 0 0 0 0 440 440 1,080 1,080 1,393 2,953 3,993 3,993 4,513
U.S. 0 0 0 0 0 0 0 0 0 0 0 520 1,560 2,600 3,120
533 800 1,680 1,680 1,680 1,680 2,120 2,760 3,400 3,400 4,027 6,107 8,187 9,227 10,267
% '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
Asia 100% 100% 100% 100% 100% 100% 79% 84% 68% 68% 65% 43% 32% 29% 26%
NWE. 0% 0% 0% 0% 0% 0% 21% 16% 32% 32% 35% 48% 49% 43% 44%
U.S. 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 9% 19% 28% 30%
100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%

Source: Simmons & Company International

12 SIMMONS & COMPANY INTERNATIONAL

Gas-To-Liquids

GTL Process. Multiple GTL technologies are available and Figure 17: GTL Process Diagram

employed by the operators of would be GTL plants. The

most significant distinguishing characteristic between these
technologies is the choice of catalyst used in the Fischer-
Tropsch (F-T) process. Most technologies involve three
stages:

ƒ STEP 1: Syngas Production: Synthesis gas (Syngas) is

generally produced in one of two ways, both use CH4
(methane) as a primary feedstock:
o Partial Oxidation. In this method, CH4
(Methane) is partially oxidized, i.e.-burned, to
generate CO2 + H2 (syngas). First, O2 is Source: Syntroleum
separated from the atmosphere, then mixed with
CH4 in restricted quantities in the presence of
Why the Qatari’s have opted for GTL. There is a general
heat so as to promote partial, but not full
belief that under historical and present market prices for
oxidation.
natural gas and diesel and current cost assumptions for LNG
o Steam Reforming: Uses heat + a catalyst to
facilities and GTL plants that LNG offers a higher netback
reform methane into CO2 + H2 (syngas)
per unit of natural gas production. This begs the question as
The creation of syngas is an endothermic and capital
to why the Qatari’s have committed to send 3,730 mmcfd of
intensive process. By some estimates, approximately
natural gas production from the North field into GTL plants
60-70% of the capital cost in a GTL plant is spent on
instead of through LNG. We believe there is a two-part
units leading up to the creation of a synthesis gas.
explanation for this:

ƒ STEP 2: Fischer-Tropsch (FT): The FT process ƒ Market Diversification: On current plans, LNG
employs the use of a catalyst to convert syngas into projects sourced from the Qatar North field are expected
hydrocarbons and water. The process is highly to account for 1/3rd of the world’s LNG growth between
exothermic, a nice match for the endothermic syngas now and 2015. For reference, at its current planned peak
production process. Different FT catalysts, temperature dry gas output capacity of 20 bcfed (including LNG
and pressures produce varying yields of gasoline, projects, GTL feedstock and regional natural gas
naphtha diesel and wax. The most recent iterations of pipeline projects), the North field would equate to close
GTL technology opt for a high production of diesel and to 100% of current global LNG trade. Such market
wax. dominance has its benefits, particularly under the base
case forecast scenario for a world short of needed LNG
ƒ STEP 3: Hydrocracking. Breaks long-chain cargos. However, the Qatari’s desire to manage the
hydrocarbons into smaller, high value diesel output. North field production for 100 years leads them to want
some market diversification. GTL diesel offers a
reasonable solution in this regard, since planned output
from the North field is much smaller in relation to the
liquid hydrocarbon market, with peak dry gas output
equating to less than 10% of the world’s total current
consumption of middle distillates.

SIMMONS & COMPANY INTERNATIONAL 13

Gas-To-Liquids (continued)

