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QATAR OIL & GAS REPORT INCLUDES 10-YEAR FORECASTS TO 2026

Published by:BMI Research

Qatar Oil & Gas Report Q2 2017 INCLUDES 10-YEAR FORECASTS TO 2026

Part of BMI’s Industry Report & Forecasts Series

Published by: BMI Research

Copy deadline: March 2017

ISSN: 1748-4189

BMI Research 2 Broadgate Circle London EC2M 2QS United Kingdom Tel: +44 (0) 20 7248 0468 Fax: +44 (0) 20 7248 0467 Email: [email protected] Web: http://www.bmiresearch.com

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CONTENTS

BMI Industry View ............................................................................................................... 7 Table: Headline Forecasts (Qatar 2015-2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

SWOT .................................................................................................................................... 9 Oil & Gas SWOT ....................................................................................................................................... 9

Industry Forecast .............................................................................................................. 11 Upstream Exploration .............................................................................................................................. 11

Latest Developments ............................................................................................................................... 11

Structural Trends ................................................................................................................................... 11 Table: Proven Oil and Gas Reserves (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Table: Proven Oil and Gas Reserves (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Upstream Projects ................................................................................................................................... 13 Table: Qatar Upstream Projects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Upstream Production - Oil ........................................................................................................................ 14

Latest Updates ....................................................................................................................................... 14

Structural Trends ................................................................................................................................... 14 Table: Oil Production (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Table: Oil Production (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Upstream Production - Gas ....................................................................................................................... 19

Latest Updates ....................................................................................................................................... 19

Structural Trends ................................................................................................................................... 19 Table: Gas Production (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Table: Gas Production (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Refining ................................................................................................................................................. 22

Latest Updates ....................................................................................................................................... 22

Structural Trends ................................................................................................................................... 22 Table: Refining Capacity and Refined Products Production (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Table: Refining Capacity and Refined Products Production (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Refined Fuels Consumption ....................................................................................................................... 25

Latest Updates ....................................................................................................................................... 25

Structural Trends ................................................................................................................................... 25 Table: Refined Products Consumption* (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Table: Refined Products Consumption* (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

Gas Consumption .................................................................................................................................... 27

Latest Updates ....................................................................................................................................... 27

Structural Trends ................................................................................................................................... 27 Table: Gas Consumption (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Table: Gas Consumption (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Table: Qatar Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29

Trade - Oil ............................................................................................................................................. 30

Crude Oil Trade Forecast ........................................................................................................................ 30

Qatar Oil & Gas Report Q2 2017

Latest Updates ....................................................................................................................................... 30

Structural Trends ................................................................................................................................... 31 Table: Crude Oil Net Exports (Qatar 2015-2021) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Table: Crude Oil Net Exports (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Refined Fuels Trade Forecast ................................................................................................................... 32

Latest Updates ....................................................................................................................................... 32

Structural Trends ................................................................................................................................... 33 Table: Refined Fuels Net Exports (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Table: Refined Fuels Net Exports (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Trade - Gas (Pipeline and LNG) ................................................................................................................. 35

Latest Updates ....................................................................................................................................... 35

Structural Trends ................................................................................................................................... 35 Table: Gas Net Exports (Qatar 2015-2020) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Table: Gas Net Exports (Qatar 2021-2026) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

Industry Risk/Reward Index ............................................................................................. 43 Middle East - Oil & Gas Risk/Reward Index ................................................................................................. 43

Table: Middle East Oil & Gas Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

Upstream: Index Resilient In Lower Price Environment ................................................................................ 44 Table: Middle East Upstream Oil & Gas Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

Downstream: Limited Opportunities .......................................................................................................... 46 Table: Middle East Downstream Oil & Gas Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

Qatar - Risk/Reward Index ........................................................................................................................ 48

Upstream Index ..................................................................................................................................... 48

Downstream Index ................................................................................................................................. 49

Market Overview ............................................................................................................... 50 Qatar Energy Market Overview .................................................................................................................. 50

Fiscal Regime ........................................................................................................................................ 51 Table: Qatar- Upstream Tax Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Licensing Regime ................................................................................................................................... 51 Table: Qatar- Contracts And Licensing Regime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

Oil And Gas Infrastructure ........................................................................................................................ 51

Oil Refineries ........................................................................................................................................ 51 Table: Refineries In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52

Table: GTL Plants In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

LNG Terminals ...................................................................................................................................... 54 Table: LNG Terminals In Qatar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55

Gas Pipelines ........................................................................................................................................ 57

Competitive Landscape .................................................................................................... 58 Competitive Landscape Summary .............................................................................................................. 58

Table: Key Domestic And Foreign Companies In The Qatari Oil And Gas Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Table: Key Upstream Players . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Table: Key Downstream Player . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

Company Profile ................................................................................................................ 60

Qatar Oil & Gas Report Q2 2017

Qatar Petroleum ..................................................................................................................................... 60 Table: Major Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

Regional Overview ............................................................................................................ 62 Middle East Oil & Gas Regional Overview ................................................................................................... 62

Oil Production: Output Cut To Have Marginal Impact .................................................................................. 62 Table: Marginal Impact On 2017 Output From Cut (mn b/d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Oil Consumption: Subsidy Reform Tempering Demand ................................................................................. 65 Table: Average Gasoline Pump Price June 2015 & December 2016 (USD/Litre) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

Refining Capacity: Mega Refineries To Support Economic Diversification ........................................................ 66

Gas Production: Gas Projects Move Forward ............................................................................................. 67

Gas Consumption: Industrial Growth And Power Strengthen Consumption ....................................................... 69 Table: Middle East Oil & Gas Production, Refining Capacity & Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70

Glossary ............................................................................................................................. 71 Table: Glossary of Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71

Methodology ...................................................................................................................... 73 Industry Forecast Methodology ................................................................................................................ 73

Source ................................................................................................................................................. 75

Risk/Reward Index Methodology ............................................................................................................... 75 Table: Bmi's Oil & Gas Upstream Risk/Reward Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

Table: Weighting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78

Qatar Oil & Gas Report Q2 2017

BMI Industry View

BMI View: The moratorium on upstream gas projects will limit the overall level of activity in the coming

quarters, while work on a small number of enhanced oil recovery and redevelopment projects continues. We

expect the fall in crude production to continue, with downside risk to steeper decline rates if enhanced

recovery programmes are scaled back due to capex cuts. Qatar's dominance of the liquefied natural gas

export market will increasingly be challenged by other producers, but efforts to diversify the economy away

from oil and gas will soften the impact. At the time of writing in March 2017, there had been no update on

the Barzan gas project's start up leading us to adjust our forecast accordingly with the first phase scheduled

to come online in mid-2017. As a result we now forecast Qatar to produce 185.9bcm in 2017.

Table: Headline Forecasts (Qatar 2015-2021)

2015e 2016e 2017f 2018f 2019f 2020f 2021f

Crude, NGPL & other liquids prod, 000b/d 1,954.2 1,964.1 1,940.4 1,937.8 1,938.0 1,938.3 1,934.1

Refined products production, 000b/d 320.3 368.4 445.7 450.2 454.7 454.7 454.7

Refined products consumption & ethanol, 000b/d 324.0 335.3 345.4 355.8 366.4 377.4 388.8

Dry natural gas production, bcm 180.9 180.4 185.9 190.3 186.3 182.3 178.5

Dry natural gas consumption, bcm 45.1 50.9 56.0 61.1 61.1 61.2 61.4

Brent, USD/bbl 53.60 45.13 57.00 60.00 64.00 67.00 70.00

e/f = BMI estimate/forecast. Source: EIA, BMI

Latest Updates And Key Forecasts

■ Qatar has joined fellow OPEC members in curtailing production in H116 in order to shift the global glut of crude and bring higher, more stable prices. Qatar has committed to cut 30,000 barrels per day (b/d) of output which has led us to downgrade overall production by 15,000b/d in 2017. At the time of writing Qatar had shown strong compliance and we anticipate that it will continue to stick to the production cut over H117. Qatar has delayed the start up of the Barzan gas project again after discovering a leak in the gas pipeline. At the time of writing in March 2017, there has been no update on the project's start up leading us to adjust our forecast accordingly with the first phase scheduled to come online in mid-2017. As a result, we now forecast Qatar to produce 185.9 billion cubic metres (bcm) in 2017 down from our original target of 187.0bcm, rising to 190.6bcm in 2018.

■ Qatar Petroleum (QP) has announced the integration of RasGas and Qatargas the two state-owned gas producers. The two entities will operate under the name 'Qatargas' with the transition aiming to be complete by the end of 2017. The benefits brought by integrating the two companies should, in theory, include cost reductions and improved efficiency and greater financing abilities. Combined, these will put Qatargas in a better position to perform in a market that will be increasingly competitive over the coming years.

Qatar Oil & Gas Report Q2 2017

■ Post-2016, Qatar does not have any new liquefied natural gas (LNG) contracts coming into force and, with 30.1bcm of contracts rolling off in the next 10 years, it will have to start negotiating new contracts to secure long-term offtake. Despite the demand weakness in South Korea and Japan, we expect Asia to remain the dominant consumer of LNG, driven by strong growth in emerging markets such as China and India. As such, it will remain a key target for Qatar.

■ Increased domestic processing of condensates will lead to condensate exports falling by 30.0%. Qatar's exports around 460,000b/d of condensates in the form of its two flagship condensate grades: the Deodorized Field Condensate (DFC) and the Qatar Low Sulphur Condensate (LSC). The Laffan Refinery will primarily use DFC as it is the more popular feedstock for condensate splitters, leading to a decline in DFC exports from 329,000b/d to 192,000b/d by 2017.

Qatar Oil & Gas Report Q2 2017

SWOT

Oil & Gas SWOT

Qatar Oil & Gas SWOT

Strengths ■ Qatar has the world's third largest proven conventional gas reserves and is also a top

15 oil-exporting country

■ The country remains partially open to foreign investment in its upstream segment and

is actively encouraging exploration

■ Qatar has the LNG capacity and GTL capacity in the world, allowing it to diversify its

gas sales

■ All fuel subsidies have been removed, freeing up additional government spending

Weaknesses ■ Heavy reliance on the Asia Pacific LNG export market

■ Majority of gas production comes from a single field with uncertainty regarding

ultimate resources and recovery despite its potential

■ Regulatory uncertainty is a concern as Qatar seeks to increase the role of state-

owned companies in upstream projects

■ Qatar remains one of OPEC's smallest oil producers with output just ahead of

Ecuador and limited upside potential for liquids

■ The last major oil discovery was in 1994, making any significant growth in oil

production unlikely

Opportunities ■ Ongoing exploration activity could open up new offshore oil and gas reserves such as

the recent Block 4 discovery

■ The integration of RasGas and Qatargas should provide cost saving efficiencies

allowing it to compete better on the global stage

Qatar Oil & Gas Report Q2 2017

Qatar Oil & Gas SWOT - Continued

■ Over the long term, GTL projects will allow for the accrual of significant revenues from

exports of liquid products. Qatar is an industry leader in GTL technology, while low

gas costs and high end product costs gives it a significant advantage

■ Qatar is promoting the maximisation of production from current oil fields, offering

opportunities for enhanced oil recovery and field redevelopments

■ Qatar has shown willingness to negotiate LNG contracts with key Asian clients

offering more favourable terms and will help them maintain market volumes

Threats ■ The risk of terrorism or regional conflict cannot be discounted, with dependency on

shipping through the Strait of Hormuz a key vulnerability

■ Competition from new suppliers of LNG could hit Qatar's chief source of

hydrocarbons revenue, resulting in downward pressure on pricing which Qatar has

been resistant to reform from oil-indexed linkages

■ Capex cuts threaten enhanced oil recovery programmes, which would lead to steeper

decline rates on the mature fields

■ An extension of OPEC cuts in H217 would act as another cap on Qatar's crude

production

Qatar Oil & Gas Report Q2 2017

Industry Forecast

Upstream Exploration

BMI View: A moratorium on new projects in the North Field is limiting exploration with few other

opportunities within Qatari borders. The 2014 Khuff discovery added some optimism to the sector, though

current gas reserves are ample and in no need of new additions.

Latest Developments

■ The re-affirmed moratorium on exploration in the North Field limits opportunities in the region.

Structural Trends

The overall level of upstream activity in Qatar is forecast to remain modest. While the Khuff discovery was

an indication of the Qatar's remaining hydrocarbon potential, the moratorium on development and the

strengthening of the government's role in the sector remain obstacles to investment.

The North Field holds the vast majority of Qatari reserves, both gas and liquids in the form of condensate

and natural gas liquids (NGLs). Our forecasts suggest Qatari proven oil reserves will remain broadly flat,

with reserves of 24.7bn barrels (bbl) in 2016 falling to 19.7bn bbl by 2026, given stable production and the

prospect, even though it is a limited one, of new offshore oil discoveries. New liquids production is most

likely to come from condensate and NGLs output from gas developments.

Gas reserves are expected to fall from an estimated 24.5trn cubic metres (tcm) in 2016 to 22.7tcm by 2026.

This includes the minimal upward revision to our reserves growth forecast on the back of the Khuff

discovery at offshore Block 4 North. The find, the first gas discovery in Qatar for 42 years, is expected to

add around 70.8bn cubic metres (bcm) to total reserves.

Table: Proven Oil and Gas Reserves (Qatar 2015-2020)

2015 2016e 2017f 2018f 2019f 2020f

Proven oil reserves, mn bbl 25,244.0 24,722.9 24,213.2 23,705.3 23,197.2 22,689.0

Proven oil reserves, bn bbl 25.2 24.7 24.2 23.7 23.2 22.7

Proven oil reserves, % y-o-y 0.0 -2.1 -2.1 -2.1 -2.1 -2.2

Reserves to production ratio (RPR), years 35.4 34.5 34.2 33.5 32.8 32.1

Natural gas proven reserves, bcm 24,680.5 24,500.2 24,314.2 24,124.0 23,937.7 23,755.3

Natural gas proven reserves, tcm 24.7 24.5 24.3 24.1 23.9 23.8

Qatar Oil & Gas Report Q2 2017

Proven Oil and Gas Reserves (Qatar 2015-2020) - Continued

2015 2016e 2017f 2018f 2019f 2020f

Natural gas proven reserves, % y-o-y -1.5 -0.7 -0.8 -0.8 -0.8 -0.8

Natural gas reserves-to-production ratio, years 136.4 135.8 130.8 126.8 128.5 130.3

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Proven Oil and Gas Reserves (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Proven oil reserves, mn bbl 22,182.4 21,680.5 21,183.5 20,691.2 20,203.5 19,720.5

Proven oil reserves, bn bbl 22.2 21.7 21.2 20.7 20.2 19.7

Proven oil reserves, % y-o-y -2.2 -2.3 -2.3 -2.3 -2.4 -2.4

Reserves to production ratio (RPR), years 31.4 30.9 30.4 29.9 29.4 28.9

Natural gas proven reserves, bcm 23,576.8 23,402.1 23,231.0 23,063.5 22,899.5 22,739.0

Natural gas proven reserves, tcm 23.6 23.4 23.2 23.1 22.9 22.7

Natural gas proven reserves, % y-o-y -0.8 -0.7 -0.7 -0.7 -0.7 -0.7

Natural gas reserves-to-production ratio, years 132.1 133.9 135.8 137.7 139.6 141.6

f = BMI forecast. Source: EIA, BMI

The Khuff discovery provides positive news to the exploration and production sharing agreements Qatar

Petroleum has inked with international oil companies in recent years. Importantly, the find suggests Qatar

may yet have further untapped hydrocarbons resources, with gas currently sourced from North Field - the

world's largest single source of gas, holding more than 25tcm.

