Oman LNG upgrade is on schedule

17 April 2003
Debottlenecking of trains 1 and 2 at the liquefaction facilities of Oman LNGis progressing on schedule. The scheme is intended to increase liquefied natural gas (LNG) output at the Qalhat plant by 15 per cent to 7.2 million tonnes a year (t/y). A further phase of debottlenecking is also envisaged. However, this is contingent on the commercial viability being determined of producing more gas from Oman LNG's first two trains, which each have nameplate capacity of 3.3 million t/y (MEED 18:10:02).

'Phase one is the most economical tranche of the debottlenecking,' Agnus Cassens, general manager and chief executive of Oman LNG, told MEED on 15 April. 'The cost of increasing output goes up exponentially, whereas the 15 per cent extra that we are putting into place offers an attractive return on our investment.'

Oman LNG is set to play a central role in the third train project, which is to be implemented by a new entity known as Qalhat LNG (see page 11). The gas exporter has taken a 40 per cent stake in the new venture, which is building the 3.3 million-t/y third train. The other shareholders are the government, with a 52 per cent stake, and Spain's Union Fenosa Gas,with 8 per cent. The new company will own the Qalhat train.

Oman LNG will also operate the new plant and be involved in the joint marketing team for the on-sale of gas. Union Fenosa has agreed to take 50 per cent of the train's output, with the remaining LNG being actively marketed to international customers (MEED 28:3:03).

Oman LNG is close to placing most of its LNG for the next two years into the market. Last November, the London-based Tractebel LNGsigned a medium-term contract to lift 600,000 t/y from Oman LNG, and a sales and purchase agreement was signed with Union Fenosa for 1.3 million tonnes to be delivered in 2004/05 (MEED 6:12:02).

'This year, we have sold every drop,' said Cassens. 'But for 2004/05 there are still small volumes available, and thereafter we may have more gas.'

Oman LNG has a contract to supply 1.6 million t/y of LNG to India's Dabhol Power Company (DPC)and its power plant in Maharashtra. The deal has been on hold since the collapse of DPC's main shareholder, Enron Corporationof the US, in late 2001 (MEED 29:11:02). However, the Indian government is reviewing options to revive the project. BPof the UK with India's Tata, National Thermal Power Corporation - also of India, and Gas Authority of India are understood to be among the parties interested in taking over Enron's role.

Oman LNG, which has found buyers for most of its excess capacity through spot deals, says it has not yet sold any long-term LNG originally intended for DPC. 'We can't sell this gas on a long-term contract until a new owner is found for DPC, but we are looking at short to medium-term fixtures,' Cassens said. 'Our contract with DPC stands and we are sticking to it.'

One of the options open to Oman LNG for placing the gas is to sell additional volumes to Korea Gas Corporation (Kogas). The exporter already supplies the South Korean utility with 4 million t/y of LNG and is now competing with international suppliers for an additional contract to supply Kogas with 2.2 million t/y over a seven-year period (South Korea, MEED Special Report, 24:5:02).

'The Kogas contract is under final evaluation, but we are also chasing several other international opportunities,' said Cassens.

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