The transition to clean and renewable energy is one of the main factors behind Oman’s restructuring of Liquefied Natural Gas (LNG) contracts, according Oman’s Minister of Energy and Minerals, Eng Salim al Aufi.
Speaking to a local Arabic news portal recently, Al Aufi shared that the Sultanate of Oman has switched from long-term contracts usually lasting 15 to 20 years to shorter-term contracts.
“Many countries are transitioning to renewable and clean energy, and this technology is advancing rapidly. They do not want to commit to long-term liquefied gas purchase contracts only to find halfway through that they need to exit the contracts. This could be due to moving to different energy [sources], such as hydrogen or renewable energy. So, buyers try to reduce the commitment period,” he shared.
According to Al Aufi, Oman LNG’s contracts are for 10 years, while Qalhat LNG contracts are for 5-year terms. He also revealed that the previous contracts have been dissolved in favour of these shorter agreements. “These are new agreements from scratch, and we negotiated all the details. We took all the observations and lessons learned from the old contracts. The current situation is different since the company has recovered most of its capital costs, giving the government the ability to compete better compared to a new plant where the capital costs are still high. This allowed us to maximise the added value to the country from selling gas,” he stated.
Term-sheet agreements signed recently by Oman LNG commit up to 10.4 million tonnes of its capacity annually, Hamed al Naamany, CEO – Oman LNG, had affirmed in media statements. He also revealed that the company’s spot market deals yielded over $1 billion in additional revenues to the company in 2023.
Oman Observer