We have been conservative with regard to new gas reserves growth estimates as the vast volumes in the

North Field provide little incentive to explore further. As of the time of writing, no plans have been outlined

for the development of the Khuff discovery. The moratorium on new natural gas developments at the North

field, put in place in 2005, remains a barrier to further activity and a study is being undertaken to assess the

full impact of extraction projects. The government says the study is looking into how quickly gas can be

developed without damaging the reservoir and will allow for time to study field optimisation plans.

Qatar Oil & Gas Report Q2 2017

Upstream Projects

Table: Qatar Upstream Projects

Field Name Companies Completion Date Status Select

Est. Peak Oil/Liquids Range (b/d)

Est. Peak Gas Output (bcm)

Bul Hanine Qatar Petroleum (100%) 1972 Upgrade/EOR 90,000 -

QSD-1 Royal Dutch Shell (75%), PetroChina (25%) - Exploration - -

Idd El Shargi South Dome

Occidental Petroleum (Oxy) (100%) - Upgrade/EOR - -

Block 3

Wintershall (40%), Pertamina (25%), Cosmo Oil (35%) - Exploration - -

Al-Rayyan Occidental Qatar Energy Company 1996 Production 115,000 -

Al Shaheen Maersk Oil, Qatar Petroleum 1994 Production 300,000 -

Dolphin

Mubadala Development Company (51%), Occidental Petroleum (Oxy) (24.5%), Total (24.5%) 2007 Production - 32.74

Al Radeef Mitsui, Qatar Petroleum - Discovery - -

Barzan (Phase and Phase 2)

ExxonMobil, Qatar Petroleum 2016 Development 22,000 14

Idd El Shargi North Dome (ISND)

Qatar Petroleum, Occidental Petroleum (Oxy) 1964 Production 100,000 -

Al Khaleej Gas (AKG-2)

Qatar Petroleum, ExxonMobil 2010 Production - 15.8

Source: BMI Projects Database

Qatar Oil & Gas Report Q2 2017

Upstream Production - Oil

BMI View: Oil production in Qatar is expected to decline slightly over our forecast period as crude

production continues to fall. Output will be supported by field redevelopment projects, NGL production

from the Ras Laffan refinery expansion and condensates from gas fields.

Latest Updates

Structural Trends

We expect Qatari liquids output, which includes crude oil, natural gas liquids (NGLs) and other liquids, to

average 1.94mn b/d in 2017. The lack of oil exploration has damaged Qatar's production prospects with no

major oil discovery since 1994 at the Al Rayyan field. Qatar National Bank (QNB) figures show that total

crude output has declined continuously in recent years, from a peak of 845,000b/d in 2007 to 733,000b/d in

2010, 724,000 b/d in 2013 and 681,000b/d in November 2014. Crude oil production fell again in 2015, and

we expect this to continue throughout our forecast period. However, we acknowledge downside risks from

the cuts to the enhanced oil recovery programmes.

Qatar Oil & Gas Report Q2 2017

Crude Production Eroding

Qatar's Crude Production, 000 b/d Ja

n -1

F e b -1

M a

r- 1

A p r-

1 4

M a y-

1 4

Ju n -1

Ju l- 1 4

A u g -1

S e

p -1

O ct

-1 4

N o v-

1 4

D e c-

1 4

Ja n -1

F e b -1

M a

r- 1 5

A p r-

1 5

M a y-

1 5

Ju n -1

Ju l- 1 5

A u g -1

S e

p -1

O ct

-1 5

N o v-

1 5

D e c-

1 5

Ja n -1

F e b -1

M a

r- 1

A p r-

1 6

M a y-

1 6

Ju n -1

Ju l- 1

A u g -1

S e

p -1

O ct

-1 6

N o v-

1 6

D e c-

1 6

Ja n

-1 7

F e b -1

600

650

700

750

Source: OPEC, BMI

The main upside risk to overall oil production comes from condensate and NGL production; however, we

still expect to see a gentle decline throughout our forecast as crude production continues to offset any

production gains from other areas.

Qatar Oil & Gas Report Q2 2017

Oil Production Forecast

(2015-2026)

Crude, NGPL & other liquids prod, 000b/d Crude, NGPL & other liquids prod, % y-o-y

2 0 1

5 e

2 0 1

6 e

2 0

1 7 f

2 0

1 8 f

2 0

1 9 f

2 0

2 1 f

2 0 2

2 f

2 0

2 3

2 0

2 4

2 0

2 5

2 0

2 6

1,000

2,000

3,000

-4

-2

-6

e/f = BMI estimate/forecast. Source: BMI, EIA

The largest oil project will be the USD13bn investment planned for the Bul Hanine field, which is due to be

redeveloped in order to boost production by 50,000b/d. The intent of the project is to boost output from

around 40,000b/d to 90,000b/d and extend field life by drilling some 150 wells by 2028. While the figure is

minimal in comparison to Qatar's total oil output, the project should support stable production volumes at

the field for 25 years, offering production longevity. New tranches of production from the Al-Shaheen fields

have been brought online, spurring recent production increases. Qatar announced in 2015 that it would

invite new bids for Al-Shaheen when the current contract expires in mid-2017. Qatar has selected Total to

take over from Maersk Oil in July 2017. The French company has signed a 25-year exploration and

production agreement. Qatar is hoping Total will be able to raise output from 300,000b/d to up to 500,000b/

d over its tenure.

Qatar Oil & Gas Report Q2 2017

Table: Oil Production (Qatar 2015-2020)

2015e 2016e 2017f 2018f 2019f 2020f

Crude, NGPL & other liquids prod, 000b/d 1,954.2 1,964.1 1,940.4 1,937.8 1,938.0 1,938.3

Crude, NGPL & other liquids prod, % y-o-y -4.4 0.5 -1.2 -0.1 0.0 0.0

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Oil Production (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Crude, NGPL & other liquids prod, 000b/d 1,934.1 1,920.9 1,907.8 1,894.9 1,882.0 1,869.4

Crude, NGPL & other liquids prod, % y-o-y -0.2 -0.7 -0.7 -0.7 -0.7 -0.7

f = BMI forecast. Source: EIA, BMI

Increased production of condensates and NGLs will continue to partially offset falling production from

conventional fields, namely at the onshore Dukhan field. Condensate production from the Barzan gas

project will also add to produced liquid volumes from 2016 and 2017, while an expansion of the Laffan

Refinery will further add to NGL production from 2016. The refinery construction has already started but

lower oil prices could have an impact on downstream petrochemical projects. As a result, over the course of

our forecast period, we expect stagnation in total liquids output, with production reaching 1.95mn b/d by

2018 and 1.90mn b/d by the end of our forecast period in 2025. However, we do note some downside risk to

further investment in the more expensive redevelopment and enhanced oil recovery projects. With the

recent oil price collapse, we expect further weakness to the market, which will last at least until 2020. This

will mean that there is likely to be a capex reduction for the upstream segment, especially when it comes to

more expensive projects, such as enhanced oil recovery projects.

Furthermore, there could be a downside risk to our oil production outlook if OPEC were to decide to cut

production. However, this is not currently our core view.

Qatar Oil & Gas Report Q2 2017

Oil Price Recovery Offers Some Upside

Front-Month Brent, Annual Average Forecast USD/bbl

Global - Brent, USD/bbl

2014 2015 2016 2017f 2018f 2019f 2020f

100

120

f = BMI forecast. Source: BMI

Qatar Oil & Gas Report Q2 2017

Upstream Production - Gas

BMI View: After a delayed start-up, the Barzan gas project will drive a small amount of growth in gas

output from mid 2017and into 2018, though following this development gas production will largely remain

flat. There is significant upside risk to gas production should the moratorium on further development of the

North Field be lifted, but there is no clear indication as to when, or if, Qatari officials could make such a

decision.

Latest Updates

■ Qatar has delayed the start up of the Barzan gas project again after discovering a leak in the gas pipeline. At the time of writing in March 2017, there had been no update on the project's start up leading us to adjust our forecast accordingly with the first phase scheduled to come online in mid-2017. As a result, we now forecast Qatar to produce 185.9 billion cubic metre (bcm) in 2017 down from our original target of 187.0bcm, rising to 190.3bcm in 2018.

Structural Trends

We estimate that 2017 natural gas production will total approximately 185.9bcm. With liquefied natural gas

and gas-to-liquid (GTL) output at near capacity and no plans to enlarge these sectors, we expect most of the

increase in output to meet domestic demand.

Currently, the Barzan gas project is the last remaining North Field project under development and output

from the field will largely be focused towards domestic consumption. The first phase of the Barzan project

will come online from Q217, with the second phase further boosting output at the back end of 2017. By

2018, we forecast natural gas production of 190.6bcm, largely as a result of new gas from the two Barzan

phases. We expect liquefied natural gas (LNG) exports to remain largely flat, though pipeline exports to the

UAE and Oman could increase slightly.

Qatar Oil & Gas Report Q2 2017

Gas Production Forecast

(2015-2026)

Dry natural gas production, bcm Dry natural gas production, bcm, % y-o-y

2 0

1 5

2 0

1 6 e

2 0

1 7 f

2 0

1 8

2 0

1 9

2 0 2

0 f

2 0

2 1

2 0

2 2

2 0

2 3

2 0 2

4 f

2 0

2 5

2 0

2 6

100

150

200

-2.5

2.5

e/f = BMI estimate/forecast. Source: BMI, EIA

Upstream Upside

Qatar's Energy Minister Mohammed al-Sada said, shortly after the Block 4 North Khuff discovery was

announced, that 'exploration efforts have been intensified in new blocks', with the minister stating that six

'active blocks are being explored' both onshore and offshore. Al-Sada also told reporters at the Gulf Energy

Forum in Doha that the Block 4 find, which lies adjacent to North Field, was currently being assessed to

determine 'to which extent it can be monetised'.

The Khuff discovery in Block 4 was announced at an important time for Qatar's gas industry, with a self-

imposed moratorium on new upstream developments at North Field currently in place as officials determine

the best way to develop the field and monitor the impact of extraction. The Qatar Petroleum and

ExxonMobil Barzan gas project will be the final project to be undertaken in line with the 2005 moratorium.

The project will be carried out in two phases, both with a capacity to produce 10bcm. The first phase was

scheduled to start production in H216. The delays in phase one has pushed back the start date for the second

Qatar Oil & Gas Report Q2 2017

phase to the tail end of 2017. The USD10.3bn project will deliver gas to the domestic market, primarily

serving power and desalination needs.

With mixed signals from Qatari officials about when, or if, the moratorium on additional development at

North Field may be lifted, any increase in production over the forecast may have to be sourced from new

discoveries outside of the North Field, such as the Block 4 discovery. However, with growing competition

in the LNG market from Australia and the US, any new field development will likely be directed towards

domestic consumption, and it is unclear whether local demand could absorb a large increase in output.

Meanwhile, Germany-based energy company Wintershall announced in May 2015 that it would stop gas

exploration operations in Qatar after making a promising offshore gas discovery, Al Radeef, in 2013. The

company will give up its licence to explore Block 4 North near the North Field offshore Qatar due to a lack

of access to local infrastructure.

Table: Gas Production (Qatar 2015-2020)

2015e 2016e 2017f 2018f 2019f 2020f

Dry natural gas production, bcm 180.9 180.4 185.9 190.3 186.3 182.3

Dry natural gas production, bcm, % y-o-y 3.9 -0.3 3.1 2.3 -2.1 -2.1

Dry natural gas production, % of domestic consumption 401.5 354.3 320.3 312.2 305.6 298.6

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Gas Production (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Dry natural gas production, bcm 178.5 174.8 171.1 167.5 164.0 160.5

Dry natural gas production, bcm, % y-o-y -2.1 -2.1 -2.1 -2.1 -2.1 -2.1

Dry natural gas production, % of domestic consumption 291.4 269.2 262.5 256.7 251.0 245.5

f = BMI forecast. Source: EIA, BMI

Qatar Oil & Gas Report Q2 2017

Refining

BMI View: The Ras Laffan refinery expansion will boost Qatar's downstream presence. Gas-to-liquids

plants will remain a core part of Qatar's refining capacity. No further downstream growth is expected

before 2026.

Latest Updates

■ The Ras Laffan refinery expansion was completed in December 2016 doubling the facilities capacity to 292,000 barrels per day (b/d).

Structural Trends

The Qatar Petroleum (QP) Refinery was built in 1958 and is capable of processing both crude oil and

condensate. The QP refinery was last expanded in 2001, increasing total capacity from 57,500b/d to

194,000b/d. Phase one of the Ras Laffan refinery came on stream in late-September 2009, adding 146,000b/

d to the country's refining capacity. The second Laffan Refinery came online in December 2016, taking the

overall refining capacity to 484,000b/d.

