Oman LNG looks to fill supply gap starting in 2029 with possible new train

Oman LNG is in early discussions with the government to expand production with its fourth train, possibly adding more than 30% to existing capacity with an eye toward filling a potential shortage seen in 2029 and onward, the company's Chief Marketing Officer Mahmoud al-Baloushi told S&P Global Commodity Insights on April 23.

"The next six months will be important for us. Things will be more clear by the end of the year," Baloushi said at his office in Muscat. "By then, we will have a clear idea whether we're going for expansion or we say no we don't need it."

Oman LNG currently has three trains with production capacity of 11.4 million mt/year. A fourth train could add 3.6 million to 3.7 million mt/year, the company's biggest expansion since 2005-2006 when the third train was added, he said. It's too early to say how much another expansion would cost, he said.

An expansion would also mean orders for new LNG ships chartered through Oman's state-owned Asyad shipping company. Oman LNG currently charters five or six LNG ships from Asyad. "In case there's expansion, we do work with them and we ask them to order new ships or get us new ships to cater for our demand," he said.

Spot LNG prices for delivery into Asia are well below their 2022 record highs. Platts, part of S&P Global Commodity Insights, assessed the benchmark JKM price for delivery into Northeast Asia at $10.33/MMBtu on April 22, down from $11.25/MMBtu at the end of 2023 and a record $74.86/MMBtu in March 2022.

'No shortage'

The drop in LNG prices is due to additional supply on the market and more buyers turning to coal instead, especially in Europe, Baloushi said. "The carbon price has been down, so that's why" more demand has turned to coal, he said. Stockpiling in anticipation of a cold winter that turned out warmer than expected has also left buyers with ample supplies, he said.

"There's no concern of a shortage of LNG in the market," he said. That may change over the next few years, however, with global demand on the upswing due to growing populations and more preference for cleaner fuels such as LNG, he said. Demand grew 3%-4% in 2023 on the year, he estimated.

Some 10%-15% of Oman's LNG sales are based on the spot market, and the rest is through long-term contracts based on Platts-assessed Dated Brent, he said. More buyers in Asia have turned to the spot market in the past five years, putting them more exposed to fluctuations in LNG prices mostly followed in Asia through the Platts-assessed JKM market and in Europe through the TTF price, he said.

Most of the spot demand Oman LNG has seen recently is from Asia, he said. "There is demand in Europe, but from our perspective, considering all the logistics, the supply they get from the US and nearby countries gets more competitive than from our side," he said.

Even with Qatar's LNG expansion plans, Oman LNG sees a potential shortage in 2029 and 2030, Baloushi said. "If you look at the supply and demand over the long-term, you will see definitely a need for LNG, and someone has to make the plans from now to provide that need or otherwise there will be a big scarcity of LNG in the future. Actually if you look today, even with the Qatar expansion plans, the supply and demand numbers that we see to date, definitely there are gaps to be closed in 2029 and 2030 in terms of supply trying to catch demand. It's global.''

QatarEnergy on Feb. 25 announced a further expansion in its is LNG production capacity to 152 million mt/year by the end of 2030, from 77 million mt/year currently and 127 million mt/year planned by 2027.