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BP strengthens Oman gas ties

With its Khazzan field boosting Oman's liquefied natural gas output, BP has moved into marketing the fuel

The start of production last year from the BP-operated Khazzan natural gas project was a game-changer for Oman LNG, which operates three liquefaction trains at Qalhat on the Indian Ocean coast. Over recent years, pressure from rising domestic demand saw gas diverted away from exports, leaving the Qalhat plant running at around 75% capacity. OLNG's chief executive Harib al-Kitani told Petroleum Economist in December that as a result of the Khazzan start-up "our three trains are now almost at full capacity of 10.5m tonnes a year".

This is just the start. The first phase of development involves 200 wells producing 1bn cubic feet a day of natural gas. When the first two phases are on stream, the field will provide 1.5bn cf/d, equivalent to 40% of Oman's gas supply. BP has committed to supply Khazzan gas to Qalhat until 2025, and OLNG is rubbing its hands in expectation.

Since Oman's LNG industry began, Japan and South Korea have been the main export markets, under long-term contracts. Kitani said he expected this pattern to continue, but with other markets rising in importance. Now, BP has stepped in with a major sales and purchase agreement for the supply of LNG to its operations in Singapore. The deal with OLNG was signed in mid-January and will come into force the same month. Over the next seven years Oman LNG will supply 1.1m t/y of its output—the equivalent of around 18 LNG cargoes a year—to BP Singapore.

Speaking at the signing ceremony in Muscat, Kitani said the agreement would enable the Qalhat plant "to operate at full capacity and thus create more value". Oil minister Mohammed al-Rumhy said the new deal would also "unlock additional reserves" of natural gas.

With the Qalhat facility now at full capacity again, doubts are increasing about the chances of another potential LNG project going ahead any time soon. During the period when the plant wasn't producing the maximum amount, Oman began talks on importing pipeline gas from Iran. This would be liquefied by OLNG for export. In December, Kitani said the issue was still under discussion—by the two governments, OLNG isn't involved. But now, with the Qalhat plant operating flat out and with markets secured for the coming years, it's hard to see Iranian gas finding space there before 2025.

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