Platts: Oman Exports More LNG in Move With Implications for Oil

Over the past two years, Oman has quietly expanded the number of countries to which it exports LNG to well beyond those with which it has long-term supply contracts.

In a state that needs increasing gas volumes to fuel its oil and heavy industrial sectors, this raises far-reaching questions about energy strategy.

To be sure, Oman’s government two decades ago saw LNG production as an important means of diversifying the sultanate’s economy and move state revenues away from heavy dependence on crude oil exports. A total of 10.4 million mt of LNG production and export capacity was duly developed at Qalhat, a remote coastal location about 350 km southeast of Muscat, with plants commissioned in 2000 and 2005. This constitutes the second largest concentration of such facilities in the Persian Gulf region, behind only those of Qatar.

The sultanate’s LNG plants and export terminals were for years run by two separate joint ventures between the government and various international partners. Oman LNG and Qalhat LNG signed long-term supply contracts with Japanese, South Korean and Spanish buyers, which in some cases were also their shareholders. They planned to negotiate further contracts with new customers, predominantly in Asia. However, industrial expansion and rampant population growth in Oman, as elsewhere in the Arabian Peninsula, meant that securing domestic gas supply quickly trumped exports as a government priority, leaving the sultanate’s LNG production plants significantly underutilized. MORE