Oman LNG signs fourth supply contract

21 December 2001

Oman LNGhas signed an agreement with the Royal Dutch/Shell Groupto supply 700,000 tonnes a year (t/y) of liquefied natural gas (LNG) to its customers in Spain. The deal is the fourth major contract to be signed by the company since 1996, when it finalised its first offtake agreement with Korea Gas Corporation (Kogas)for 4.1 million t/y (MEED 8:3:96).

Under the terms of the agreement, LNG will be shipped from the company's 6.6 million-t/y liquefaction plant at Qalhat on a tanker provided by Shell. Oman LNG has the option to replace this vessel with its own tanker from 2004. The contract has a five-year duration, starting in 2002.

The company's other major LNG contracts are with Japan's Osaka Gas Companyfor 700,000 t/y and India's Dabhol Power Company (DPC) for 1.6 million t/y.

The financial collapse of DPC's majority owner, Enron Corporationof the US, is expected to affect LNG supplies to the Indian power generator. Oman's Oil & Gas Ministry has stated that it is doubtful whether Oman LNG will be able to send cargoes in 2002 or 2003. Marketing for the excess production has already begun on the international LNG spot market.

DPC - which is 65 per cent owned by Enron, 10 per cent each by Bechtel and General Electric Company (GE), both of the US, and 15 per cent by the state-owned Maharashtra State Electricity Board- is in the process of being taken over by a group of Indian power companies. However, bankers say the company's LNG terminal could be stripped from its power generation assets and sold as a separate concern - a move that would open up the distribution of LNG on the Indian subcontinent.

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