Refining Capacity Forecast

(2015-2026)

Crude oil refining capacity, 000b/d Crude oil refining capacity, utilisation, % Refined products production, 000b/d

2 0

1 5 e

2 0

1 6 e

2 0

1 7 f

2 0 1

8 f

2 0

1 9

2 0

2 1

2 0

2 2

2 0

2 3

2 0

2 4

2 0

2 5

2 0

2 6

200

400

600

e/f = BMI estimate/forecast. Source: BMI, EIA

Qatar Oil & Gas Report Q2 2017

Table: Refining Capacity and Refined Products Production (Qatar 2015-2020)

2015e 2016e 2017f 2018f 2019f 2020f

Crude oil refining capacity, 000b/d 338.7 393.7 484.7 484.7 484.7 484.7

Crude oil refining capacity, % y-o-y 0.0 16.2 23.1 0.0 0.0 0.0

Crude oil refining capacity, utilisation, % 94.6 93.6 92.0 92.9 93.8 93.8

Refined products production, 000b/d 320.3 368.4 445.7 450.2 454.7 454.7

Refined products production, % y-o-y 1.0 15.0 21.0 1.0 1.0 0.0

Refined products production & ethanol, 000b/d 320.3 368.4 445.7 450.2 454.7 454.7

Refined products production & ethanol, % y-o-y 1.0 15.0 21.0 1.0 1.0 0.0

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Refining Capacity and Refined Products Production (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Crude oil refining capacity, 000b/d 484.7 484.7 484.7 484.7 484.7 484.7

Crude oil refining capacity, % y-o-y 0.0 0.0 0.0 0.0 0.0 0.0

Crude oil refining capacity, utilisation, % 93.8 93.8 93.8 93.8 93.8 93.8

Refined products production, 000b/d 454.7 454.7 454.7 454.7 454.7 454.7

Refined products production, % y-o-y 0.0 0.0 0.0 0.0 0.0 0.0

Refined products production & ethanol, 000b/d 454.7 454.7 454.7 454.7 454.7 454.7

Refined products production & ethanol, % y-o-y 0.0 0.0 0.0 0.0 0.0 0.0

f = BMI forecast. Source: EIA, BMI

The second phase expansion of the Laffan Refinery (LR2) is a joint venture between QP and private players

led by Total. LR2 became operational in December 2016 doubling the facilities capacity to 292,000b/d.

The plant will process around 40.0% concentrate from the North Field and has a production capacity of:

■ 60,000b/d of naphtha

■ 53,000b/d of jet fuel

■ 24,000b/d of gas oil

■ 9,000b/d of liquid petroleum gas (LPG)

Qatar Oil & Gas Report Q2 2017

The project was developed by QP (84.0%) in partnership with Total (10.0) with the remainder split between

Idemitsu Kosan, Cosmo Oil and Marubeniand Mitsui. Supplied from Qatar's giant gas-rich North Field,

the combined 292,000b/d capacity of LR1 and LR2 will make the plant the largest condensate refinery

developed to date.

Meanwhile, QP and Royal Dutch Shell decided to stop their joint Al Karaana petrochemical project in

Qatar in January 2015. The companies said in a joint statement that the decision was made after the project

was deemed commercially unfeasible based on the price quoted to build the complex, amid the current

economic climate in the energy industry. The proposed olefins and derivatives plant was initially due online

in 2018.

Gas-To-Liquids

Apart from the two conventional refineries, Qatar also has a 34,000b/d gas-to-liquid (GTL) plant known as

Oryx, which is operated by synthetic oil specialist Sasol. The South African-based firm has plans to treble

the capacity of the site, potentially taking it to more than 100,000b/d using gas from the Al Khaleej field.

However, no progress has yet been made on the project, with Sasol appearing to put greater focus on its

other international GTL projects.

In addition, the larger Shell-operated Pearl GTL plant has the capacity to produce 140,000b/d of petroleum

productions including ultra-clean diesel and naphtha. The first train started up in 2011 and the facility

reached full capacity at the end of 2012. The Pearl facility also produces some 120,000b/d worth of

associated condensate and LPG volumes. The plant is currently the world's largest GTL facility and is

notable as the first GTL facility to integrate upstream natural gas production with the downstream

conversion facility. In December 2014, Qatar Kentz, a part of Canadian construction company SNC-

Lavalin, secured a four-year engineering, procurement and construction management contract with an

option of two-year extension from Qatar Shell for its Pearl facility. The planned USD11bn Al Shaheen

refinery was reported in February 2010 to be indefinitely delayed, with re-scaling and re-tendering

expected. The 250,000b/d facility was to be fed with heavy, sour crude from the offshore oil field, known

by the same name.

Qatar Oil & Gas Report Q2 2017

Refined Fuels Consumption

BMI View: Fuels consumption will rise throughout our forecast period, driven by strong private

consumption growth and an expanding construction sector.

Latest Updates

■ Overall refined fuels consumption is going to grow from 345,400 barrels per day (b/d) in 2017 to 366,400b/d in 2019, driven by a strong growth in private consumption and a booming construction industry.

■ In a drive to ease budgetary pressures and prevent wasteful consumption, as of May 2016, local fuel prices will fluctuate in response to global market changes, reflecting the full removal of subsidies. In response to this we have marginally reduced our growth outlook for refined fuels consumption in 2016 and 2017. In March 2017, Premium Gasoline was priced at QR1.6/litre and diesel cost QR1.55/litre.

Structural Trends

Demand for petroleum products in 2015 was estimated at around 324,000b/d. We expect this to rise as the

growing economy requires more energy and low fuels prices sustain strong demand from a small

population. Qatar's vehicle fleet is forecast to increase by 6.0% on average over 2015-2019. This will be one

of the primary demand drivers and, as a result, we forecast consumption to rise to around 366,440b/d by

2019.

Qatar Oil & Gas Report Q2 2017

Refined Products Production and Consumption Forecast

(2015-2026)

Refined products production, 000b/d (LHS) Refined products consumption, 000b/d (LHS) Refined products consumption, % y-o-y (RHS)

2 0

1 5

2 0 1

6 e

2 0 1

7 f

2 0

1 8

2 0

1 9 f

2 0 2

0 f

2 0

2 1 f

2 0

2 2

2 0

2 3 f

2 0 2 4

2 0 2

5 f

2 0

2 6 f

200

400

600

-2.5

2.5

7.5

e/f = BMI estimate/forecast. Source: BMI, EIA

Table: Refined Products Consumption* (Qatar 2015-2020)

2015 2016e 2017f 2018f 2019f 2020f

Refined products consumption, 000b/d 324.0 335.3 345.4 355.8 366.4 377.4

Refined products consumption, % y-o-y 6.6 3.5 3.0 3.0 3.0 3.0

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Refined Products Consumption* (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Refined products consumption, 000b/d 388.8 400.4 412.4 420.7 424.9 424.9

Refined products consumption, % y-o-y 3.0 3.0 3.0 2.0 1.0 0.0

f = BMI forecast. Source: BMI, EIA

Qatar Oil & Gas Report Q2 2017

Gas Consumption

BMI View: Low feedstock cost and an increasing natural gas power and desalination capacity are the

principal drivers of domestic gas demand in Qatar. Furthermore, the Barzan gas project will primarily feed

into the domestic market leading to a significant ramp up in demand over the next two years.

Latest Updates

■ A further delay to the start up of the Barzan gas project to mid-2017 marginally reduces our 2017 gas consumption forecast.

■ Natural gas consumption will grow aggressively over the few years as the Barzan gas project feeds into domestic industries taking overall demand from 45.1 billion cubic metres (bcm) in 2015 to 61.1bcm in 2018.

■ While we expect consumption growth to slow down towards the end of our forecast, the Football World Cup in 2022 will be an exception, with increased power demand boosting consumption.

Structural Trends

Domestic gas consumption is due to rise at an aggressive rate, increasing from around 50.92bcm in 2016

to 56.01bcm in 2017. We forecast strong growth in consumption particularly linked to major energy

intensive industries, including desalination and gas power supporting the Ras Laffan industrial city. Further

to this, gas-fired power generation is expected to grow an average of 6.0% per annum over 2015-2026.

Qatar Oil & Gas Report Q2 2017

Gas Production and Consumption Forecast

(2015-2026)

Dry natural gas production, bcm Dry natural gas consumption, bcm Dry natural gas consumption, % y-o-y

2 0

1 5 e

2 0

1 6 e

2 0

1 7 f

2 0

1 8 f

2 0

1 9

2 0

2 0 f

2 0

2 1 f

2 0

2 2

2 0

2 3

2 0

2 4 f

2 0

2 5 f

2 0

2 6 f

100

200

-5

e/f = BMI estimate/forecast. Source: BMI, EIA

Table: Gas Consumption (Qatar 2015-2020)

2015 2016e 2017f 2018f 2019f 2020f

Dry natural gas consumption, bcm 45.1 50.9 56.0 61.1 61.1 61.2

Dry natural gas consumption, % y-o-y 16.0 13.0 10.0 9.0 0.0 0.2

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Gas Consumption (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Dry natural gas consumption, bcm 61.4 65.0 65.3 65.4 65.4 65.5

Dry natural gas consumption, % y-o-y 0.3 6.0 0.4 0.1 0.1 0.1

f = BMI forecast. Source: EIA, BMI

Qatar Oil & Gas Report Q2 2017

We also expect a small spike in consumption at the end of the forecast due to higher power usage over the

World Cup period. Qatar's power production is currently 100% generated from natural gas, with the country

due to add a further 2,000 megawatts (MW) of capacity before 2018 and roughly another 3,000MW up to

2023. Despite government plans to increase the share of renewables in the energy mix, the proliferation of

heavily subsidised, readily available supplies of gas will see gas maintain strong dominance of the supply

picture, with only a minimal contribution from solar power expected over the forecast period.

Table: Qatar Power

2014 2015 2016e 2017f 2018f 2019f 2020f

Generation, Natural Gas, % of total electricity generation 100.000 100.000 99.710 99.738 99.761 99.783 99.786

Generation, Nuclear, % of total electricity generation 0.000 0.000 0.000 0.000 0.000 0.000 0.000

Generation, Non-Hydropower Renewables, % of total electricity 0.322 0.303 0.290 0.262 0.239 0.217 0.214

e/f = BMI estimate/forecast. Source: National sources, BMI

Qatar Oil & Gas Report Q2 2017

Trade - Oil

BMI View: Refined fuels exports will see a large increase in 2017 due to the Ras Laffen facility coming

online. However, the overall long-term trend for oil and refined fuel exports is one of decline.

Crude Oil Trade Forecast

Latest Updates

■ Net crude exports are forecast to fall from 1.59mn barrels per day (b/d) in 2016 to 1.41mn b/d at the end of our forecast period.

■ The completion of Ras Laffan expansion in Q416 reduces Qatar's oil exports as the refinery consumes domestically produced condensates.

Crude Oil Net Exports Forecast

(2015-2026)

Crude & other liquids net export, 000b/d Crude & other liquids net export, % y-o-y

2 0

1 5

2 0

1 6 e

2 0

1 7

2 0

1 8 f

2 0

1 9

2 0 2

0 f

2 0

2 1

2 0

2 2

2 0

2 3

2 0

2 4

2 0

2 5

2 0

2 6

500

1,000

1,500

2,000

-7.5

-5

-2.5

2.5

e/f= BMI estimate/ forecast. Source: BMI, EIA

Qatar Oil & Gas Report Q2 2017

Structural Trends

Ras Laffen Expansion

The expansion of Ras Laffan doubles the facility's capacity to 292,000 barrels per day (b/d). Laffan

Refinery 1 (LR1) started production in September 2009 and was the Emirate's first condensate refinery.

Qatar Petroleum has a 51.0% stake,

while ExxonMobil, Total, Idemitsu, Cosmo, Mitsui and Marubeni make up the additional shareholders.

The second phase of the Laffan Refinery will be near identical to the processing capacity of the LR1,

producing of 60,000b/d of naphtha, 53,000b/d of kerojet, 24,000b/d of gasoil and 9,000b/d of liquefied

petroleum gas (LPG).

Increased domestic processing of condensates will lead to condensate exports falling by 30.0%. Qatar

exports around 460,000b/d of condensates in the form of its two flagship condensate grades: the Deodorized

Field Condensate (DFC) and the Qatar Low Sulphur Condensate (LSC). The Laffan refinery will primarily

use DFC as it is the more popular feedstock for condensate splitters, leading to a decline in DFC exports

from 329,000b/d to 192,000b/d by 2017.

As a major contributor to the global condensate market, a significant withdrawal in supply could lead to a

tightening in the market and upwards pressure on prices. However, we believe that lower exports from

Qatar will have little impact on global prices for condensates, as the Qatari grades have been facing

increasingly stiff competition from ultra-light crude and condensates cargo from the US. Furthermore, a

large portion of Iran's export growth is comprised of condensates as production from the South Pars gas and

condensate field ramps up. Removing barrels from the market is therefore not going to have a significant

impact on prices.

On the fuels side, the Asian market which the LR will be targeting is already flooded with supply (see 'Near

Term Gasoline Production To Ease', June 8 2016). Excessive production and slowing demand in key

markets have resulted in increasing gasoline exports from China and South Korea, driving Singapore

gasoline margins down 56.5% to USD9.8 per barrel (/bbl) in the week ending June 7 2016, from a peak of

USD22.6/bbl in January. An already saturated market gasoline market will struggle to absorb the additional

influx of naphtha, forcing Qatar to explore new growth markets.

Qatar Oil & Gas Report Q2 2017

Table: Crude Oil Net Exports (Qatar 2015-2021)

2015e 2016e 2017f 2018f 2019f 2020f 2021f

Crude & other liquids net export, 000b/d 1,633.9 1,595.7 1,494.6 1,487.6 1,483.3 1,483.6 1,479.4

Crude & other liquids net export, % y-o-y -5.4 -2.3 -6.3 -0.5 -0.3 0.0 -0.3

Crude & other liquids net export, USDbn 29.7 23.7 29.5 30.9 33.0 34.7 36.2

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Crude Oil Net Exports (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Crude & other liquids net export, 000b/d 1,479.4 1,466.2 1,453.1 1,440.2 1,427.4 1,414.7

Crude & other liquids net export, % y-o-y -0.3 -0.9 -0.9 -0.9 -0.9 -0.9

Crude & other liquids net export, USDbn 36.2 36.9 37.7 37.8 37.5 37.2

f = BMI forecast. Source: EIA, BMI

Refined Fuels Trade Forecast

Latest Updates

■ We forecast refined product net exports to increase strongly from 2016 as the expanded Ras Laffan refinery doubles output at the facility.

■ The Ras Laffan refinery will boost refined exports from 33,0000b/d in 2016 to around 100,000b/d in 2017.

Qatar Oil & Gas Report Q2 2017

Refined Products Net Exports Forecast

(2015-2026)

Refined products net exports, 000b/d Refined products net exports, % y-o-y

2 0

1 5 e

2 0

1 6

2 0

1 7

2 0

1 8

2 0

1 9 f

2 0

2 0 2

1 f

2 0

2 2

2 0

2 3

2 0

2 4

2 0

2 5

2 0

2 6

100

-50

150

-1,000

-500

500

-1,500

e/f = BMI estimate/forecast. Source: BMI, EIA

Structural Trends

The bulk of the new output at Ras Laffan will be naphtha and jet fuel. We expect naphtha production will

largely be targeted at Asian markets with a large petrochemicals sectors. Jet fuel will more likely find

customers in regional markets throughout the Middle East.

