Having snagged a flurry of important LNG supply contracts in recent weeks, Oman LNG says it is discussing an extension of the life of its liquefied natural gas (LNG) complex at Qalhat for another 10 years beyond its current mandate, which expires in 2024.
The revelation came in a interview by Hamad al Naamany (pictured), CEO, featured in Enjaz & Eejaz, the quarterly newsletter of Oman Investment Authority (OIA), which represents the government’s stake in Oman LNG.
A succession of long-term offtake commitments clinched by Oman LNG over the past month has enabled the company to secure a market for part of the plant’s output for up to 10 years starting from 2025. This bodes well for the company’s hopes to obtain a license to operate beyond its current concession expiring in 2024.
“On new contracts, overall, our commercial strategy for LNG from Oman future volumes is being discussed with the government and shareholders to extend the life of Oman LNG by an additional ten years,” said the CEO.
“We are progressing very well; our teams are worldwide to make the best use of this opportunity. We have highly skilled technical and commercial teams with over 20 years of experience to bring the best value to Oman,” he stated.
Last month, Japanese trading conglomerates Mitsui & Co and Itochu Corp, along with power company JERA, signed long-term pacts for the supply of a total of 2.35 million tonnes per annum (mtpa) of LNG from Oman. Supply timeframes span 5 to 10 years starting from 2025.
More recently, Shell International Trading Middle East FZE signed a term sheet for the offtake of 0.8 mtpa of LNG from Oman LNG for ten years starting from 2025.
The outlook for further offtake arrangements continues to be bright, say experts, as gas dependent economies scramble for new energy sources in the wake of supply disruptions sparked by the outbreak of hostilities between Russia and Ukraine a year ago.
In the interview, Al Naamany highlighted Oman LNG’s efforts to capitalize on the strong uptrend in global demand for gas-based resources. In particular, he credited the company’s ‘rejuvenation’ programme that has contributed to the upgrade and modernization of its 3-train complex at Qalhat.
“This programme, which aimed to maximize the value of our 22-year-old plant, already creates value,” said the CEO. “We all see now the results of this forward-looking decision. We then went further to enhance our production and environmental performance. As such, the company implemented various projects, including plant debottlenecking, to boost its efficiency and increase its nameplate capacity by a further 10%,” he stated.
The CEO also sought to explain that LNG supply contracts are underpinned by pricing strategies that are universally applied across the industry. “LNG contracts are often signed as long-term due to the nature of this market and commodity,” he pointed out. “Long-term contracts are usually set with the investment to protect investors, buyers, and sellers on the significant upfront investment. They also lead to the development and delivery of this business and leverage that with other opportunities. All LNG-exporting countries around the world are following this approach.”
Beyond the long-term contracts, Oman LNG also seeks to optimize value creation through mid-term sales, diversions, swaps or spot cargo deliveries, he added.
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