OLNG Exported 5.9Mn Tons In 2001

VOL. XLV

No 27

8-July-2002

OMAN

OLNG Exported 5.9Mn Tons In 2001

Oman LNG (OLNG) exported 5.9mn tons in 2001, compared to the targeted figure of 5.25mn tons, according to the company’s Annual Report 2001. OLNG operates two LNG trains at Qalhat, near Sur, each with nameplate capacity of 3.3mn tons/year. During the same year, the company loaded 96 LNG ships, up 13 on the target total of 83 comprising 74 cargoes associated with long-term sales and purchase agreements (SPAs) and 22 spot sales. In addition to the LNG, the company also loaded and delivered 26 NGL cargoes.

OLNG’s main long-term customer, Korea Gas Corporation (KOGAS), lifted 64 cargoes. Shipments to KOGAS, under a 25-year SPA, began in February 2000 with 2mn t/y of LNG, rising to 4mn t/y in 2001 (MEES, 21 February 2000). Shipments to Osaka Gas of Japan, under another 25-year SPA for the supply of 0.7mn t/y of LNG, began in November 2000, with 10 shipments loaded in 2001. OLNG said in the 2001 report that it had “delivered full volume to Osaka Gas using the Japanese company’s vessel Jamal as per original plan, and one cargo was diverted to the US market.”

The report also said that under an SPA signed in January 2000 with Spain’s Gas Natural, OLNG in 2001 sold on an ex-ship basis 10 cargoes “which were all delivered in the Spanish terminal of Huelva using the LNG vessel Galeoma chartered by Oman LNG.” In addition, six spot cargoes were sold to Enron on an FOB basis in March-December 2001 using the vessel Hoegh. The November cargo “was diverted to Puerto Rico to capture higher prices, with Enron’s prior consent. Enron’s declaration of bankruptcy resulted in the last cargo being cancelled before the loading date. Taking advantage of KOGAS vessel availability, four spot sales were concluded on an ex-ship basis to BP, Enron, Tohoku Electric and Shell. One spot cargo was also sold to TotalFinaElf using the vessel Lakshmi.”

Oman’s third long-term SPA contract is with India’s Dabhol Power Company (DPC) in Maharashtra and covers the supply of 1.6mn t/y of LNG for 20 years, with an original starting date in 4Q 2001 that was later put back to 1Q 2002. However the collapse of Enron, which has a 65% stake in DPC, has left the future of the project in doubt. According to the OLNG 2001 report, “DPC has experienced difficulties in 2001, up to the point where construction of the LNG terminal was halted. The initial loading date from Oman was 11 February 2002, but as a result of its difficulties, DPC declared that it would not lift any LNG in 2002. However, OLNG was successful is selling most of the volume to the European market.”

In March 2002 OLNG signed an agreement with Shell Western Supply and Trading to provide 0.7mn t/y of LNG over a period of five years (MEES, 18 March). The cargoes are being shipped to the Spanish terminal of Huelva. The Shell deal accounts for 0.7mn tons of the 2.2mn tons surplus this year, with most of the remaining 1.5mn tons available for spot/short-term sales going to BP (698,000 tons to Spain), Gas Natural of Spain (117,000 tons to Spain), Gaz de France (549,000 tons to France), Kogas (183,000 tons to Korea) and TotalFinaElf (61,000 tons to Belgium – MEES, 10 June).

Looking ahead, the report says that in the Far East, “the general picture of the market is still developing due to market restructuring and low economic growth. The Korean market is affected by deregulation and potential KOGAS privatization, while the Japanese LNG sector is affected by power and gas market deregulation. However, both markets are expected to open up when the situation is clear, with the Korean market opening up as early as 2004. The European market has seen the emergence of the booming Spanish market. Independent power producers have become extremely active and the natural gas market deregulation has opened doors to many new players. The US market is still growing. Terminals such as Elba Island and Cove Point are being built and revamped,” opening the way of increasing LNG imports.

OLNG’s latest annual report points out that 2001 was the company’s first full year of production (the first cargo was exported from Qalhat in April 2000 – MEES, 16 April 2000), and the primary target was to achieve satisfactory levels of reliability and availability – with the latter achieving 94.2%, above the 92% target. “During the year,” the report continued, “first inspections of gas turbine trains were undertaken with satisfactory results. During the consequent train shut-downs, galvanic corrosion was detected on the waterside of the sea coolers. Technical issues were identified and temporary repairs and solutions were put in place. Permanent solutions will be installed as part of 2002 activities.”

Details Of Equity Shares In Third LNG Train Awaited

In May this year Spain’s Union Fenosa signed a 20-year agreement with OLNG under which the former will be supplied with 1.65mn t/y of LNG starting in 2006 (MEES, 10 June). This covers half the output of the company’s proposed third train (with nameplate capacity of 3.3mn t/y), effectively giving a green light to the expansion project. But while the Omani Government gave its approval in principle to the project last April, a formal announcement, including the equity share division, is still awaited. The current equity holders in OLNG are: the Omani Government (51%); Shell (30%); TotalFinaElf (5.54%); Korea LNG (5%); Mitsubishi (2.77%); Partex (2%); and Itochu Corp (0.92%). MEES soundings indicate that the Omani Government wants to increase its stake in the third train, with negotiations over the proposed arrangements continuing.