In November 2014 Qatar's state-run oil marketing firm Tasweeq planned to cut condensates exports by

150,000b/d over the next two years as Qatar looked to process larger volumes domestically, displacing

condensates exports with exports of naphtha and other higher value-added, light-end products.

Qatar Oil & Gas Report Q2 2017

Table: Refined Fuels Net Exports (Qatar 2015-2020)

2015e 2016e 2017f 2018f 2019f 2020f

Refined products net exports, 000b/d -3.7 33.0 100.3 94.4 88.3 77.3

Refined products net exports, % y-o-y -128.0 -998.1 203.7 -5.9 -6.5 -12.5

Refined products net exports, USDbn 1.0 1.4 3.5 3.5 3.4 3.3

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Refined Fuels Net Exports (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Refined products net exports, 000b/d 65.9 54.3 42.3 34.0 29.8 29.8

Refined products net exports, % y-o-y -14.7 -17.7 -22.1 -19.5 -12.4 0.0

Refined products net exports, USDbn 3.4 3.1 2.9 2.7 2.6 2.6

f = BMI forecast. Source: EIA, BMI

Qatar Oil & Gas Report Q2 2017

Trade - Gas (Pipeline and LNG)

BMI View: LNG will remain Qatar's principal revenue stream over the next 10 years. Qatar is the largest

LNG exporter in the world and has long-term supply contracts with 16 countries, delivering spot cargoes to

many more. The UK, Korea, Japan and India remain the country's key export markets.

Latest Updates

■ We expect natural gas exports to marginally increase from 129.5 billion cubic metres (bcm) in 2016 to 129.9bcm in 2017.

■ The overall trend is one of decline as domestic consumption increases, while domestic production stays steady. By the end of our forecast period (in 2026) we expect net exports of liquefied natural gas (LNG) to have fallen to 75.5bcm.

■ Qatar Petroleum (QP) has announced the integration of RasGas and Qatargas the two state-owned gas producers. The two entities will operate under the name 'Qatargas' with the transition aiming to be complete by the end of 2017. The benefits brought by integrating the two companies should in theory include cost reductions and improved efficiency and greater financing abilities. Combined, these will put Qatargas in a better position to perform in a market that will be increasingly competitive over the coming years.

Structural Trends

Qatar is the world's biggest exporter of LNG, accounting for more than 27.0% of global contracted volumes

in 2013. Alongside Nigeria, Qatar also plays a dominant role in meeting supplies delivered under non-long-

term contracts.

Qatar has two LNG exporters, namely Qatargas and Ras Laffan LNG Company (RasGas). Each operates

seven trains, which represent a total LNG export capacity of 77.7mn tonnes per annum (mntpa), or around

105.6bcm. Qatar has not announced plans to add more liquefaction capacity beyond the existing facilities.

We believe growing competition from liquefaction capacity in Australia and the US will limit the need for

new LNG trains in Qatar. Qatar Petroleum has moved its investment focus from its domestic market,

joining ExxonMobil as a possible LNG export project from Golden Pass in the US. Qatar is reportedly also

considering investment in Venezuela's energy sector as the Latin American country seeks help to overcome

the damage suffered by its economy because of falling oil revenue.

Qatar Oil & Gas Report Q2 2017

Gas Net Exports Forecast

(2015-2026)

Pipeline gas net exports, bcm LNG net exports, bcm

2 0

1 5 e

2 0

1 6

2 0

1 7 f

2 0 1

8 f

2 0

1 9

2 0 2

0 f

2 0

2 1

2 0

2 2

2 0 2

3 f

2 0

2 4

2 0

2 5

2 0

2 6

100

150

e/f = BMI estimate/forecast. Source: BMI, EIA

Qatargas Better Positioned To Meet Changing Conditions

QP has announced the integration of RasGas and Qatargas the two state-owned gas producers. The two

entities will operate under the name 'Qatargas' with the transition aiming to be complete by the end of 2017.

At present Qatargas has an LNG export capacity of 41mntpa and

partners Total, ExxonMobil, Shell, ConnocoPhillips, Mitsui and Marubeni in its operating ventures. RasGas

is slightly smaller in scale, operating around 37mntpa of LNG export capacity and is a joint venture

between QP and ExxonMobil.

The benefits brought by integrating the two companies should in theory include cost reductions and

improved efficiency and greater financing abilities. Combined, these will put Qatargas in a better position to

perform in a market that will be increasingly competitive over the coming years. Competition will come

mainly from rising volumes being shipped out of the US and Australia. The new capacity will be vying for

access to the lucrative Asian LNG import market which is where Qatar's traditionally exports the majority

of its volumes.

Qatar Oil & Gas Report Q2 2017

Most of Qatar's exported volumes are secured through long-term supply contracts. The impending LNG glut

will create a buyer's market, so as Qatar's contracts roll off in the coming years and negotiations begin it is

vital that the emirate is in the strongest possible position (see 'Contract Expiry Opens Window Of

Opportunity For Asian Importers', March 16 2016 and 'JKM: Short-Term Strength Masking Long-Term

Weakness', December 8 2016). Combining the two entities will help achieve this as the larger company will

have greater negotiating power in addition to a more favourable cost structure.

Furthermore, a rising trend in the industry is the growing presence of portfolio players, which buy large

volumes of cargos from varied sources, with different contract pricing terms, giving them greater flexibility

when selling on to importers. The merger of Shell-BG, has created the largest portfolio player by size,

overtaking Qatargas and Rasgas. Integrating the two Qatari entities will enable to the emirate to reclaim its

title as the largest LNG trader, offering better flexibility and enhanced market power.

Another benefit from the consolidation is the greater financial clout that the company will be granted given

its size. This will assist in its international ambitions as it looks to grow its production presence beyond

domestic boundaries. QP is talks with ExxonMobil and Eni about buying a stake in Mozambique's LNG and

is also participating in Cyprus's offshore licensing round. The creation of new entity could provide greater

impetus behind these ambitions as it will have superior financial muscle to participate in LNG projects.

Contract Expiry Opens Window Of Opportunity For Asian Importers

Qatar is the leading producer of LNG globally, exporting 106bcm in 2015, equivalent to 82.7% of the

Emirate's total natural gas exports. Asia has historically been the largest offtaker of Qatari LNG. However,

in 2015, the volume of exports to Europe started to increase again, at the same time as Qatar reduced its

exports to Asia. This move to Europe was, in our view, a response to weak demand in core North-East Asia

markets, notably Japan and South Korea.

We believe that Qatari LNG exports to Europe will remain elevated historically in the coming two to three

years. In particular, the outlook for demand in Japan looks sluggish, as nuclear capacity comes back online

and due to a dampened macroeconomic outlook. The ability of Europe to absorb these excess volumes will

be increasingly tested because of weak demand growth in the European power sector, coupled with

increased competition from new exporters, primarily from the US.

Qatar Oil & Gas Report Q2 2017

Negotiating Contracts In Buyers Market

Post-2016, Qatar does not have any new contracts coming into force and with 30.1bcm of contracts rolling

off in the next ten years, will have to start negotiating new contracts to secure long-term offtake. Despite the

demand weakness in South Korea and Japan, we expect Asia to remain the dominant consumer of LNG,

driven by strong growth in emerging markets such as China and India. As such, it will remain a key target

for Qatar.

According to our JKM forecast, the Asian LNG price benchmark will collapse in 2017 and 2018, as a global

oversupply drives down prices (see 'JKM: Short-Term Strength Masking Long-Term Weakness', December

8 2016). We expect prices to remain weak for the coming five years, despite a modest recovery in 2019 and

2020.

Price weakness creates a buyer's market, eroding the negotiating power of Qatar. Reduced bargaining power

will lead to terms that favour the Asian consumer, in particular through more flexible contract terms. Major

changes we expect to occur include a relaxation of destination clauses, a shift to cargo-by-cargo contract

models and more generous price reopener clauses. In addition, a larger share of the contracts will be short

and medium term rather than historically preferred long-term contracts.

Qatar Oil & Gas Report Q2 2017

Weak North-East Asian Demand Pushing Cargoes To Europe

Qatar's LNG Export Volumes, bcm

Source: Bloomberg

Traditionally, Qatar has dominated global LNG trade, accounting for around 32.0% of total exports in 2014.

With the market remaining tight over 2011-2014, its substantial share in the supply combined with its

strategic position between the key Asian and European demand centres gave Qatar significant pricing

power. Qatar would swing cargoes between Asia and Europe, rationing supplies to Asia in support of spot

price premiums.

Over the next 10 years, Qatar's pricing power is set to ebb. In part this stems from a forecast decline in its

share in global LNG trade. It is also a result of the increasing flexibility of global LNG supply, which will

drive more effective arbitrage between Europe, Asia and Latin America.

On the domestic supply side, with a moratorium on new projects in the flagship North Field, Qatari gas

output is set to remain relatively flat. The Barzan Project will add upside to production in 2016 and 2017,

but we forecast no significant supply additions beyond this point. In contrast, domestic demand is set for

continued strong growth. Subsidisation of electricity and water consumption will drive rising demand from

Qatar Oil & Gas Report Q2 2017

power and desalination plants. Aggressive economic diversification plans will also increase consumption in

the domestic industrial - in particular petrochemicals - sector.

Currently, we see a tightening of the domestic supply and demand balance putting downward pressure on

Qatar's LNG exports, with exports falling from 106bcm in 2016 to 75.5bcm by the end of our forecast

period in 2026. However, a prospective lifting of the North Field moratorium from 2016 poses downside

risk to this view, as new field developments could side-step the forecast squeeze in exports.

Table: Gas Net Exports (Qatar 2015-2020)

2015e 2016e 2017f 2018f 2019f 2020f

Dry natural gas net exports, bcm 135.9 129.5 129.9 129.2 125.2 121.2

Dry natural gas net exports, % y-o-y 0.5 -4.7 0.4 -0.5 -3.1 -3.2

Dry natural gas net exports, USDbn 33.6 26.3 34.9 36.6 38.0 38.6

Pipeline gas net exports, bcm 21.5 23.0 24.0 23.0 19.0 20.0

Pipeline gas net exports, % y-o-y 16.2 7.0 4.3 -4.2 -17.4 5.3

Pipeline gas net exports, % of total 15.8 17.8 18.5 17.8 15.2 16.5

LNG net exports, bcm 106.0 106.0 106.0 106.0 106.0 101.2

LNG net exports, % y-o-y -9.2 0.0 0.0 0.0 0.0 -4.6

LNG net exports, % of total gas exports 78.0 81.9 81.6 82.0 84.7 83.5

e/f = BMI estimate/forecast. Source: EIA, BMI

Table: Gas Net Exports (Qatar 2021-2026)

2021f 2022f 2023f 2024f 2025f 2026f

Dry natural gas net exports, bcm 117.2 109.7 105.8 102.1 98.6 95.0

Dry natural gas net exports, % y-o-y -3.3 -6.3 -3.6 -3.5 -3.5 -3.6

Dry natural gas net exports, USDbn 39.0 37.7 37.4 36.6 35.3 34.0

Pipeline gas net exports, bcm 20.0 20.0 19.5 19.5 19.5 19.5

Pipeline gas net exports, % y-o-y 0.0 0.0 -2.5 0.0 0.0 0.0

Pipeline gas net exports, % of total 17.1 18.2 18.4 19.1 19.8 20.5

LNG net exports, bcm 97.2 89.7 86.3 82.6 79.1 75.5

LNG net exports, % y-o-y -4.0 -7.7 -3.8 -4.2 -4.3 -4.4

Qatar Oil & Gas Report Q2 2017

Gas Net Exports (Qatar 2021-2026) - Continued

2021f 2022f 2023f 2024f 2025f 2026f

LNG net exports, % of total gas exports 82.9 81.8 81.6 80.9 80.2 79.5

f = BMI forecast. Source: EIA, BMI

While Qatar's exports are brought under strain, global supply will be mounting. Major liquefaction projects

are scheduled to come online in the US and Australia, adding a combined 145bcm in additional volumes by

2019. The emergence of the US as a major LNG exporter is particularly significant. US contracts typically

have no destination clause and much of the supply has been contracted to global portfolio players. This

more flexible supply base can be optimised between regions in response to short-term price signals. In an

amply supplied market, regional price disparities (in excess of marginal shipping costs) can be easily

arbitraged away, undercutting Qatar's ability to set the price.

Losing Ground

Australia, Qatar, US Net LNG Export Forecast (bcm)

Australia Qatar United States

2016e 2020f 2025f

100

200

300

400

e/f = BMI estimate/forecast. Source: EIA, BMI

Qatar Oil & Gas Report Q2 2017

Beyond 2025, Qatar may look to resume a more assertive role in the global LNG market. The moratorium

on the North Field is temporary, awaiting a full evaluation of optimal reservoir management techniques.

When development returns to the field, the bulk of production will be targeted towards LNG. This is due to

the higher prospective netbacks - compared to regional pipeline exports - and slowing growth in domestic

demand.

Qatar benefits from low lifting costs, while high volumes of natural gas liquids (NGLs) and condensates

produced with the gas render Qatari LNG projects highly competitive. Qatar has also displayed increased

confidence and flexibility in its approach to meeting the need of long-term buyers, which could strengthen

its bargaining position in future contract negotiations. An agreement with PetroChina saw Qatar shift

deliveries of LNG under an existing long-term supply agreement towards the winter period. The move was

anticipated to affect spot prices but was indicative of Qatar's pro-active efforts to maintain its place as the

supplier of the premium Asian LNG market.

As global LNG demand catches up to supply by the mid-2020s, we believe Qatar could look to retake its

more dominant role in the global LNG market. However, given the structural shifts occurring in contracting

and supply it is unlikely to regain its former pricing power.

Qatar Oil & Gas Report Q2 2017

Industry Risk/Reward Index

Middle East - Oil & Gas Risk/Reward Index

BMI View: The Middle East region performs strongly upstream, due to a large and low-cost reserves base

as well as a strong production growth outlook. It has also been among those regions least impacted by the

current industry downturn, with a number of key producers scaling up activities to benefit from widespread

services cost deflation. The above-ground environment remains challenging due to heavy state dominance

in the sector and unattractive licensing regimes and the prospects for improvement here are low and will

continue to drag on the region's risk profile over the coming years.

The main themes from our overall Middle East Oil & Gas Risk/Reward Index (RRI) are:

■ The Middle East outperforms every other region in our Upstream Oil & Gas RRI, supported by a substantial resource base and strong production profile. Middle Eastern producers are among those least affected by the fall in oil prices, due to the region's lower production cost structures.

