Muscat fired up by gas potential

07 November 2013

The development of a huge tight gas project and gas trade potential with Iran could boost Oman’s economy

The liquefied natural gas (LNG) industry of Oman, despite paling in comparison with that of Qatar, is one of the sultanate’s most important assets.

LNG exports represent the second-largest source of revenue for Muscat after crude sales and provide the largest returns for international energy company investment.

Rising demand for power from a booming population, as well as from industry have, however, depleted Oman’s ability to export gas through lucrative shipments to Asia.

Oman LNG, which is responsible for national gas liquefaction and exports, has been running at below capacity for several years due to supply constraints.

The sultanate’s net gas exports have dropped from almost 450 billion cubic feet in 2007 to about 400 billion cubic feet in 2012, according to the US’ Energy Information Administration.

Muscat is keen to maintain or increase these gas exports, especially with Asian buyers paying record prices for LNG over the past two years. Its main avenue to achieve this is the swift development of its $15bn-20bn Khazzan tight gas project.

When complete, the ambitious scheme is expected to increase gas production by about a third, with the first gas expected to be produced in 2017. However, delays in reaching an investment decision between developer the UK’s BP and Muscat could lead to this start-up date being missed.

A second development that could give Oman’s LNG industry a boost is the potential of gas imports from Iran. Tehran recently said it wants Oman to be the centre of its gas marketing strategy, but many challenges lay ahead for this to become a reality.

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