LNG Market Moving Towards More Flexible Contracts: Kuwait Petroleum
Weaker than expected demand in traditional Asia markets is leaving several large LNG buyers in the region over-contracted which should help accelerate a transition towards more flexible contractual structures, Nizar Mohammad Al-Adsani, CEO, Kuwait Petroleum Corporation said during his talk at the fifth IEF – IGU Ministerial Gas Forum that was held in New Delhi December 6 on the sidelines of Petrotech 2016.
Nizar Mohammad Al-Adsani, CEO, Kuwait Petroleum Corporation (Credit: Petrotech)
“As producers reduce investments to re-focus more on cost reductions and budget savings, such efforts may be too late for global gas markets to re-balance during this decade, but could sow the seeds for tighter markets into the next decade,” he said.
According to Al-Adsani, reducing both capital and operating costs will be a major challenge, which could drive sellers to invest in receiving terminals in partnerships with buyers. “Buyers and sellers will have to work together to develop contracts that recognise the changes that are taking place in gas markets around the world. Pricing, volume and destination flexibility and shorter contracts durations will be high on the agenda for buyers.”
As imports from Japan and South Korea decline, the rebalancing of global markets will depend on the rate of expansion in China, India, and other countries in developing Asia, he argued.
Kuwait’s recognition of importance of LNG
Al-Adsani stated that Kuwait was among the very first Gulf Cooperation Council countries to recognize the importance of LNG to cover the gas deficit. It has been importing LNG since 2009. “Beginning with 2009, KPC has imported LNG, re-gasified and injected into the fuel gas network for power generation during the peak summer months. This operation is a pioneer in the Middle East and deserves to be a success story.”
Increasing domestic gas output
Kuwait uses about 1bn ft³/d of natural gas, of which 60% is for refining and petrochemicals and the rest for power generation. With Kuwaiti domestic demand for gas expected to increase significantly in coming years, KPC’s strategy would be to focus on increasing the domestic gas production. “Our plan to meet such high demand is to develop newly discovered, deep and naturally fractured reservoir. Currently our non-associated gas production is only 130mn ft3/d,” Al-Adsani said.
Shardul Sharma