■ Despite vast proven reserves, Saudi Arabia and Kuwait continue to rank poorly in our Upstream Index. This is the result of the closed nature of both countries' oil and gas sectors, and the lack of opportunities for foreign investors.

■ UAE and Qatar rank at the top of the index, supported by a sizeable reserves base and favourable above- ground environment.

■ Iran's showing in the index saw strong improvements in 2016, following the lifting of international sanctions. Further gains are expected in the coming quarters.

■ The Middle East performs poorly in our Downstream Index, due to the high level of state involvement and limited room for non-state competitors.

Table: Middle East Oil & Gas Risk/Reward Index

Upstream R/R Ratings Downstream R/R Ratings Oil & Gas R/R Ratings Rank

UAE 66.1 48.9 57.5 1

Qatar 65.1 42.1 53.6 2

Oman 60.6 44.9 52.7 3

Iraq 64.0 29.7 46.9 4

Saudi Arabia 45.9 45.8 45.8 5

Bahrain 51.8 39.2 45.5 6

Iran 50.0 39.9 45.0 7

Kuwait 47.2 36.3 41.8 8

Yemen 43.2 26.3 34.7 9

Qatar Oil & Gas Report Q2 2017

Middle East Oil & Gas Risk/Reward Index - Continued

Upstream R/R Ratings Downstream R/R Ratings Oil & Gas R/R Ratings Rank

Average 54.9 39.2 47.1 -

Note: Scores out of 100, with 100 the best. Source: BMI

Upstream: Index Resilient In Lower Price Environment

Table: Middle East Upstream Oil & Gas Risk/Reward Index

Upstream Industry Rewards

Upstream Country Rewards

Upstream Rewards

Upstream Industry Risks

Upstream Country

Risks Upstream

RRI Rank

UAE 62.5 75.0 65.6 70.0 62.2 67.3 66.1 1

Qatar 62.5 85.0 68.1 55.0 63.5 58.0 65.1 2

Iraq 81.3 65.0 77.2 40.0 21.1 33.4 64.0 3

Oman 53.8 65.0 56.6 85.0 54.3 74.2 61.9 4

Bahrain 35.0 65.0 42.5 80.0 61.0 73.4 51.8 5

Iran 68.8 27.5 58.4 25.0 34.2 28.2 49.4 6

Kuwait 75.0 5.0 57.5 5.0 57.1 23.2 47.2 7

Saudi Arabia 72.5 10.0 56.9 5.0 48.8 20.3 45.9 8

Yemen 36.3 59.0 41.9 50.0 20.2 39.6 41.2 9

Average 60.8 50.7 58.3 46.1 46.9 46.4 54.7 -

Note: Scores out of 100, with 100 the best. Source: BMI

The Middle East outperforms in our Upstream RRI. The outperformance is largely due to high Industry

Rewards scores, which reflect the size of the Middle East's reserves base, and a strong production growth

trajectory. The above-ground environment is significantly less favourable, due to stringent licensing terms,

widespread corruption and a high level of state involvement.

The oil and gas sector in the Middle East is among those least vulnerable to a period of sustained lower oil

prices, given the dominance of conventional onshore production in the region and the typically lower cost

bases. In a number of markets, upstream activity has strengthened in recent quarters, as state-owned

companies look to profit from the downturn and associated industry cost deflation.

Qatar Oil & Gas Report Q2 2017

Strong Production Drives Regional Outperformance

Middle East Upstream Risk/Reward Index

Scores out of 100, with 100 the best. Source: BMI

The countries at the top of our upstream rankings are not those with the greatest reserves or the strongest

production profiles, but those with the best above-ground environments. In particular the UAE and

Qatar are supported by high Country Rewards and Industry Risks scores. This reflects the greater

participation of non-state competitors in these countries, as well as more favourable licensing terms and the

comparatively low level of state ownership of assets. Iraq also benefits from a relatively diverse competitive

landscape, but its fee-per-barrel contracts and the limited private ownership of assets drag the country's

score down.

Those at the bottom of the rankings, in particular Saudi Arabia and Kuwait, suffer from low Country

Rewards and Industry Risks scores. This is due to the closed nature of their upstream sectors, and the

limited opportunities for investment. Licensing terms are unattractive, with both countries offering technical

service contracts, as opposed to production sharing or concessional agreements. Opaque regulatory

environments all weigh on the countries' scores.

Qatar Oil & Gas Report Q2 2017

Yemen is an outlier, combining a poor fiscal and licensing structure and generally weak business

environment with declining production and a small reserves base. Widespread security issues and growing

political instability are also major causes for concern, triggered repeated supply outages. The country's

Upstream RRI stands at 41.2 out of 100, substantially below the regional average of 54.7.

There is usually little movement in the Middle East upstream rankings, due to the mature nature of the

region's producers. However, we would flag the following current and prospective trends:

■ Iran's Upstream RRI score has risen in recent quarters. The lifting of sanctions has allowed for a ramp-up in output and exports, while the return of foreign capital will strengthen the country's longer-term production growth.

■ Ongoing disputes between the central government in Baghdad and the Kurdistan Regional Government over revenue-sharing have triggered repeated disruptions to exports and output, which continue to pose risk to the country's Upstream Index.

■ The deal between OPEC and non-OPEC producers to curtail output will not materially alter the region's RRI, despite the Middle East absorbing the bulk of the cuts. The deal is temporary and rising oil prices will help offset the loss to output.

Downstream: Limited Opportunities

Table: Middle East Downstream Oil & Gas Risk/Reward Index

Downstream Industry Rewards

Downstream Country Rewards

Downstream Rewards

Downstream Industry

Risks

Downstream Country

Risks

Down- stream Risks

Downstream R/R Index Rank

UAE 48.9 36.0 45.7 50.0 66.0 56.4 48.9 1

Saudi Arabia 56.7 36.0 51.5 10.0 66.0 32.4 45.8 2

Oman 41.1 34.0 39.3 60.0 54.9 58.0 44.9 3

Qatar 48.9 26.0 43.2 20.0 68.9 39.6 42.1 4

Iran 50.0 34.0 46.0 10.0 49.2 25.7 39.9 5

Bahrain 30.0 30.0 30.0 60.0 61.3 60.5 39.2 6

Kuwait 42.2 24.0 37.7 15.0 60.6 33.2 36.3 7

Iraq 36.7 22.0 33.0 15.0 32.2 21.9 29.7 8

Yemen 17.8 28.0 20.3 50.0 25.5 40.2 26.3 9

Average 41.4 30.0 38.5 32.2 53.8 40.9 39.2 -

Note: Scores out of 100, with 100 the best. Source: BMI

Qatar Oil & Gas Report Q2 2017

The Middle's East refining capacity will continue to grow, as governments target economic diversification

through downstream expansions. We forecast an increase of 1.9mn b/d in the five years to 2021.

Low Scores Capture Lack Of Opportunities

Middle East Downstream Oil & Gas Risk/Reward Index

Note: Scores out of 100, with 100 the best. Source: BMI

The region ranks poorly in our Downstream Risk/Reward Index, with an average score of 39.2 out of 100.

This encompasses several structural weaknesses in the region's downstream sector that combine to severely

limit opportunities for private sector investors.

■ State-owned companies dominate and have control over the bulk of downstream assets.

■ There are limited numbers of non-state competitors. Widespread privatisation of the sector is unlikely, and it is thus doubtful that new entrants will be able to get a toehold in the market.

■ The business environment can be challenging and regulation is often onerous.

The region scores highly on Industry Rewards, reflecting large and growing domestic markets for refined

fuel products. We forecast refined fuel consumption to increase from 7.7mn b/d in 2016 to 9.1mnb/d by

2025. The widespread use of fuels subsidies has weighed on the sector's overall profitability, although the

fall in oil prices and consequent collapse in state revenues has catalysed reforms efforts in a number of

Qatar Oil & Gas Report Q2 2017

markets across the region: all GCC countries have enacted subsidy reforms in the past 18 months, with

Kuwait the last to cut.

We forecast major capacity expansions in Iran, Saudi Arabia and Kuwait and Oman, putting upside pressure

on the Industry Rewards scores of these markets. However, the new capacity will do little to alter the

fundamentals of a sector largely closed to international participation.

Qatar - Risk/Reward Index

Upstream Index

Qatar, a member of OPEC, is the world's largest supplier of liquefied natural gas (LNG) worldwide. It also

remains one of the world's top crude oil exporters. Its significant below-ground potential, as well as its

leadership of the natural gas and particularly LNG industry, ensures that the country will remain a key

global player for the foreseeable future. The presence of non-state competitors and relatively stable political

outlook support an attractive business environment.

Rewards

Vast proven natural gas reserves and a strong gas reserves-to-production ratio support Qatar's high ranking

in our Middle East Risk/Reward Index (RRI). However, there are limitations in light of the few options

available for gas production growth due to a moratorium on the North Field. Qatar's oil reserves are

significant as well, although its fields are maturing. Qatar is making particular efforts to stem the decline

through field redevelopments to prolong field life. Recent oil production growth has stemmed from natural

gas liquids (NGLs) and gas-to-liquids (GTL) products. However, other than these developments Qatar has

only had one new gas discovery recently, which was made in Block 4 in March 2013. Nevertheless, the

strong presence of foreign players and positive licensing terms make Qatar an attractive investment

location, making its overall outlook very positive if opportunities materialise.

Risks

The strong likelihood of governance and policy continuity, as well as relatively low levels of corruption,

especially for the Middle East region, reduces some of the country's political risks. The country receives an

average score for physical infrastructure, although much of the LNG and GTL infrastructure is relatively

new.

Qatar Oil & Gas Report Q2 2017

Downstream Index

Qatar's downstream score is mediocre among its Middle East peers, and has declined recently due to

slowing economic growth. Meeting growing domestic energy demand will be critical in the years ahead,

particularly in terms of gas production which is the primary input for the country's power generation

facilities. While oil consumption remains low relative to production, it is also rising. The downstream

segment remains relatively closed off to foreign investment with Qatar Petroleum (QP) owning around

80.0% of operations. The expanded Laffan refinery will also be 84.0% owned by QP, showing little change

in the country's downstream policy.

Qatar Oil & Gas Report Q2 2017

Market Overview

Qatar Energy Market Overview

Key Legislation

The Natural Resources Law (Law No. 3) of 2007 regarding the exploitation of natural resources and its

source regulates all aspects of the oil and gas industry.

Other key legislations are:

■ Decree Law No. (4) of 1977 on Preserving Oil Wealth

■ Decree-Law No. (10) of 1974 on the Establishment of Qatar Petroleum (and its amendments)

■ Decree Law No. (30) of 2002 Law of Environmental Protection

■ Law No. (8) of 2004 concerning Protection of the Maritime Facilities of Petrol and Gas

■ Decree Law No. (15) of 2007 concerning the Organization of Marketing and Sale of Regulated Products Outside the State of Qatar (Tasweeq Law)

Regulatory Bodies

The Ministry of Energy and Industry regulates Qatar's oil and natural gas policy, with the Emir of Qatar

having ultimate discretion. Qatar Petroleum (QP) is entrusted to manage and develop all of Qatar's

hydrocarbon resources.

State Involvement

The oil and gas sector is state-controlled, with QP responsible for exploration and production. The National

Oil Distribution Co. (NODCO) is in charge of refining and distribution. Qatargas and RasGas are

responsible for the production and marketing of liquefied natural gas (LNG). The state controls virtually all

aspects of the energy sector, sets policies and determines domestic pricing. QP itself accounts for 50.0% of

national oil production and almost 40.0% of gas volumes. QP is even more dominantly invested in the

downstream industry.

Qatar Oil & Gas Report Q2 2017

Fiscal Regime

Table: Qatar- Upstream Tax Regime

Corporate Income Tax

Royalties Fees and Bonuses

Resource Tax Export Duties Import Duties

35-55%. Payable on the total sales under a DFA with the rate(s) set by each DFA. Not For PSCs.

Payable under a PSC at signature and based on production targets. No bonuses for DFAs

- - Customs duty of 5.0% applies on all imports.

Source: E&Y Tax 2015 Guide

Licensing Regime

Table: Qatar- Contracts And Licensing Regime

Main Contract Type

State Participation

Local Content Requirement

Domestic Supply Requirement

Stabilisation Clause

Arbitration

Production Sharing Contract (PSC)

Yes Yes - under the terms of Qatarisation

Preference for local goods and services

na Yes - under Qatari law (Art. 190 of the Code of Civil and Commercial Procedure)

Development and Fiscal Agreement (DFA)

Yes Yes - under the terms of Qatarisation

Preference for local goods and services

na Yes - under Qatari law (Art. 190 of the Code of Civil and Commercial Procedure)

na = not available. Source: E&Y 2015 Tax Guide

Oil And Gas Infrastructure

Oil Refineries

Qatar has two crude oil refineries, both of which are owned by Qatar Petroleum (QP). Throughout 2013,

contracts were awarded for the 146,000 barrels per day (b/d) expansion of the Laffan Refinery. This is

scheduled to increase refining capacity in Qatar to 485,000b/d by 2016.

Qatar Oil & Gas Report Q2 2017

Table: Refineries In Qatar

Refinery Capacity (b/d) Owner (Contractor)

Completed Details

Qatar Petroleum 193,000 Qatar Petroleum 1958 na

Ras Laffan 146,000 Qatar Petroleum 2009 Condensate refinery

Total capacity 339,000 - - -

Planned additional capacity

Al-Shaheen 250,000 Qatar Petroleum Suspended USD11bn project

Ras Laffan (Expansion) 146,000 Qatar Petroleum 2016

Technip awarded design contract; Chiyoda awarded EPC contract

Q213, cornerstone laid April 2014. Construction started in 2015.

na = not available/applicable. Source: BMI

Qatar Petroleum Refinery

The first refinery in Qatar, known as the Qatar Petroleum Refinery, was built in 1958 and is capable of

processing both crude oil and condensate. The QP refinery was last expanded in 2001, raising refining

capacity from 137,000b/d to 193,000b/d. The expansion added a 57,000b/d condensate refining facility

capable of producing higher-value products. The state-owned plant mainly produces liquefied petroleum

gas (LPG), premium gasoline, super gasoline, jet fuel, diesel and marine fuel oil, as well as large quantities

of naphtha for petrochemical operations. Over half of the refinery's products are supplied to the Gulf region,

although much of the jet fuel is sold to Europe and the bulk of the naphtha is exported to East Asia for

further processing. Asian markets are being targeted for future expansions, where Qatar is envisaging strong

demand, particularly for LPG.

