Oman signs LNG supply contracts with three Japanese firms

Eric Watkins
Senior Correspondent

LOS ANGELES, July 9 -- Oman's state-owned Qalhat LNG SAOC will supply LNG to the Far East under the terms of contracts announced by three Japanese firms, adding a further boost in revenues for the natural gas-rich Arab country.

In separate statements, Japan's Itochu Corp. and Osaka Gas Co. said they already have signed contracts with Qalhat LNG, while Mitsubishi Corp. said its deal was to go through on July 1.

Under terms of the agreements, Itochu said it will purchase 700,000 tonnes/year (t/y) from Qalhat for 20 years starting in 2006, while Osaka Gas will buy around 800,000 t/y for 17 years starting in 2009.

Mitsubishi said it will purchase 800,000 t/y for 15 years, which can be extended for five years if mutually agreed.

Spokesmen for two of the companies said the agreements did not set specific purchase prices, which will instead be decided on the basis of market prices.

However, without naming its sources, Japan's Nihon Keizai Shimbun newspaper reported June 30 that the three firms would purchase a total of 2.3 million t/y—worth more than 60 billion yen based on current LNG prices.

The Japanese sales agreements follow reports of a steady upsurge in Oman's production of LNG and its revenues from export sales.

In June, Oman's total LNG production as of the end of April increased to 247.5 bcf from 223.8 bcf in 2003, according to Omani official figures.

Oman also announced a 37% increase in the country's LNG revenues, which reached $35.6 million in the first 4 months of this year, up from $26 million in the same period last year. For the year ending in April, Oman's LNG revenues came to $328.6 million.

To handle the upsurge in production and exports of LNG, Oman also has announced it will charter an 138,000 cu m LNG carrier and subcharter the vessel to Oman LNG at a cost of $67,000/day. The vessel will join two others—the Sohar and the Muscat—already owned by the government.

In announcing the charter arrangements, Oman's Minister of National Economy Ahmed bin Abdulnabi Macki said the Sultanate had taken important steps to expand its LNG transport fleet to cope with additional production from Oman LNG's projected Train 3 at Qalhat.

Oman LNG is currently producing 6.6 million t/y of LNG from its existing two trains at Qalhat. The third train is due for completion by the end of 2005, and exports are set to begin in early 2006.

The Qalhat LNG Terminal is on Oman's northeast coast at Sur, some 75 nautical miles southeast of Muscat and 12 nautical miles from Ras al Hadd. The terminal, well away from the busy Strait of Hormuz, already caters to the growing demand for LNG in the Far East.

In its report of the new sales, Nihon Keizai Shimbun observed that, "The embarkation port is outside the Straits of Hormuz and transport via the port is less vulnerable to conflicts in the Middle East."

According to the Organisation of Arab Petroleum Exporting Countries, the latest available figures show Oman has proven gas reserves of about 30.3 tcf.

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