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05 October 2011
Kwok W Wan, LONDON:
Kuwait will import up to 42% more liquefied natural gas (LNG)
this year as it extends its buying period by a month into
November. The country expects to import 43-47 cargoes this
year, compared with 33 in 2010 and 11 in 2009, says state-owned
Kuwait Petroleum (KPC).
Kuwait began importing LNG in 2009 on
a seasonal basis - from May to October - to meet growing
electricity demand for cooling during the summer and to reduce
crude oil burn in its power stations (PE 8/10 p20). LNG imports were to
be a temporary solution until 2013 while domestic gas resources
were developed, but KPC is now considering a permanent import
facility to meet soaring demand.
The country uses Excelerate tankers as a floating import
terminal, with the Exquisite vessel berthed
offshore Kuwait since March according to AIS Live ship-tracking
data. Excelerate vessels, which can regasify LNG onboard the
tanker, have a capacity of around 5.2 million tonnes a year, or
around 600 million cubic feet a day (cf/d).
Kuwait imported 2.1 million tonnes of
LNG in 2010 (nearly 100 billion cf of gas), sourced mainly from
Oman, Egypt, and Trinidad and Tobago, according to Cedigaz. The
country's gas industry, meanwhile, produced 415 billion cf,
while consumption was 513 billion cf.
And Kuwait is set to import more LNG
to feed its power sector. Electricity generating capacity stood
at 11.3 gigawatts (GW) in 2008, but Kuwait plans to add another
16 GW by 2014, mainly gas-fired turbines.
The Oxford Energy Institute estimates
demand could climb to 6.36 billion cf by 2015, but with
domestic gas production unlikely to keep pace, pricey LNG
imports are the only option - to meet the supply deficit in
2015 would require 4.6 million tonnes of LNG imports.
The country could be forced to buy
spot LNG cargoes, which are more than seven times higher than
subsidised domestic gas prices. Kuwait DES cargoes were around
$15/million Btu at the end of September, according to ICIS
KPC also has a four year LNG contract
with Shell and energy trader Vitol, which was signed in May
2010. Under the agreement, Shell will deliver two cargoes with
an option of a third, while Vitol will deliver one with an
option of a second. It is also thought to be buying spot
cargoes from BG Group, originating from Trinidad and Tobago,
with BG offering a significant discount.
Oil-rich Kuwait, with 7.3% of the
world's proved resources, is not so well endowed with gas - at
63 trillion cf, under 1% of global reserves.
The kingdom should emerge as the region's first major shale gas producer. But not quickly
Geopolitics has lost its impact on the market and the fundamentals are bearish