ƒ IOC Capital Funding: Economic costs are higher for Pearl. Shell signed a Development and Production Sharing
GTL plants than for LNG plants. Comparison is Agreement (DPSA) in July, 2004 for the construction of a
difficult, given that two different markets are being 140 kbd GTL facility. Initial cost estimates were $5 billion,
exploited (one natgas, one being diesel). However, we but have grown to $6.3 billion with the expectation of further
don’t believe it to be coincidental that Shell and increases before Final Investment Decision (FID) is made
ExxonMobil’s large scale GTL plants will be 100% IOC later this year (2006). The project is an integrated
funded, whereas capital spending on existing and future upstream/downstream development, involving two offshore
LNG liquefaction trains is shared between the QP, the platforms and 1,600 mmcfd of natural gas feed into the GTL
NOC, and partner IOCs. facility with 100 kbd of associated condensate and NGL
production. Output from the plant is expected to be 140 kbd.
Oryx. The Oryx GTL plant is Qatar’s first, having been
Construction is anticipated to occur in two stages, with stage
officially established in January, 2003 as a JV between QP
one set to come online around 2010 at 70 kbd. Stage 2 startup
and Sasol with startup planned for June, 2006. The facility
is to come one year later. Shell has shot 3D seismic over
has two trains and a total GTL product capacity of 34 kbd
their allocated North field block and drilled 2 wells to
(including approximately 24 kbd of ultra-clean diesel, 9 kbd
delineate the upstream resource in February, 2004. Shell’s
of naphtha and 1 kbd of LPG). As feedstock, the plant uses
“Pearl” facility is scheduled to be the second GTL plant in
330 mmcfd of natural gas processed from the ExxonMobil-
Qatar. With an output capacity over 4x the Oryx plant, Pearl
operated Al Khaleej regional gas project. Oryx is also reliant
GTL is expected to be the largest construction project in
on common utility supplies available at Ras Laffan. Gross
Qatar, occupying a land mass equivalent to 450 football
capital costs are estimated at $1 billion (25% above prior
fields and requiring a peak construction workforce of 15,000.
budget). As a non-integrated project aided by the support of
Approximately 600 – 1,000 employees will be required to
regional gas supplies and shared utilities, Oryx is afforded
operate the plant.
unit capital cost savings believed to make unit economics
significantly more attractive than would otherwise be the
case. These savings, combined with recent trends in EPC Figure 19: Pearl GTL Project Summary
contractor and raw material costs going forward are expected
to put the next two GTL projects at a cost disadvantage
Pearl GTL
relative to the Oryx plant. While in Qatar, we spoke with Startup 2010-11
Feed (mmcfd) 1,600
several industry representatives who are looking to the Associated Liquids (kboed) 100
successful startup of the Oryx project (the first commercial Total E&P Production (mmcfed) 2,200
Product Yield (kbd) 140
scale GTL plant in the Middle East) as a positive sign for the
Cost ($mm) $6,300
potential of the Shell and ExxonMobil projects. Cost ($/bd) $45,000
Source: Simmons & Company International

Figure 18: Oryx GTL Project Summary

ExxonMobil. ExxonMobil’s proposed GTL facility is the
Oryx GTL largest and last GTL project to receive preliminary approval
Startup 2006 from the Qatari’s. A Heads of Agreement (HOA) was signed
Feed (mmcfd) 330 in July, 2004 specifying the principle terms to be defined in a
Associated Liquids (kboed) n/a future DPSA. At the time, ExxonMobil estimated total
Total E&P Production (mmcfed) 330
project costs at $7 billion (recent quotes from third party
Product Yield (kbd) 34
Cost ($mm) $1,000 sources indicate current consolidated cost estimates could be
Cost ($/bd) $29,412 closer to $7.8 billion). The DPSA is anticipated to be 25
Source: Simmons & Company International
years in length commencing with first GTL production in
2011. ExxonMobil will fund 100% of the project capital
requirements.

14 SIMMONS & COMPANY INTERNATIONAL

Gas-To-Liquids (continued)

The project will include integrated upstream facilities, which Honorable mentions. Only the Oryx, Pearl and
are to supply the required 1,800 mmcfd of natural gas ExxonMobil GTL facilities appear to have made the 25 bcfed
feedstock in addition to 165 kbd of associated liquids. cut-off. Other projects have been mentioned, but do not
appear to have won preliminary approval. These include:

Figure 20: ExxonMobil GTL Project Summary • Marathon: Proposed GTL project with output
capacity of 120 kbd from two equal-sized trains.
ExxonMobil GTL Potential partners included PetroCanada and
Startup 2011 Occidental.
Feed (mmcfd) 1,800
Associated Liquids (kboed) 165 • ConocoPhillips: Proposed two stage GTL project. A
Total E&P Production (mmcfed) 2,790
Product Yield (kbd) 154 feasibility study was submitted in mid-2003.
Cost ($mm) $7,800
Cost ($/bd) $50,649
Source: Simmons & Company International