Qatar Oil & Gas Report Q2 2017

Ras Laffan Refinery

The 146,000b/d Ras Laffan plant, which became operational in late-September 2009 (about a year behind

schedule), is the country's second refinery and the first designed exclusively to process condensate, a by-

product of Qatar's massive gas industry. The Ras Laffan condensate refinery is operated by a consortium

comprising state-run Qatar Petroleum (51.0%), oil majors ExxonMobil (10.0%) and Total (10.0%), and

four Japanese companies: Cosmo Oil (10.0%), Idemitsu Kosan (10.0%), Mitsui (4.5%) and Marubeni

(4.5%). The Japanese companies farmed in to the project in 2006 as Japan was expected to be one of the

main markets for Ras Laffan's liquids products.

At full capacity, the refinery produces 52,000b/d of kerosene and jet fuel, 24,000b/d of gas oil (heating

fuel), as well as other clean-burning middle distillates and 9,000b/d of LPG. The facility is fed from all

three main Qatari upstream projects: gas fields run by QP and RasGas and the Al-Khaleej condensate

complex. The second phase of the Ras Laffan refinery was commissioned in Q416 boosting output to

292,000b/d with most of the produced fuels likely to be destined for Asian markets.

Al-Shaheen Refinery (Proposed)

QP had been considering building a third facility, although construction has been indefinitely delayed. The

250,000b/d al-Shaheen refinery was slated for construction in the Mesaieed Industrial City in south-eastern

Qatar. The USD11bn refinery was designed to process heavy sour crude from al-Shaheen offshore oil field,

which would be supplied to the facility by a 200km pipeline. Front-end engineering and design (FEED)

work was carried out by French services provider Technip between 2007 and 2009. The first phase was

expected to involve the construction of a crude distillation unit and a hydrocracker, while the second phase

would see the addition of a fluid catalytic cracker. In April 2009, however, MEED reported that QP

intended to break the project up into smaller sections to cut costs and spread project risks, though there have

been no further developments to suggest progress toward bringing the development online.

Gas-To-Liquids

Qatar's large gas reserves have made it a frontrunner in the development of gas-to-liquids (GTL) plants. The

country has one operational plant, Oryx, with a capacity of 34,000b/d. This capacity rose significantly with

the start-up of Pearl GTL operations in 2011. The Pearl project, which cost a total of USD19bn, hit full

capacity of 140,000b/d in September 2012. It is now the largest GTL project in the world.

Qatar Oil & Gas Report Q2 2017

Qatar Kentz, a part of Canadian construction company SNC-Lavalin, secured a four-year engineering,

procurement and construction management contract in December 2014 with an option of two-year extension

from Qatar Shell for its Pearl GTL onshore and offshore facilities in Qatar.

Table: GTL Plants In Qatar

Facility Capacity (b/d) Owner Completion date

Oryx 34,000 QP, Sasol 2007

Pearl 140,000 Royal Dutch Shell 2012

Possible Additional Capacity

Oryx expansion 66,000 QP, Sasol Unknown

Source: BMI

Oryx GTL

Oryx GTL is operated by South African synthetic oil specialist Sasol. QP and Sasol Chevron signed a

memorandum of understanding to expand the Oryx GTL project, potentially taking it to more than

100,000b/d. However, due to the capital intensity of the project, it appears Sasol will be focusing on its

North American developments, with no progress announced for Oryx.

Pearl GTL

The Pearl plant in Ras Laffan, developed by Shell, processes around 20bn cubic metres (bcm) of North

Field gas per annum in two trains, and, using the Shell Middle Distillate Synthesis, produces 140,000b/d of

products such as gasoil, kerosene, naphtha and normal paraffin for export. It also strips out 120,000b/d of

natural gas liquids and the petrochemical feedstock ethane. Over the 25-30 year life of the plant, Shell says

Pearl will use 3bn barrels of oil equivalent (boe) of natural gas. The first phase of the facility started

receiving North Field gas in March 2011 and its first refined fuels cargoes began shipping in June of that

year. The facility reached full output towards the end of 2012.

LNG Terminals

Qatar has two liquefied natural gas (LNG) projects comprising 14 liquefaction trains. The country's send-

out capacity reached a peak in 2011, with 77.7mn tonnes per annum (tpa) (around 107bcm) of liquefaction

Qatar Oil & Gas Report Q2 2017

capacity. No further trains are planned at the moment, and with growing liquefaction capacity in Australia

and the US, we do not expect further LNG facilities over our forecast.

Table: LNG Terminals In Qatar

Terminal Trains Capacity (mn tpa) Capacity (bcm)

Completed Ownership

RasGas I 2 6.6 9.2 1999 QP (63%), Exxon (25%), Kogas (5%), LNG Japan(3%)

RasGas II 3 14.1 19.5 2004 QP (70%), Exxon (30%)

RasGas III 2 15.6 21.5 2010 QP (70%), Exxon (30%)

Qatargas I 3 10.0 13.8 2005 QP (65%), Exxon (10%), Total (10%), Mitsui(7.5%), Marubeni (7.5%)

Qatargas II 2 15.6 21.5 2009 Train 4: QP (70%), Exxon (30%).

Train 5: QP (65%), Exxon (18.3%), Total (16.7%)

Qatargas III 1 7.8 10.8 2010 QP (68.5%), Conoco (30%), Mitsui (1.5%)

Qatargas IV 1 7.8 10.8 2011 QP (70%), Shell (30%)

Total capacity 14 77.5 107.1 - -

Source: BMI

RasGas

RasGas I is owned by a consortium made up of QP (63.0%), ExxonMobil (25.0%), Kogas (5.0%) and LNG

Japan (3.0%). RasGas I consists of two 3.3mn tpa (4.6bcm) trains. The main export market for LNG from

trains one and two is South Korea.

RasGas II, a 70:30 joint venture (JV) between QP and ExxonMobil, consists of three additional trains, each

of which has a processing capacity of 4.7mn tpa (6.5bcm). Trains three, four and five came on stream in

2004, 2005 and 2006 respectively, raising RasGas' total processing capacity to 20.7mn tpa (28.5bcm). The

main export market for LNG from train three is India, with LNG from train four destined for Europe and

exports from train five shipped to Europe and Asia.

RasGas III, a 70:30 JV between QP and ExxonMobil, consists of two additional trains, each of which has a

processing capacity of 7.8mn tpa. With trains six and seven operating at full capacity, RasGas's processing

capacity has risen to 36.3mn tpa (50.1bcm).

Qatar Oil & Gas Report Q2 2017

Qatargas

Qatargas I, made up of a consortium between QP (65.0%), ExxonMobil (10.0%), Total (10.0%), Mitsui

(7.5%) and Marubeni (7.5%), comprises three trains, which originally had a capacity of 2mn tpa (2.7bcm)

each. At the end of 2005, Qatargas I completed the de-bottlenecking of its facilities, increasing total

capacity to 10mn tpa (13.8bcm). Most of the exported LNG is destined for Japan and, to a lesser

extent, Spain.

Qatargas II consists of two trains, with train four owned by QP (70.0%) and ExxonMobil (30.0%) and train

five by a consortium between QP (65.0%), ExxonMobil (18.3%) and Total (16.7%). Trains four and five

have a capacity of 7.8mn tpa (10.8bcm). The first LNG cargo from Qatargas II arrived at the UK's South

Hook LNG terminal on March 20 2009 and train five became operational in early September 2009.

Qatargas III (also known as train six) is owned by QP (68.5%), ConocoPhillips (30.0%) and Mitsui (1.5%).

Qatargas III has a capacity of 7.8mn tpa (10.8bcm), with exports originally aimed at the US market, mainly

through El Paso Energy's terminal at Elba Island. However, due to the lack of demand from the US, LNG

from this train has been redirect to the UK as well as Japan, while also being sold on the spot market.

Qatargas IV (train seven) also has a capacity of 7.8mn tpa (10.8bcm). It is a JV between QP (70.0%) and

Shell (30.0%). Shell announced in January 2010 that half the LNG produced at the Qatargas IV project will

be sent to China (which is to receive around 40.0%) and Dubai (around 10.0%), instead of to the US market

for which it was originally destined. Qatargas started production from Train 7 at Qatargas IV in February

2011. The train increases Qatargas' total capacity to 41.2mn tpa.

Qatargas kicked off with a USD1bn jetty boil-off gas recovery (JBOG) project intended to reduce flaring at

LNG terminals in Ras Laffan Industrial City in November 2014. The JBOG project is expected to save

around 28bnm per day of natural gas in a period of 30 years and reduce greenhouse gas emissions,

according to the company's estimates. The facilities would be operated by Qatargas and RasGas with Qatar

Petroleum, ExxonMobil, Total, ConocoPhillips and Shell among other shareholders. The project is expected

to be the largest LNG boil-off recovery project in the world.

Qatar Oil & Gas Report Q2 2017

Gas Pipelines

Qatar has one 182km subsea gas export pipeline through which it supplies the UAE and Oman. The pipeline

is owned and operated by Dolphin Energy, a JV between the state-owned Mubadala Development

Company (51.0%), France's Total (24.5%) and the US's Occidental Petroleum (24.5%). This is the first

cross-border gas project in the Arab Gulf region.

The Dolphin Energy gas pipeline, the Gulf Cooperation Council's first regional gas project, could see a

capacity expansion according to Total's senior vice president for the Middle East, Arnaud Breuillac. The

pipeline currently has a capacity of 90mn cubic metres per day (mcm/d) - or 33bcm per

annum. However, current sales agreements and existing compression facilities only support volumes of just

over 60mcm/d or 21.9bcm per year. Under current plans, a new compression facility at Ras Laffan would

allow Dolphin to economically deliver volumes closer to full capacity from 2015. The pipeline has seen

exports rise temporarily to meet demand in excess of contracted capacity, but only for short periods of time.

Dolphin started supplying the UAE with gas in February 2008 and Oman in October 2008. Most of the gas

is used to feed the UAE's burgeoning heavy industries, petrochemicals and water desalination plants as well

as to maintain production at maturing oil fields through gas injection. Around 2bcm is exported to Oman.

The long-term customers for Dolphin gas from Qatar are ADWEA (Abu Dhabi Water & Electricity

Authority), UWEC (Union Water & Electricity Authority), DUSUP (Dubai Supply Authority) and Oman

Oil Company (OOC). Each has signed a 25-year gas supply agreement with Dolphin Energy.

Qatar is one source of gas for the proposed subsea gas export pipeline from the Middle East to India. In

2008, a technical and commercial feasibility report was undertaken by INTECSEA, which found that the

project would be technically feasible. Gas for the project could be sourced from Qatar or Iran, and would be

transported to a gas-gathering system on the eastern coast of the Arabian Peninsula (mostly likely Oman)

from where deepwater gas pipelines would cross the Arabian Sea to India's west coast.

The pipelines would reach a maximum depth of 3,500m with a total length of about 1,000km. The pipelines

would each transport 226.5bcm over a 25-year period, suggesting an annual supply per pipeline of around

9bcm per year. No further action has been taken on the project and Qatar continues to supply large volumes

of LNG to India.

Qatar Oil & Gas Report Q2 2017

Competitive Landscape

Competitive Landscape Summary

■ The main government vehicle is Qatar Petroleum (QP), which owns all downstream oil interests, negotiates exploration and production (E&P) agreements, has shares in upstream projects and is involved in liquefied natural gas (LNG) projects, and gas-to-liquid (GTL) schemes. It is responsible for about 30.0% of oil and 50.0% of gas production.

■ QP plans to expand its operations in overseas markets following restructuring efforts. QP's restructuring programme involved the takeover of its foreign investment arm Qatar Petroleum International, a divestment of non-energy units, and the imposition of stricter conditions on foreign partners. QP has stated that it is focused on long-term projects and is looking towards expansion to better position it internationally, reports Gulf Times, citing President and CEO Saad Sherida al-Kaabi.

■ International oil company (IOC) upstream involvement is extensive. Foreign groups are active in oil production, gas field development, LNG projects, as well as GTL and petrochemicals schemes.

■ Present in Qatar since 1936, Total has a 20.0% interest in the upstream part of the Qatargas 1, a 10.0% interest in the Qatargas 1 liquefaction plant joint venture (JV), a 24.5% stake in Dolphin Energy and a 16.7% stake in Qatargas 2 Train 5 JV. Total's Qatari production averaged 132,000 barrels of oil equivalent per day (boe/d) in 2014. Total has signed a new agreement with QP under which the two companies will continue to develop the Al Khalij for the next 25 years.

■ QP has formally announced a JV with private players, led by Total, for the construction of a USD1.5bn condensate refinery at Ras Laffan. At 146,000b/d, the Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it is expected to come online in Q416. The plant will have a production capacity of 60,000b/d of naphtha, 53,000b/d of jet fuel, 24,000b/d of gas oil and 9,000b/d of liquid petroleum gas (LPG).

■ Occidental Petroleum Corporation (Oxy) has expanded the Idd Al Sharqi North Dome (ISND) field development programme, which is expected to result in the recovery of approximately 145mn additional gross barrels (bbl) of oil. It has been reported that Oxy is considering the sale of a stake in its entire Middle Eastern business, with no developments on that front at the time of writing.

■ Qatar Petroleum (QP) has announced the integration of RasGas and Qatargas the two state-owned gas producers. The two entities will operate under the name 'Qatargas' with the transition aiming to be complete by the end of 2017. At present Qatargas has an LNG export capacity of 41million metric tonnes per annum (mmtpa) and partners Total, ExxonMobil, Shell, ConnocoPhillips, Mitsui and Marubeni in its operating ventures. RasGas is slightly smaller in scale, operating around 37mmtpa of LNG export capacity and is a joint venture between QP and ExxonMobil. Sasol, Shell, ConocoPhillips and Marathon Oil are involved in developing a series of GTL facilities, with the 34,000b/d Sasol/QP Oryx plant entering production in March 2007. Shell, in July 2007, launched the 140,000b/d Pearl GTL project. It reached full capacity in September 2012, and is now the largest GTL plant in the world.

• QP and Shell have decided to stop their USD6.5bn joint Al Karaana petrochemical project in Qatar. The companies said in a joint statement that the decision was made after the project was declared commercially unfeasible based on the price quoted to build the complex, amid the current economic climate in the energy industry.

■ In late-August 2009, QP signed a 25-year Exploration and Production Sharing Agreement (EPSA) with China National Offshore Oil Corporation (CNOOC) Middle East, a subsidiary of CNOOC, for Block BC in the deep pre-Khuff reservoirs.

