SEPTEMBER 20, 2023

Key study sees potential for expansion of Oman’s LNG capacity

A key study commissioned by OQ Gas Networks (OQGN) – the wholly state-owned operator of the nation’s gas transportation system – has concluded that gas demand in the Sultanate of Oman is anticipated to remain stable over the next 20 years, with feedgas supply for LNG exports constituting an important source of this demand.

The study was undertaken by Gas Strategies Ltd, a UK-based global gas and LNG commercial advisory firm, as part of a market review of the natural gas industry and the gas transportation network in Oman.

The upbeat outlook for gas demand bolsters OQGN’s positioning as the sole transporter of gas over the next couple of decades, despite the changing dynamics of the energy landscape globally. OQGN, part of OQ Group, is preparing to offer 49 per cent of its share capital for public subscription on the Muscat Stock Exchange from September 26, 2023.

Summing up the high-level conclusions reached by Gas Strategies Ltd, OQGN stated: “Gas Strategies expects gas demand in Oman to remain stable over the next 20 years, with gas supply for LNG exports being an important foundation source of demand; Diversification of gas demand across sectors and geographically across the country provide resilience to total gas demand and, accordingly, to the utilisation of the network on a regional basis.”

In particular, the market consultant noted the potential for the addition of a fourth LNG train to the 3-train gas liquefaction complex of Oman LNG at Qalhat in light of sustained LNG demand growth in key global markets.

Oman LNG, as the biggest consumer of natural gas, accounted for a hefty 44 per cent share of the 39.4 billion cubic metres (bcm) transported by OQGN in 2022. Given its track record in securing global markets for its LNG output, combined with more recent investments in debottlenecking and capacity upgrades, Oman LNG is strongly tipped to secure a further extension of its operating license beyond 2024 when the current license is due expire.

Under new binding term sheets signed by the company since the start of this year, a sizable chunk of its future LNG capacity, for delivery starting from 2025 and 2026, has already been committed to an array of long-term international offtakers.

Given Oman LNG’s strong positioning, and coupled with upbeat projections of buoyant global LNG demand for the foreseeable future, Gas Strategies has underlined the potential for a further ramp-up of domestic LNG capacity.

“There is potential to further expand the plant with an additional liquefaction train,” said OQGN, citing the market consultant. “Assuming that a positive final investment decision (FID) is taken on a fourth train at the time of the renewal of the operating arrangements, that would likely result in the new train beginning production in 2029 at the earliest. Gas Strategies’ view is that Asian LNG demand can be expected to grow at a 3.4% CAGR between 2023 and 2043, providing strong support for increased Omani LNG production.

However, this has to be balanced with an overall plateauing of global LNG demand (which Gas Strategies expects to occur in the late 2030s) and competition from new Qatari and US liquefaction plants. As a result, Gas Strategies has included the expansion at Oman LNG in the High Case demand scenario only, where it supports an additional 5.8 BCM/yr of gas demand,” it further noted.

Other opportunities for LNG productions include small-scale LNG bunkering projects, such as the Marsa LNG initiative of TotalEnergies. Marsa LNG, which is awaiting a Final Investment Decision, will be sized at 1.15 mtpa.