SIMMONS & COMPANY INTERNATIONAL 15

Regional Pipeline Projects

Regional pipeline options have progressed much slower Al Khaleej. ExxonMobil is operating the Al Khaleej natural
than LNG projects. Qatar has in the past discussed several gas development, which adds additional natural gas supply to
options for regional natural gas pipelines. However, to-date the domestic market for Qatar. First volumes from the initial
only one has been fully sanctioned and begun construction stage were delivered in November, 2005. Gross peak
(the Dolphin project linking the North field to the UAE.) capacity for this stage is 675 mmcfd of natural gas and
Other options discussed but not implemented include a 40 kbd of associated liquids. Future phases are expected to
natural gas grid heading north to Bahrain and Kuwait and a add 1,140 mmcfd and 70 kbd.
subsea extension to the Dolphin gas line into Pakistan.
Political hurdles have been significant for these
Vision of a regional gas pipeline grid. In early 2002, the
developments, tending to slow their progress. In addition,
Qataris signed a preliminary agreement with Kuwait for a
there is some concern that the netback afforded the Qatari’s
$2 billion subsea gas pipeline to deliver natural gas from the
from regional pipeline initiatives ($1.30/mmbtu for Dolphin,
North field to Kuwait. Expectations at the time were for
for instance) is substantially below the unit netback afforded
delivery of first gas to begin in 4Q’05 and last 25 years.
the Qatari’s through their LNG export strategies.
Initial volumes were envisioned at 800 mmcfd, rising to
1.4 bcfd in the long-term. At the same time, a Memorandum
Dolphin. The Dolphin project involves a pipeline from Qatar
of Understanding (MOU) was signed with Bahrain to allow
to the UAE with supplies sourced from the North field. Initial
the country 500 mmcfd of initial volumes from the new
design capacity is 2 bcfd. Total spending for the initial stage
regional natural gas line, rising to 800 mmcfd long-term.
is estimated at $4 billion. Project partner Occidental expects
These preliminary agreements sat un-finalized for quite some
first gas late in ’06, with a ramp towards full production by
time. In February, 2006 it was announced that the Kuwait
mid-2007. Long-term expansion plans are expected to bring
natural gas line would not proceed on the basis that Saudi
total pipeline capacity to 3.2 bcfd, with some of the
Arabia would not permit the line to cross their maritime
increment potentially used to power an Omani steamflood
borders. Perhaps more interesting are coinciding comments
project operated by Occidental.
from the Qatari oil minister that no natural gas was available
for this line anyway due to sizeable commitments on other
projects.

16 SIMMONS & COMPANY INTERNATIONAL

Appendix D

Analyst Certification:
I, Robert Kessler, hereby certify that the views expressed in this research report to the best of my knowledge, accurately reflect my
personal views about the subject compan(ies) and its (their) securities; and that, I have not been, am not, and will not be receiving
direct or indirect compensation in exchange for expressing the specific recommendation(s) or views in this research report.

Important Disclosures:
For detailed rating information, go to http://publicdisclosure.simmonsco-intl.com. Additional information is available upon
request. Research analysts compensation is based upon (among other things) the firm's general investment banking revenues.
Simmons & Company International may seek compensation for investment banking services from Amerada-Hess Corp.,BP
p.l.c.,Chevron Corporation,Marathon Oil Corporation,Occidental Petroleum Corp,Petro-Canada,Royal Dutch Petroleum
Company,Royal Dutch Shell plc.,Shell Transport & Trading,Suncor Energy Inc.,TOTAL S.A.,Exxon Mobil Corporation and other
companies for which research coverage is provided. The firm would expect to receive compensation for any such services.

One of the analysts, or a member of the analyst's household, responsible for the preparation/supervision of this report has a Long
Stock position in Exxon Mobil Corporation.

Foreign Affiliate Disclosure:

This report may be made available in the United Kingdom through distribution by Simmons & Company International Limited, a
firm authorized and regulated by the Financial Services Authority to undertake designated investment business in the United
Kingdom. Simmons & Company International Limited's policy on managing investment research conflicts is available by request.
The research report is directed only at persons who have professional experience in matters relating to investments who fall within
the definition of investment professionals in Article 19(5) Financial Services and Markets Act (Financial Promotion) Order 2001 (as
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Scotland; and 54 St. James’s Street, London, United Kingdom.

Disclaimer:
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SIMMONS & COMPANY INTERNATIONAL 17

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