Qatar Oil & Gas Report Q2 2017

■ Japan's JX Nippon Oil and Gas Exploration (NOEX) entered Qatar's upstream segment with the signing of a 30-year EPSA with QP for the 6,173sq km offshore Block A.

■ Germany's Wintershall stopped gas exploration operations in Qatar after making a promising offshore gas discovery, Al Radeef, in 2013. The company gave up its licence to explore Block 4 North near the North Field offshore Qatar in May 2015 because of a lack of access to local infrastructure. The move will not have an impact on the company's other Middle Eastern operations.

Table: Key Domestic And Foreign Companies In The Qatari Oil And Gas Sector

Company 2011 Sales (USDbn)

% Share Of Total Sales

No Of Employees Year Established Ownership

Qatar Petroleum 79.4 100 10,378e 1974 100% state

Total Qatar na na na 1938 100% Total

Maersk Oil na na na 1992 100% AP Moeller

Occidental Qatar na na na 1994 100% Occidental

ExxonMobil Qatar na na na 1935 100% ExxonMobil

na = not available; e = estimate. Source: BMI

Table: Key Upstream Players

Company Oil Production (000b/d) Market Share (%) Gas Production (bcm) Market Share (%)

Qatar Petroleum 517 33e 62 54

Total Qatar 32 na 5.7 na

Maersk Oil 167 10.6 na na

Occidental Petroleum 89 4.8 2.4 na

ExxonMobil na na na na

na = not available; e = estimate. Source: Company data, BMI

Table: Key Downstream Player

Company Refining Capacity (000b/d) Market Share (%) Retail Outlets Market Share (%)

Qatar Petroleum 346 100 na na

na = not available. Source: Company data, BMI

Qatar Oil & Gas Report Q2 2017

Company Profile Qatar Petroleum

Latest Updates

■ Qatar Petroleum (QP) plans to expand its operations in overseas markets following restructuring efforts. QP's restructuring programme involved the takeover of its foreign investment arm Qatar Petroleum International, divestment of non-energy units and imposition of stricter conditions on foreign partners.

■ QP has awarded the operatorship of the Al Shaheen oil field to Total SA who will take over from Maersk Oil in July 2017. The field produces about 300,000b/d and is responsible for more than 40.0% of the nation's output.

■ The Ras Laffan 2 (LR2) will double the capacity of the existing Laffan Refinery (LR1) when it comes online. The plant will have a production capacity of 60,000b/d of naphtha, 53,000b/d of jet fuel, 24,000b/d of gas oil and 9,000b/d of liquid petroleum gas (LPG).

Company Analysis

Strengths ■ Major domestic oil and gas producer

■ Unrivalled access to exploration acreage

■ Well established partnerships with international oil companies (IOCs)

■ Substantial short-term volume growth

■ Rapid expansion of liquefied natural gas (LNG), gas-to-liquids (GTL) and

petrochemicals

Weaknesses ■ Limited financial or operational freedom

■ Some cost and efficiency disadvantages

■ Rising investment requirement

Opportunities ■ Considerable untapped gas export potential

■ Rising domestic energy consumption

■ Large areas of under-explored territory

Qatar Oil & Gas Report Q2 2017

Company Analysis - Continued

Threats ■ Competition in regional LNG supply

■ Changes in OPEC/national energy policy

Company Overview QP is active in all segments of the energy chain and participates in all major oil and gas

developments. The firm's exploration and production activities are centred on the

onshore Dukhan oil field and the offshore Bul Hanine and Maydan Mahzam oil fields.

The state firm also holds stakes in seven offshore fields that are being developed under

production sharing agreements. Gas resources are centred on the giant North Field. QP

operates all of the country's 200,000b/d crude oil refining capacity, with the Ras Laffan

refinery expansion expected to start operations in Q416.

Table: Major Assets

Field Name Field Type Peak Production (boe)

Bul Hanine Oil 120,000

Barzan Gas & Condensates 275,000

Dolphin Gas & Condensates 580,000

Source: BMI Upstream Database

Qatar Oil & Gas Report Q2 2017

Regional Overview

Middle East Oil & Gas Regional Overview

BMI View: Gas production in the Middle East is set for substantial growth over the next 10 years freeing

up domestically consumed oil for export. Oil will also increase despite OPEC curtailments, though efforts

to diversify economies will support new refining and petrochemicals projects adding value to exports.

To highlight the key themes that inform BMI's Middle East oil and gas forecasts, we have compared

countries on the basis of the following key indicators:

■ Oil production

■ Oil consumption

■ Refining capacity

■ Gas production

■ Gas consumption

Our Middle East coverage includes Bahrain, Kuwait, Iran, Iraq, Israel, Oman, Qatar, Saudi Arabia, UAE

and Yemen.

Oil Production: Output Cut To Have Marginal Impact

In 2016, all oil producing countries outside of Yemen in the Middle East, will see increased oil production

year on year. The region as a whole will increase output by more than 1.1mn b/d to 30.3mn b/d in 2016, led

by Saudi Arabia, Iraq and Iran. The agreement by OPEC and non-OPEC members to cut production over

H117 will only marginally impact production over the short term. Production targets revealed at the

November 30 meeting, were near output highs for many countries. It remains unclear whether the cut will

be sustained into H217, but it is likely most countries in the Middle East will raise production at least

seasonally. As such we expect higher output from Middle East countries in 2017, though only marginally.

Qatar Oil & Gas Report Q2 2017

Table: Marginal Impact On 2017 Output From Cut (mn b/d)

2016 Oil Production Cut Target 2017 Oil Production

Saudi Arabia 10.338 10.058 10.215

Iraq 4.290 4.351 4.400

Iran 3.595 3.797 3.810

UAE 2.953 2.874 2.950

Kuwait 2.884 2.707 2.950

Oman 1.000 0.965 0.982

Qatar 0.651 0.618 0.620

Source: BMI, OPEC

Beyond 2017, most countries in the Middle East will most likely bring back any spare production capacity

that was created from limiting output. A number of major projects, both gas and oil, remain under

development and will drive production growth over the coming years:

■ Saudi Arabia has vowed to maintain its 12.5mn b/d of crude production capacity adding 300,000b/d at the Khurais oil field, 900,000b/d at Manifa and up to 1mn b/d at Shaybah. Production from the neutral zone is also due to restart in early 2017.

■ Kuwait, which will also benefit from the neutral zone restart, is investing to reach its target crude and condensate production capacity of 3.165mn b/d by 2017 and 4.0mn b/d by 2020. A water injection scheme to boost production from the Burgan oil field was tendered in September.

■ The UAE is aiming to increase crude oil output to 3.5mn b/d by the end of 2018 and sustain that output for 25 years. ExxonMobil's Upper Zakum expansion and the addition of Total, BP and Inpex to the onshore concession investors will support this.

■ Iraq has an oil production target of 5.5mn b/d to 6.0mn b/d by 2020, supported by contracted production plateau levels at its largest oil fields. Combined plateau output of the Rumaila, West Qurna-2, Majnoon, Zubair and Halfaya is 5.55mn b/d.

■ Iran has signed a sweep of memorandums with companies including Total and Shell, to work on expanding oil production from the country's vast resources.

Qatar Oil & Gas Report Q2 2017

Middle East Expansion Continues

Oil Production In Major Middle East Producers (000b/d)

Bahrain Iran Iraq Kuwait Oman Qatar Saudi Arabia United Arab Emirates

2 0

1 5

2 0

1 6

2 0 1

7 f

2 0

1 8

2 0

1 9

2 0

2 1

2 0

2 2

2 0 2

3 f

2 0

2 4 f

2 0

2 5

10,000

20,000

30,000

40,000

e/f = BMI estimate/forecast. Source: National sources, EIA, BMI

We forecast crude, condensate and oil liquids production to increase nearly 3mn b/d from 2016 to 2025,

with the ten countries we cover in the Middle East increasing output from 30.3mn b/d to 33.0mn b/d.

Qatar Oil & Gas Report Q2 2017

Oil Consumption: Subsidy Reform Tempering Demand

Low oil prices are driving fuel subsidy reform as government budgets are squeezed by lower revenues. All

Gulf Cooperation Council (GCC) countries have implemented changes to increase pump prices for gasoline,

and in some cases diesel. Numbing powerful refined fuel demand growth will be essential to prevent

countries from dropping net oil export levels and enact production cuts. All major states in the Middle East

have seen the price of fuel increase since mid-2015, and in most cases this has led to a weaker or negative

year-on-year demand in 2016.

Table: Average Gasoline Pump Price June 2015 & December 2016 (USD/Litre)

June-15 December-16

Saudi Arabia 0.12 0.24

Kuwait 0.20 0.34

Qatar 0.26 0.41

Bahrain 0.27 0.42

Oman* 0.29 0.45

UAE* 0.47 0.48

*Revised monthly in line with global market prices; accurate as of September 19 2016. Source: globalpetrolprices.com

Consumption patterns have been weaker in 2016 and in some cases even negative due to higher fuels prices.

We also anticipate a switch from higher quality fuels to lower grades, given the largest price increases have

been made in the premium 98 and 95 octane fuels, while 91 and 88 have seen less of an increase. Economic

expansion policy, particularly in the refining and petrochemical sectors, will continue to drive demand for

oil, while population growth and vehicle sales continue to point to stronger domestic demand. That said,

weaker economic growth is weighing on consumption.

We forecast Middle East refined product consumption to increase from 8.1mn b/d in 2016 to 9.5mn b/d in

2025. Consumption is forecast to grow 17% over to 2025, far stronger than our forecast 9% growth in oil

production.

Qatar Oil & Gas Report Q2 2017

Subsidy Reform Slowing Consumption Growth

Middle East Oil Consumption (000b/d)

Bahrain Iran Iraq Israel Kuwait Oman Qatar Saudi Arabia United Arab Emirates Yemen

2 0

1 5

2 0 1

6 f

2 0

1 7 f

2 0

1 8

2 0

1 9 f

2 0 2

0 f

2 0

2 1 f

2 0 2

2 f

2 0

2 3

2 0

2 4

2 0

2 5

2,500

5,000

7,500

10,000

e/f = BMI estimate/forecast. Source: National sources, BMI, EIA

Refining Capacity: Mega Refineries To Support Economic Diversification

With an abundance of low-cost feedstock and widespread government support to diversify the economy

away from crude oil exports, the Middle East's refining capacity is forecast to grow strongly across our 10-

year forecast period. We forecast refining capacity to increase from 9.2mn b/d in 2016 to 11.1mn b/d by

2025.

New investment will be spread across a number of greenfield and brownfield developments, but

key contributors to growth include:

■ Saudi Arabia's 400,000b/d Jizan facility is slated for start-up in 2018.

■ Kuwait has awarded USD11.5bn in contracts for the 615,000b/d Al Zour refinery and is targeting operational start-up by 2020.

■ Iraq let the contract for the 140,000b/d Karbala refinery in June 2015, which is due to be completed by 2020.

■ Iran is due to bring on the first 120,000b/d phase of the Persian Gulf Star refinery by early 2017, with two subsequent 120,000b/d phases following. The country has also proposed an extensive upgrade programme to modernise existing facilities.

Qatar Oil & Gas Report Q2 2017

■ Expansions at Ras Laffan in Qatar (Q416), Sohar in Oman (2017) and Sitra in Bahrain (2018) will boost crude distillation capacity.

Fuels import demand in the major consumption market of Europe is forecast to be flat to negative, forcing

the Middle East to lean on Asia for fuels exports. China and India are also building up their own domestic

refining centres, leaving an increasingly crowded global market. However, the new facilities being built in

the Middle East benefit from access to low-cost feedstock, are efficient and leverage economies of

scale, which all combine to offer an advantage in a competitive fuels market.

Diversifying Through Refined Product Exports

Middle East Refining Capacity & Refined Product Consumption (000b/d)

Crude oil refining capacity, 000b/d Refined products consumption, 000b/d

2 0

1 4

2 0

1 5

2 0

1 6 f

2 0

1 7 f

2 0

1 8

2 0

1 9

2 0

2 1

2 0

2 2

2 0

2 3

2 0

2 4

2 0

2 5

f 0

5,000

10,000

15,000

f = BMI forecast. Source: Company data, EIA, BMI

Gas Production: Gas Projects Move Forward

Middle East gas production is set for growth as the region looks to substitute more costly and less efficient

oil with gas in power generation (see 'Low Oil Price Supports Gas Projects', August 15). Increased gas

output is intended to free up more crude for export, or prevent exports from declining as domestic demand

rises. We forecast natural gas production in the Middle East to increase 13.2% from 2016 to 2025, rising

from 675bcm to 764bcm, with more potential upside from Iran depending on IPC uptake from foreign

investors.

Qatar Oil & Gas Report Q2 2017

Much of the gas in the Middle East is associated in oilfields and few countries have developed sufficient

infrastructure to collect and transport this resource to demand centres. A further disincentive to progress is

that many countries do not have separate regulations governing associated gas production, creating a lack of

clarity around the reward for monetising gas. As a result, large volumes of gas that could be monetised are

flared - particularly in Iraq and Iran.

Gas Focus Grows

Middle East Gas Production (bcm)

Bahrain Iran Iraq Israel Kuwait Oman Qatar Saudi Arabia United Arab Emirates Yemen

2 0

1 5

2 0

1 6

2 0

1 7

2 0

1 8

2 0

1 9

2 0

2 0 2

1 f

2 0 2

2 f

2 0

2 3

2 0

2 4

2 0

2 5

1,000

250

500

750

e/f = BMI estimate/forecast. Source: National sources, EIA, BMI

Non-associated gas will be the largest contributor to new gas output:

■ Iran holds the most gas production upside through further phase development of the South Pars field, which could add over 60bcm of production capacity in the next five years.

■ Oman is progressing the Khazzan gas project, which will boost gas production by 15bcm in 2017

■ In Saudi Arabia, the Wasit gas project has already reduced crude burn over 2016 - supporting oil exports - and the Fadhilli gas development (26bcm) will be major boost to gas growth in 2019.

■ The Miran project (8bcm) in the Kurdistan Region of Iraq, Leviathan (12bcm) in Israel and Barzan phase 2 (10bcm) in Qatar will also be major additions over the next few years.

Qatar Oil & Gas Report Q2 2017

Gas Consumption: Industrial Growth And Power Strengthen Consumption

All countries in the Middle East will see gas consumption grow over the next 10 years and this will be at a

faster rate than production growth. We forecast gas consumption to increase from 560bcm in 2016 to

710bcm in 2025, an increase of 26.7%.

