MUSCAT: Oman's LNG export market is poised for a notable transformation, as outlined by Eng Salim al Aufi, Minister of Energy and Minerals, in an interview with Oman TV last week. The imminent expiry of a 25-year LNG supply contract with South Korea has paved the way for a series of strategic changes that will redefine Oman's position in the global LNG market.
Under the newly negotiated contracts, Oman anticipates a substantial increase in gas income, ranging from 30 to 40% compared to the previous agreement, said Al Aufi. This significant boost in revenue is expected to fuel Oman's economic growth and development. Additionally, the duration of new contracts will range from 5 to 10 years, providing greater flexibility and adaptability to evolving market conditions, he noted.
Significantly, Oman's timely entry into the market at the peak of gas demand has been met with an overwhelming response. The country's initial offer of 10.5 million tonnes per annum of LNG for sale was met with orders in the range of 70 million tonnes, underscoring the strong demand for Omani gas in the global market. Recognizing this favourable market position, the new contracts have been carefully crafted to maximize the government's share of profits from LNG sales, ensuring a sustainable stream of revenue for the nation, the Minister explained.
Furthermore, to ensure stability and predictability for both Oman and its LNG buyers, the pricing mechanism for the new contracts will be based on a combination of oil prices and market prices. Eighty per cent of gas prices will be linked to oil prices, while the remaining 20 per cent will be linked to prevailing market rates. This balanced approach will provide a stable pricing environment while ensuring that Oman benefits from price fluctuations in the global energy market, Al Aufi stated.
Currently, Oman exports approximately 30 per cent of its gas production, with the remaining 70 per cent utilized domestically. However, this balance is expected to shift as the country transitions towards renewable energy sources. Over time, domestic gas consumption will gradually decrease, allowing Oman to further expand its gas export capabilities and capitalize on the growing global demand for clean energy sources, he said.
The upcoming transformation of Oman's gas sector is set to propel the country towards a brighter economic future. Increased LNG income, flexible contract durations, and a focus on maximizing government profits will all contribute to Oman's economic growth and stability. As the world transitions towards a cleaner energy future, Oman is well-positioned to leverage its abundant gas reserves and establish itself as a leading player in the global energy market.
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