United Arab Emirates: Qatar’s Legal And Organisational Framework For Exploration And Production Of Natural Gas Reserves

The State of Qatar (Qatar) has the third largest proven gas reserves in the world after Russia and Iran. Its reserves account for approximately 14% of the world's total. Qatar is also the world's leading producer of liquefied natural gas (LNG) and liquid fuels using gas-to-liquids (GTL) technology.

Virtually all of Qatar's proven reserves are located in the North Field. The North Field extends into Iranian sovereign territory where it is known as South Pars. It is estimated by the United States Energy Information Administration (EIA) to be the largest non-associated gas field in the world. Qatar has over 100 years of proven gas reserves at projected long-term production levels.

Qatar began exporting LNG only in 1997. Qatar's LNG sector is led by Qatargas Operating Company Limited and RasGas Company Limited. These are purely operating companies. They do not own the LNG facilities or the LNG itself. There are specific joint venture companies that own one or more of the LNG trains and the corresponding LNG.

As per Law No. (3) of 2007 Regarding the Exploitation of Natural Resources and its Sources (the Natural Resources Law), natural resources (including natural gas) are deemed the public property of the State. The Ministry of Industry and Energy regulates Qatar's natural gas policy subject to the ultimate control of the Emir of Qatar.

Pursuant to the Decree Law No. (10) of 1974 Concerning the Establishment of Qatar Petroleum (the QP Law), QP manages upstream, midstream and downstream oil and gas operations on behalf of the Government of Qatar. QP acts as the State's investment arm in the oil and gas sector.

The right to explore, develop and produce petroleum is typically granted by way of an exploration and production sharing agreement (EPSA) or a development and production sharing agreement (DPSA) entered into with QP on behalf of the State of Qatar. A DPSA will be more usual where there is a mid/downstream component integrated into the development of the project. This will typically be the case for gas projects – and will be less usual for oil projects.

It is usual for the government, typically acting through QP, to take a majority interest in a gas project. QP typically owns about 70% of the shares in each of the RasGas and Qatargas train companies. In Barzan, however, QP owns over 90%.

As noted above, natural gas is deemed the public property of the State and QP is entrusted with its management and development. There is little detail in the law as to how this is to be implemented. It is QP's strategy to perform this function through EPSAs and DPSAs – the terms of which are sanctioned by Emiri decree.

The State of Qatar typically derives value from natural gas development through:

• a share in or right to offtake production (via QP);
• equity participation at the mid/downstream phase (via QP); and
• taxation.

Subject to the terms of the individual EPSAs and DPSAs, the approval of the State is generally required prior to the transfer of natural gas development rights or interests.

It is possible as a matter of Qatari law to "mortgage" or "pledge" (depending on the translation) the right to receive a debt. It is also possible to assign contractual rights generally. In an EPSA or DPSA, it would be usual to see detailed provisions regulating any such right to pledge, assign or otherwise make a grant of security having similar effect.

Participants are obliged to comply with the framework of State environmental, health and safety laws and regulations.

Generally speaking, industrial projects in Qatar must seek approval from certain regulatory entities, such as the Ministry of Environment. For example, under Law No. (30) of 2002 on Environmental Protection (the Environmental Protection Law) and the Executive Regulations pursuant to Ministerial Decision No. (4) of 2005, all plans for public and/or private development projects must be submitted to the Ministry for approval.

Law No. (4) of 1983 Concerning the Exploitation and Protection of Aquatic Life in Qatar states that plant, laboratory and factory waste, sewage water, chemical and petroleum substances, ship oils or any other liquids that may cause harm to aquatic life may not be discharged into fishing water or internal water without the written approval of the competent department.

The Environmental Protection Law requires that all organizations undertaking activities in the field of exploration, drilling, extraction, production, refining and processing of crude oil shall follow international standard specifications with regard to methods and ways of safe operation in all matters related to the storage and transportation of petroleum, petrochemicals and gas, as well as to the disposal of water and other dispensable substances while avoiding loss of petroleum or gas.

Note: Qatari Laws (save for those issued the Qatar Financial Centre to regulate internal business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translations and interpreted the same in the context of Qatari regulation and current market practice.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.