Consumption will be driven by the region's burgeoning downstream sector - in particular petrochemicals -

and a gradual reorientation of the Middle East power sector from oil to gas-fired generation. Oil continues

to be used in power plants due to insufficient gas availability, while some gas power facilities are idle or

working at low capacity due to lack of supply. Gas reinjection is also increasing throughout the Middle East

to maintain reservoir pressures at maturing oil fields.

Burgeoning Gas Demand

Selected Middle East Countries - Gas Consumption (bcm)

Bahrain Iran Iraq Israel Kuwait Oman Qatar Saudi Arabia United Arab Emirates

2 0

1 5 e

2 0

1 6 f

2 0 1

7 f

2 0

1 8 f

2 0

1 9

2 0

2 0 2

1 f

2 0

2 2

2 0 2

3 f

2 0

2 4

2 0

2 5

250

500

750

e/f = BMI estimate/forecast. Source: EIA, BMI

Qatar Oil & Gas Report Q2 2017

Table: Middle East Oil & Gas Production, Refining Capacity & Trade

2015 2016f 2017f 2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f

Middle East oil production, 000b/d

29,202 30,226 30,831 31,233 31,433 31,742 32,216 32,612 32,971 33,309 33,683

Middle East oil consumption , 000b/d

8,126.7 8,162.4 8,312.3 8,497.2 8,618.3 8,788.4 8,948.1 9,107.3 9,259.6 9,403.8 9,535.5

Middle East oil net exports, 000b/d

21,076 22,064 22,519 22,736 22,815 22,954 23,268 23,505 23,711 23,906 24,148

Middle East oil refinery capacity, 000b/d

9,463.0 9,215.5 9,416.5 10,000.5 10,230.5 11,075.5 11,075.5 11,075.5 11,075.5 11,075.5 11,075.2

Middle East gas production, bcm

626.1 675.0 705.1 720.4 729.5 749.6 762.4 763.0 762.4 760.6 757.2

Middle East gas consumption , bcm

504.8 552.2 576.0 591.3 605.5 629.3 645.0 662.6 676.3 690.1 705.1

Middle East gas net exports, bcm

121.3 122.8 129.1 129.1 124.0 120.2 117.3 100.4 86.2 70.5 52.1

Middle East LNG net exports, bcm

117.5 120.4 132.7 133.9 123.5 112.1 102.5 87.8 76.4 63.7 49.1

f = BMI forecast. Source: National sources, EIA, JODI, BMI

Qatar Oil & Gas Report Q2 2017

Glossary

Glossary of Terms

Table: Glossary of Terms

AOR additional oil recovery KCTS Kazakh Caspian Transport System

APA awards for predefined areas km kilometres

API American Petroleum Institute LAB linear alkyl benzene

bbl barrel LDPE low density polypropylene

bcm billion cubic metres LNG liquefied natural gas

b/d barrels per day LPG liquefied petroleum gas

bn billion m metres

boe barrels of oil equivalent mcm thousand cubic metres

BTC Baku-Tbilisi-Ceyhan Pipeline Mcm mn cubic metres

BTU British thermal unit MEA Middle East and Africa

Capex capital expenditure mn million

CBM coal bed methane MoU memorandum of understanding

CEE Central and Eastern Europe mt metric tonne

CPC Caspian Pipeline Consortium MW megawatts

CSG coal seam gas na not available/ applicable

DoE US Department of Energy NGL natural gas liquids

EBRD European Bank for Reconstruction &Development NOC national oil company

EEZ exclusive economic zone OECD Organisation for Economic Cooperation & Development

e/f estimate/forecast OPEC Organization of the Petroleum Exporting Countries

EIA US Energy Information Administration PE polyethylene

EM emerging markets PP polypropylene

EOR enhanced oil recovery PSA production sharing agreement

E&P exploration and production PSC production sharing contract

EPSA exploration and production sharingagreement q-o-q quarter-on-quarter

FID final investment decision R&D research and development

FDI foreign direct investment R/P reserves/production

FEED front end engineering and design RPR reserves to production ratio

FPSO floating production, storage and offloading SGI strategic gas initiative

FTA free trade agreement SoI statement of intent

Qatar Oil & Gas Report Q2 2017

Glossary of Terms - Continued

AOR additional oil recovery KCTS Kazakh Caspian Transport System

FTZ free trade zone SPA sale and purchase agreement

GDP gross domestic product SPR strategic petroleum reserve

G&G geological and geophysical t/d tonnes per day

GoM Gulf of Mexico tcm trillion cubic metres

GS geological survey toe tonnes of oil equivalent

GTL gas-to-liquids conversion tpa tonnes per annum

GW gigawatts TRIPS Trade-Related Aspects of IntellectualProperty Rights

GWh gigawatt hours trn trillion

HDPE high density polyethylene T&T Trinidad & Tobago

HoA heads of agreement TTPC Trans-Tunisian Pipeline Company

IEA International Energy Agency TWh terawatt hours

IGCC integrated gasification combined cycle UAE United Arab Emirates

IOC international oil company USGS US Geological Survey

IPI Iran-Pakistan-India Pipeline WAGP West African Gas Pipeline

IPO initial public offering WIPO World Intellectual Property Organization

JOC joint operating company WTI West Texas Intermediate

JPDA joint petroleum development area WTO World Trade Organization

Source: BMI

Qatar Oil & Gas Report Q2 2017

Methodology

Industry Forecast Methodology

BMI's industry forecasts are generated using the best-practice techniques of time-series modelling and

causal/econometric modelling. The precise form of model we use varies from industry to industry, in each

case being determined, as per standard practice, by the prevailing features of the industry data being

examined.

Common to our analysis of every industry is the use of vector autoregressions. Vector autoregressions allow

us to forecast a variable using more than the variable's own history as explanatory information. For

example, when forecasting oil prices, we can include information about oil consumption, supply and

capacity.

When forecasting for some of our industry sub-component variables, however, using a variable's own

history is often the most desirable method of analysis. Such single-variable analysis is called univariate

modelling. We use the most common and versatile form of univariate models: the autoregressive moving

average model (ARMA).

In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality

is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for

analysis and forecasting.

BMI mainly uses OLS estimators and in order to avoid relying on subjective views and encourage the use

of objective views, BMI uses a 'general-to-specific' method. BMI mainly uses a linear model, but simple

non-linear models, such as the log-linear model, are used when necessary. During periods of 'industry

shock', for example poor weather conditions impeding agricultural output, dummy variables are used to

determine the level of impact.

Effective forecasting depends on appropriately selected regression models. BMI selects the best model

according to various different criteria and tests, including but not exclusive to:

■ R2 tests explanatory power; adjusted R2 takes degree of freedom into account;

■ Testing the directional movement and magnitude of coefficients;

■ Hypothesis testing to ensure coefficients are significant (normally t-test and/or P-value);

■ All results are assessed to alleviate issues related to auto-correlation and multi-collinearity.

Qatar Oil & Gas Report Q2 2017

BMI uses the selected best model to perform forecasting.

Human intervention plays a necessary and desirable role in all of BMI's industry forecasting. Experience,

expertise and knowledge of industry data and trends ensure that analysts spot structural breaks, anomalous

data, turning points and seasonal features where a purely mechanical forecasting process would not.

Sector-Specific Methodology

There are a number of principal criteria that drive our forecasts for each energy indicator.

Energy Supply

This covers the supply of crude oil, natural gas, refined oil products and electrical power, which is

determined largely by investment levels, available capacity, plant utilisation rates and national policy. We

therefore examine:

■ National energy policy, stated output goals and investment levels;

■ Company-specific capacity data, output targets and capital expenditures, using national, regional and multinational company sources;

■ International quotas, guidelines and projections from organisations such as OPEC, the International Energy Agency (IEA), and the US Energy Information Administration (EIA).

Energy Consumption

A mixture of methods is used to generate demand forecasts, applied as appropriate to each individual

country:

■ Underlying economic (GDP) growth for individual countries/regions, sourced from BMI published estimates;

■ Historic relationships between GDP growth and energy demand growth in an individual country are analysed and used as the basis for predicting levels of consumption;

■ Government projections for oil, gas and electricity demand;

■ Third-party agency projections for regional demand, from organisations such as the IEA, EIA and OPEC;

Extrapolation of capacity expansion forecasts based on company- or state-specific investment levels.

Qatar Oil & Gas Report Q2 2017

Cross Checks

Whenever possible, we compare government and/or third-party agency projections with the declared

spending and capacity expansion plans of the companies operating in each individual country. Where there

are discrepancies, we use company-specific data as physical spending patterns to determine capacity and

supply capability. Similarly, we compare capacity expansion plans and demand projections to check the

energy balance of each country. Where the data suggest imports or exports, we check that necessary

capacity exists or that the required investment in infrastructure is taking place.

Source

Sources include those international bodies mentioned above, such as OPEC, IEA, and EIA, as well as local

energy ministries, official company information, and international and national news, plus international and

national news agencies.

Risk/Reward Index Methodology

BMI's Risk/Reward Index (RRI) provides a comparative regional ranking system evaluating the ease of

doing business and the industry-specific opportunities and limitations for potential investors in a given

market. The RRI system is divided into two distinct areas:

Rewards: Evaluation of sector's size and growth potential in each state, and also broader industry/state

characteristics that may inhibit its development. This is further broken down into two sub-categories:

■ Industry Rewards (this is an industry-specific category taking into account current industry size and growth forecasts, the openness of market to new entrants and foreign investors, to provide an overall score for potential returns for investors);

• Country Rewards (this is a country-specific category, and the score factors in favourable political and economic conditions for the industry).

Risks: Evaluation of industry-specific dangers and those emanating from the state's political/economic

profile which call into question the likelihood of anticipated returns being realised over the assessed time

period. This is further broken down into two sub-categories:

■ Industry Risks (this is an industry-specific category whose score covers potential operational risks to investors, regulatory issues inhibiting the industry, and the relative maturity of a market);

• Country Risks (this is a country-specific category in which political and economic instability, unfavourable legislation and a poor overall business environment are evaluated to provide an overall score).

Qatar Oil & Gas Report Q2 2017

We take a weighted average, combining Market and Country Risks, or Industry and Country Rewards.

These two results in turn provide an overall Risk/Reward Index score, which is used to create our regional

ranking system for the risks and rewards of involvement in a specific industry in a particular country.

For each category and sub-category, each state is scored out of 100 (with 100 the best), with the overall

Risk/Reward Index score a weighted average of the total score. Importantly, as most of the countries and

territories evaluated are considered by BMI to be 'emerging markets', our index is revised on a quarterly

basis. This ensures that the index draws on the latest information and data across our broad range of

sources, and the expertise of our analysts.

Sector-Specific Methodology

BMI's approach in assessing the Risk/Reward balance for oil and gas industry investors is three-fold:

■ First, we have disaggregated the upstream (oil and gas exploration and production) and downstream (oil refining and marketing, gas processing and distribution), enabling us to take a more nuanced approach to analysing the potential in each segment, and identifying the different risks along the value chain.

■ Second, we have identified objective indicators that may serve as proxies for issues and trends that were previously evaluated on a subjective basis.

■ Finally, we have used BMI's proprietary Country Risk Index in a more refined manner in order to ensure that only those risks most relevant to the industry have been included.

Conceptually, the index is organised in a manner that enables us clearly to present the comparative strengths

and weaknesses of each state. The headline oil and gas index score is the principal score. However, the

differentiation of upstream and downstream and the articulation of the elements that comprise each segment

enable more sophisticated conclusions to be drawn, and also facilitate the use of the index by clients who

have varying levels of exposure and risk appetite.

Our sector-specific industry indices include:

■ Oil & Gas Risk/Reward Index: this is the overall index score, which comprises 50% upstream and 50% downstream;

■ Upstream Oil & Gas Risk/Reward Index: this is the overall upstream index score, which is composed of rewards/risks (see below);

■ Downstream Oil & Gas Risk/Reward Index: this is the overall downstream index score, which comprises rewards/risks (see below).

The following indicators have been used. Overall, the index uses three subjectively measured indicators and

41 separate indicators/datasets.

Qatar Oil & Gas Report Q2 2017

Table: Bmi's Oil & Gas Upstream Risk/Reward Index

Rationale

Upstream RRR: Rewards

Industry Rewards

Resource Base

- Proven oil reserves, mn bbl Indicators used to denote total market potential. High values given better scores.

- Proven gas reserves, bcm

Growth Outlook

- Oil production growth, 2009-2014 Indicators used as proxies for BMI's market assumptions, with strong growth accorded higher scores.

- Gas production growth, 2009-2014

Market Maturity

- Oil reserves/production Indicator used to denote whether industries are frontier/emerging/ developed or mature markets. Low existing exploitation in relation to potential is accorded a higher score.

- Gas reserves and production

- Current oil production versus peak

- Current gas production versus peak

Country Rewards

State ownership of assets, % Indicator used to denote opportunity for foreign NOCs/IOCs/ independents. Low state ownership scores higher.

Number of non-state companies Indicator used to denote market competitiveness. Presence (and large number) of non-state companies scores higher.

Upstream RRR: Risks

Industry Risks

Licensing terms Subjective evaluation of government policy towards sector against BMI-defined criteria. Protectionist states are marked down.

Privatisation trend Subjective evaluation of government industry orientation. Protectionist states are marked down.

Country Risks

Physical infrastructure Score from BMI's Country Risk Index (CRI). It evaluates the constraints imposed by power, transport and communications infrastructure.

Long-term policy continuity risk From CRI. It evaluates the risk of a sharp change in the broad direction of government policy.

Rule of law From CRI. It evaluates government's ability to enforce its will within the state.

Qatar Oil & Gas Report Q2 2017

Bmi's Oil & Gas Upstream Risk/Reward Index - Continued

Rationale

Corruption From CRI, to denote risk of additional legal costs and possibility of opacity in tendering or business operations affecting companies' ability to compete.

NOC = national oil company; IOC = international oil company. Source: BMI

Weighting

Given the number of indicators/datasets used, it would be inappropriate to give all sub-components equal

weight. Consequently, the following weighting has been adopted:

Table: Weighting

Component Weighting, %

Upstream RRI 50, of which

Rewards 70 of Upstream RRI, of which

- Industry Rewards 75

- Country Rewards 25

Risks 30 of Upstream RRI, of which

- Industry Risks 65

- Country Risks 35

Downstream RRI 50 of Oil & Gas RRI, of which

Rewards 70 ,of which

- Industry Rewards 75

- Country Rewards 25

Risks 30, of which

- Industry Risks 60

- Country Risks 40

Source: BMI

Qatar Oil & Gas Report Q2 2017

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